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According to the Employment Gazette , construction earnings have gone up by just under 10 per cent. in the past 12 months. What hon. Member can believe that figure if he has talked to construction workers in his constituency?An article in the Financial Times dealing with CSO statistics stated :
"The Central Statistical Office said wages and salaries per unit of output rose at an annual rate of 10.7 per cent. in January compared with 11.9 per cent. in December.
That encouraging development on inflation comes in the wake of last week's unexpectedly bad producer-price data and ahead of the release of the retail prices index on Friday."
That quote made two points. First, one set of figures published at the same time as the Employment Gazette 's figures--which reveal virtually no change --showed a marked decrease in wage costs. It also referred to some producer price figures which most people do not believe.
When the community charge was introduced, the Government spent £1.3 billion on a transitional relief scheme, but it had no effect on the retail prices index, which makes no allowance for any rebate that an individual may receive. If people are not paying for something such as the community charge, it is ludicrous that no allowance should be made for that in the RPI. Everyone knows that enormous discounts are offered on air travel and holidays. Does the RPI take account of those discounts? The answer is no. It is ludicrous to have another set of statistics on which economic decisions are made which are so grossly distorted.
Talking of grossly distorted figures, I should like to pick up my earlier intervention about the Opposition's Budget calculations. When I challenged the hon. Member for Dunfermline, East (Mr. Brown), he referred me to the comments last Wednesday by the right hon. and learned Member for Monklands, East (Mr. Smith) about how the Labour party's Budget would be costed. My right hon. and learned Friend the Chief Secretary to the Treasury demolished the Labour party's calculations in great detail. Since then, a series of Opposition spokesmen have come to the Dispatch Box, not one of whom has challenged my right hon. and learned Friend's figures.
Mrs. Beckett : I am happy to tell the hon. Gentleman that I propose to demolish those figures comprehensively in my reply.
Mr. Hayward : I thank the hon. Lady for that clarification. I shall listen to her with interest.
Mr. Martlew : The hon. Gentleman has spent the last 10 minutes telling us that he has demolished the figures on which the Labour party based its economic calculations. If one takes cognisance of the hon. Gentleman's comments, how can one expect any hon. Member to put any weight on the Government's statistics?
Mr. Hayward : The hon. Gentleman has merged two points incorrectly : one was the series of indices on which I was commenting, and the other was the series of costings of Labour proposals. I await with interest the comments of the hon. Member for Derby, South (Mrs. Beckett), and I shall certainly be in my place when she speaks. I should like to pick up the points made by my right hon. Friend the Member for Worthing (Mr. Higgins) and others in suggesting abolition of certain charges. In the long run, I should like to see removal of two other aspects of the unnecessary masses of paperwork. That would benefit the country. I was disappointed that the Budget did
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not do away with the road fund licence, although I was pleased that it was frozen. I hope that it will soon be abolished. I should also like the television licence fee to be done away with.6.45 pm
Mr. Giles Radice (Durham, North) : Before the hon. Member for Kingswood (Mr. Hayward) started on his party political point, I very much agreed with his comments about statistics. As he knows, the Treasury and Civil Service Select Committee has done quite a lot of work on that point, trying to improve the Government's statistics. Part of the problem has been the way in which the economy has changed. With an open economy, it is difficult to collect statistics in the way that they were collected 10 or 15 years ago. There is another problem--in the early 1980s, we cut the resources for our statistical department. We should restore that funding. Perhaps the hon. Gentleman should have mentioned the problem.
This is a highly political Budget. As many hon. Members have said, by far the most important part of the 70-minute speech came in the last four minutes--the cuts in the poll tax and the increase in VAT to pay for them, or what my constituents call the "sting in the tail". I wish to refer to the Government's efforts to extricate themselves from the poll tax fiasco, but first I shall comment on the Red Book. It is an excellent custom that the Red Book is published when the Chancellor makes his statement. This year there is a marked contrast between the Budget speech and the Red Book. In the Budget speech, there was an upbeat forecast of economic activity and a lot of talk about the recession being partly behind us, but one need only turn to table 3.1 of the Red Book--as my right hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore) pointed out--to reveal the devastating figures : the 2 per cent. drop in output, the 5 per cent. drop in manufacturing output and the almost 10 per cent. drop in fixed investment for the coming year. Astonishingly, the decreases in manufacturing output and in investment were not mentioned by the Chancellor although, as even he had to admit, unemployment will continue to rise throughout 1991 and probably into 1992.
We are experiencing a severe recession which affects all parts of the economy and all regions. We do not have a small downturn. Output has been falling for not just two quarters but at least four quarters, and it could well fall in a fifth. By any standard, this is a big recession.
The Treasury and Civil Service Select Committee predicted that the economy would be in recession. When the present Prime Minister was Chancellor and introduced his autumn statement in November, he talked about a period of "weak activity." When the Chancellor came to the Select Committee on the Treasury and Civil Service in, I think, December he spoke about the recession being "shallow and short-lived".
Why did the Government get it so wrong? First, there is no evidence that the Gulf war made matters substantially different. The Chief Secretary admitted as much to the Select Committee on the Treasury and Civil Service when he told it about the economic consequences of the Gulf war. Therefore, that cannot be used as an alibi. The Chancellor tries to imply that we are suffering because of a world recession, but that is not so. There is a slowdown in the United States, but it is expected to be short-lived and the Chancellor's expectations of a recovery
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in the British economy are partly predicated on a recovery in the American economy. He cannot pray that in aid as the reason why our economy is in such a state.If the Chancellor had looked at page 23 of the Red Book, he would have seen that the Japanese and German economies will grow by 3 per cent. this year and that the economies of France and Italy are growing by 1.5 per cent. Ours is definitely the odd economy out. The recession cannot be said to be the natural effect of the economic cycle. Some Members have already suggested that, and no doubt we shall hear it during the election campaign. A slowdown after an upswing might be part of an economic cycle, but the problem in the United Kingdom is quite different, because it is a four quarters drop in output. That is not a slowdown but a severe and sharp recession. The reasons for this state of affairs are simple. This is a home -grown recession which arose from the over-expansion of the economy in 1987 -88. Before Conservative Members say that the Opposition wanted the economy to expand at that time, perhaps I could quote something that I said, odious though that may seem. In early 1988 I warned the Government about over- expanding the economy and said that they should not cut taxes, which they proceeded to do. The right hon. Member for Worthing (Mr. Higgins) will know that in its Budget report of 1988 the Select Committee on the Treasury and Civil Service warned the Government that they were over-expanding the economy. We were right to issue that warning.
When the economy got out of hand, Government ideology or dogma led them to believe that they could rely on interest rates alone and that there was no other way. They could not increase taxes, because they had promised to reduce them and to go on reducing them. The problem about relying on high interest rates to slow down the economy is that they are slow and rather perverse and in the end have a massive effect. First, they had an impact on the housing market, on the small business sector and on investment. The effect eventually spread to the high street and the consumer, and in the second half of 1990 the economy fell off a cliff. It is unwise to rely on interest rates alone.
Conservative Members may say that all other economies are using high interest rates, but they are not. They use all the weapons at their disposal in a way that the Government have not. Our economy is in massive recession, because, for a long time after over-expanding the economy, the Government relied on a single weapon.
We are in a massive recession and must find a way out of it. The Government say that three things will happen : first, that destocking will come to an end ; secondly, that there will be a decline in inflation ; and, thirdly, that the American economy will expand and things will get better some time in the second half of the year. So far, their forecasting has not been good and until they have been proved right I prefer to rely on the CBI and the banks, including the National Westminster bank. They expect some shallow recovery, to use the Chancellor's words, but do not expect it to happen quickly and certainly not until the end of 1991, perhaps in the third or fourth quarter.
I looked to the Budget for something to help recovery and assist investment, but I am afraid that, despite some useful minor measures, it contains no meaningful help for business. The hon. Member for Bridlington (Mr. Townend), who, unlike some of his hon. Friends, knows something about business, said that sotto voce to the
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Government. In yesterday's Sunday Telegraph Mr. Gavin Davis, who is one of our advisers, said that the Government have followed a rather confused strategy.Mrs. Teresa Gorman (Billericay) : The hon. Gentleman is a covert Tory.
Mr. Radice : I occasionally read the Sunday Torygraph.
Mr. Davis said that there is a bit of a muddle about immediate help to firms with cash problems and boosting the long-term rate of return on successful investment. Insufficient resources do little for either. As the hon. Member for Orkney and Shetland (Mr. Wallace) said, the amount that the Budget gives to industry is dwarfed by the £2.2 billion that will have to be paid out in the uniform business rate and which is three times more than the corporation tax assistance. The CBI rightly argued for a new incentive for manufacturing, but the Budget contains no such incentive. The CBI and the Labour party asked for major help for training, but the Budget contains no such help. There is no new help for employment, although one would have expected such help because even the Chancellor admits that unemployment will rise. There is no new help for the infrastructure. The Government are relying on small and slow-acting help for business and less overtly on the increase in the public sector borrowing requirement, which partly reflects allowing the automatic stabilisers to work during a recession. I welcome that. Finally, the Government rely on a wing and a prayer and put their trust in the recovery of the American economy, but that is too little and too late. In reality, the Budget has nothing to do with any of those things. It is designed to get the Government out of the poll tax mess and nobody pretends otherwise. Speeches by Conservative Members have not been about the real economy or what is happening to it, but about how to get out of the poll tax mess. The Budget was the first half of the effort which, in theory, was completed by the statement by the Secretary of State for the Environment two days later. As everybody knows, that did not quite do the trick.
The Budget represents a major U-turn, because it advocates the transfer of local government to central Government fundings. That reverses many years of cuts in central Government subsidy, a policy that was opposed by the Labour party. The right hon. Member for Worthing argues that there should be no local taxation and that all should be financed by national taxation.
Mr. Radice : The hon. Lady says, "Hear, hear," but if she agrees with that, what is the point of having local government? Why not run the whole show from Whitehall, which is the argument advanced by some Conservative Members? If there is to be local government there must be some sort of local government taxation, as is the case in every other country in Europe. No other European country would dare suggest that everything should be financed centrally, because it is understood that that is a recipe for running everything from the centre. That might please the invisible people in the Box, but it should not please Members of Parliament, who should want something better and to take a broader view of democracy.
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The increase in value added tax will also have an impact on inflation. When VAT was increased from 8 per cent. to 15 per cent. in 1979, 4 per cent. was added to the retail prices index. This year's increase of 2.5 per cent.--from 15 per cent. to 17.5 per cent.--will add 1.2 per cent. to the RPI, although the Government point out that, if one takes into account the poll tax reduction, the RPI will fall. The Government should start to look again, as they did all last year, at the underlying rate of inflation. When RPI was high last year, the Government said that mortgages and the poll tax should not be taken into account. However, Samuel Brittan points out in an interesting article in the Financial Times today that the underlying rate of inflation is not falling rapidly but has increased--and it is not predicted that it will fall much. Samuel Brittan is probably right when he says :"Don't believe the coming plunge in the inflation rate." Perhaps hon. Members should bear that in mind.
The increase in VAT is the tip of the poll tax iceberg. That tax has helped to undermine the Government's public finances, which have been affected not only by recession. More than £10 billion was spent trying to persuade voters to love the poll tax, but unfortunately--or fortunately--that effort was a complete failure. The Government's attempts to extricate themselves from the poll tax have done them immense political damage, and will continue to do so.
It is a measure of the mess that the Government have made that the only large-scale item in the Budget is the £4.5 billion devoted to the switch from local to central taxation. I wish that those resources had been devoted instead to manufacturing investment, training, and the infrastructure. The fact that at a time of recession, when manufacturing output is contracting and investment is falling, the Government are devoting such massive resources to getting out of a mess of their own making speaks volumes about their priorities. This is not a Budget for business--it is a Budget to save the Government's skin. I predict that it will fail in that intention.
Several Hon. Members rose --
Madam Deputy Speaker (Miss Betty Boothroyd) : Order. Between now and 9 o'clock, right hon. and hon. Members should limit their speeches to 10 minutes.
7.3 pm
Sir William Clark (Croydon, South) : I congratulate my right hon. Friend the Chancellor of the Exchequer on introducing what is mainly a neutral Budget--and I, like many of my right hon. and hon. Friends, am particularly pleased with the help that he has given to small businesses. I refer in particular to the reduction in corporation tax, the carrying back of losses for three years and the raising of the VAT threshold, which will take 150,000 businesses out of the orbit of VAT. I am delighted also that my right hon. Friend the Chancellor will review VAT penalties, because in many cases they are draconian and should never have been introduced in the form that they were. The new treatment of bad debts will also be welcomed by small businesses, which frequently suffer from cash flow problems. They may be profitable, but they find it difficult to get in their money. The time is fast approaching when it should be mandatory for debts that remain outstanding after the agreed credit period has expired to be subject to interest. After all, if one has an account with a large store such as Harrods, interest is automatically added if one
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does not pay one's bill promptly. The imposition of interest would be a salutary lesson to companies that owe money to small businesses--as well as to Government Departments and local authorities, which are often extremely bad payers, waiting until the last minute before settling their accounts.As to capital allowances, the provision for a 25 per cent. offset on a reducing basis means that a company will have to wait eight or nine years before it recoups its money. If one went for a straight 25 per cent. instead, the money would come back to the company within four years.
There have been four reductions in interest rates over the past few months, from 15 per cent. to 12.5 per cent., and my right hon. Friend the Chancellor is right to exercise caution. If sterling is too low, it is essential to increase the base rate--drastically if need be--to boost its value. On the other side of the coin, if one is trying to produce a fall in interest rates, it is as well to test the water--which my right hon. Friend successfully did. Sterling remains strong against the dollar and the deutschmark.
One feature of the Budget that I regret is the pettifogging nonsense of assessing the value of a mobile telephone at £200--to produce a charge on the user of £50, if he pays tax at the standard rate. I wonder whether my right hon. Friend the Chancellor appreciates the importance of the mobile telephone as a business tool.
I am a director of a company that has representatives on the road who use mobile telephones--but that is not their choice. It is the employer who wants to be able to contact his staff--particularly in service industries, such as washing machine and central heating repairs. Mobile telephones allow employers easily to switch an engineer, for example, from one place to another. It is nonsense to tax the employee, when mobile telephones are really in the interests of employers.
If a mobile phone is used only for business, it is not taxable, but if it is used for only one private call, the tax falls due. Who is to decide the veracity of the representative who says, "I don't use the phone for private purposes"? Who is to monitor its usage? Will the employer have to scrutinise the monthly accounts to determine whether each and every call was made for business purposes? That would be bureaucratic and administrative nonsense.
I am certain that ordinary members of the staff in my office occasionally use the telephone there to make private calls, but they are not surcharged. My right hon. Friend the Chancellor would be well advised to remove that extra burden of a mobile phone tax on what are often one-man bands. We should not even have to move an amendment against that measure. As for mobile telephones in restaurants, if one goes to a decent restaurant, such as the restaurants that I normally go to, they are banned anyway. It is up to the restaurant owner to ban mobile telephones. I repeat that I hope my right hon. Friend the Chancellor will think and cancel the measure.
I accept that after this year child benefit will be indexed. However, consideration should be given to taxing child benefit, particularly as, from 6 April this year, a husband and wife will be assessed separately and consequently wives who have no income apart from child benefit will not have to pay tax. However, it is ludicrous to give tax-free child benefit to rich people who do not need it. My right hon. Friend should look again at that.
I welcome the Government's consistency on the community charge. I remind hon. Members that in his first
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or second Budget my right hon. and learned Friend the Member for Surrey, East (Sir. G. Howe) undertook a complete switch from direct to indirect taxation and that became Tory philosophy. He did that on the premise that it is better to tax spending than earnings. That is analogous to what has happened this year. My right hon. Friend the Chancellor has put the emphasis on indirect taxation. The necessities of life are zero-rated for VAT. Heating, lighting, public transport and rent are all zero-rated, so the necessities of life are not affected by the increase in VAT. In that sense, VAT is, to a certain extent, a voluntary tax. That is the argument that we used in the 1980s and it holds today.As I said earlier, my right hon. Friend the Chancellor is to be congratulated on this neutral Budget. He has introduced many changes which I have not had time to discuss in the 10 minutes available to me--for instance, the help that he has given to charities. The Budget is very good, particularly as my right hon. Friend has been restrained this year and did not have much manoeuvrability, but he has stuck to the Government's philosophy. The prudent reductions in interest rates will continue and, as we have all said, as inflation comes down interest rates fall accordingly as night follows day. I hope that my right hon. Friend will continue on the course that he has set himself.
7.12 pm
Mr. Denzil Davies (Llanelli) : Most Budgets are by their very nature short-term affairs, but this Budget takes the prize for short-termism. Indeed, it is little more than an attempt to construct a somewhat flimsy raft to which senior Ministers could cling as they frantically attempt to chart a rather meandering and zig-zag course between the Scylla of the recession and the Charybdis of the poll tax, both of which are monsters of their own creation, and it is a raft held together by nothing other than a collective ministerial fear of losing the general election and a cynical contempt for the good sense of the British electorate.
The other day, the chairman of the Tory party, the right hon. Member for Bath (Mr. Patten)--a member of the Cabinet, although he does not have much of a Cabinet job--was reported to have said that the Tory party had won the economic argument in the 1980s. I had always thought that the right hon. Member for Bath was one of the more intelligent members of the Tory party, but to make a statement like that in view of the Government's economic record must mean either that Tory central office has already spongified his brain or that he did not believe what he was saying.
In 1979 the Tories came to power proclaiming what they saw as three fundamental economic aims--to defeat inflation ; to transform the supply side of the economy, thereby increasing the efficient supply of goods and services ; and to establish, as they saw it, sound public finances. Certainly inflation has not been defeated ; it has hardly been dented. As the Red Book shows, over the 12 years between 1979 and 1991 the inflation rate in the United Kingdom, except for a period of two and a half years, has been consistently higher than the average rate for all the countries in the European exchange rate mechanism. It is higher here than in France or Germany. Last Thursday, the right hon. Member for Bath was reported as having said that inflation would now fall like a stone ; he said that--poor fellow--just a few hours before the latest RPI figures were announced, showing a fall of
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0.01 per cent. in the retail prices index, and the underlying rate of inflation had actually gone up. Last week was not a good week for the chairman of the Tory party.The hope now is that inflation, as measured by the RPI, will fall to something like 4 per cent. by the end of this calendar year--that is, by the end of December 1991. That may happen, but I have my doubts, as do professional commentators such as Sam Brittan and others. But even if it falls to 4 per cent. by the end of the year, the fall will owe more to the quirkiness of the RPI than to any real fall in the underlying rate of inflation. The Treasury's own Red Book forcecasts for the financial year to April 1992 an average underlying rate of inflation as measured by the GDP deflator--as good a measurement as any--an average underlying rate of inflation of 7 per cent., and in one of the worst recessions that Britain has faced since the end of the second world war.
The second aim of the Tory party in 1979 was to transform the supply side of the economy. The reality has been a disastrous failure. Between 1979 and 1991 the average annual rate of growth of the British economy was a miserable 1.8 per cent.--the worst record in western Europe and a worse record than that of the ideologically despised 1970s. Despite the reduction in the top rate of income tax to 40 per cent., the amelioration of capital taxes such as inheritance tax and capital gains tax, and despite deregulation and privatisation, all that the Shi'ite fundamentalists of the radical right have to show for the 1980s is high inflation and a disastrously low rate of growth.
In 1979 we had a surplus on our foreign trade in manufactured goods. In 1989, after 10 years of Tory supply side economics, that suplus had become a massive deficit of £17 billion. Last year it was still £11 billion, and the forecast in the Red Book for the coming year is for a deficit of £6 billion. As the Treasury candidly points out on page 33 of the Red Book, however, that fall in the deficit to £6 billion in manufacturing goods is the result of lower domestic demand and has nothing to do with the transformation of the supply side of the economy. If the recession recedes, as it might, and if interest rates start to come down and demand starts to increase, the deficit in our manufacturing trade will go up from £6 billion. I believe that it will go up to levels which will become unsustainable.
Finally, we come to the public finances. Once upon a time, we are told, a terrible dragon roamed the land, devouring the crops and terrorising the people, and it was called the public sector borrowing requirement or PSBR. As the right hon. Member for Blaby (Mr. Lawson) hinted, it was slain in 1984 or 1985--or perhaps it was 1986--much to the jubilation of members of the Institute of Economic Affairs and others. But the people, apparently were indifferent, and the crops were still destroyed. The dragon was changed by the nice PSDR--the public sector debt repayment--and the radical right slept soundly in their beds, but now they are beginning to wake up, as we heard from the hon. Member for Bridlington (Mr. Townend), and to form groups. And they are beginning to get very worried because the dragon is coming back--the PSBR is with us again. It may be said that it is only £8 billion for this year, which is nothing really.
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One is reminded of the argument about the balance of payments that we heard from the right hon. Member for Blaby-- that it does not matter, and even if it did, it would be all right if it could be funded. If privatisation proceeds for this year were taken out, the £8 billion would become £12 billion. In any case, I do not believe the figure of £8 billion, and I do not think that the Chancellor or anyone else believes it. I do not know about the Financial Secretary to the Treasury. Perhaps he should go into the Chancellor's room one night and look through the secret drawers in his big desk, where the worst-case estimates--perhaps event the middle-case estimates--for the PSBR lie.Even on the basis of the present public expenditure figures, the general view in the City is that the figure will be about £12 billion. I agree with that view. Even the Red Book points out that there is a margin of error of about £6 billion. But if the public expenditure totals are eroded, as they may very well be, the figure may go above £12 billion. In the following year it will be far higher because, if I may mix my metaphors, one cannot turn around the great tanker of the PSBR in one year. As the balanced Budget fades away, the PSBR will increase.
The old wheel has come full circle. Inflation has not been defeated, the supply side has not been transformed, and the public finances are in deficit. On its economic record alone--never mind its aims and, indeed, its achievements--the Tory party does not deserve to be re-elected, and after the antics of last week it will not be re-elected.
7.23 pm
Sir Hal Miller (Bromsgrove) : The speeches from the Opposition Benches--in this respect, outstandingly introduced by the hon. Member for Dunfermline, East (Mr. Brown)--have demonstrated intellectual arrogance that is absolutely breathtaking and delight in the difficulties of this country that is deeply depressing. Opposition Members have once again demonstrated dramatically that they have learnt nothing and have forgotten nothing. If the country really is in the difficulties that the Opposition attempt to portray, it is certain that the British people will not trust Labour to bring it out of those difficulties. The hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) would try to take us back into debt. When the present Chairman of the Public Accounts Committee--the right hon. Member for Ashton-under-Lyne (Mr. Sheldon)--was in government, his was the one voice of righteousness that I admired, but he has been longingly harking back to the purchase tax as a regulator of businesses. The right hon. Gentleman welcomed fixed exhange rates, but only for an interval until a Labour Government could devalue once again.
I welcome the general thrust of my right hon. Friend's Budget. In particular, I welcome the move from direct taxes to indirect taxes. Like my right hon. Friend the Member for Worthing (Mr. Higgins), I believe that that will provide a more equitable and sensible basis for taxation. Because of lack of time, I shall not go down the road of local government finance, but I have to say that I agree very much with the conclusion of those who say that central Government must do and pay for what it wants at
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the local level, while local government must raise the money that it wants to spend. That is the way to achieve proper accountability. The fact that the Labour party has learnt nothing and forgotten nothing is illustrated in the motor industry. I am glad that in recent weeks my right hon. Friend the Prime Minister and the Chancellor have paid tribute to that industry for the investment that it has undertaken. That investment will result in the doubling of this country's production capacity by 1994. My right hon. Friends paid tribute to the industry also for its increased skill levels, for imbalance quality, and for achieving a significant reduction in the imbalance of trade in manufactured goods. Despite the difficulties, to which the Labour party continually draws attention, it is significant that the motor industry has maintained production by increasing exports.Sir Hal Miller : Those are British jobs. It is interesting that the hon. Member for Durham, North (Mr. Radice), who comes from the north-east, should object to inward investment, which has provided jobs and quality and has resulted in exports from the area. It was interesting to hear my right hon. Friend the Secretary of State for Trade and Industry say that he did not believe in different tax regimes for different industries. In that case, why do we have the special car tax--a tax unique to the motor industry and exacerbated by the increase in VAT? Value added tax is grossed up on the special car tax, making it far more than 17.5 per cent., and resulting in one of the highest rates of taxation on motor vehicles in the Common Market. In view of the tributes that have been paid to the motor industry, I wonder how that can be justified. This industry is the goose that has been laying the golden eggs. If the Government persist in selecting it for increased taxation, they may succeed in killing the goose.
As for taxation on company cars, I must say that there is no justification, in terms of the environment or of equity, for increasing the scale charges above the rate of inflation. The rate proposed by my right hon. Friend the Chancellor is double the rate of inflation. In conversations that I have had with the Treasury over the past four years, it has been established that the scale charges represent the arm's-length cost of providing a car, as measured against contract hire rates. In many firms, the company car is a tool of the trade. The employee will now be taxed at a higher rate than the self-employed person under schedule D. Nor is the proposal environmentally satisfactory. Newer cars are cleaner and lead to an improvement in the environment.
My right hon. Friend could have done more to improve the environment. He could have given teeth to the statement of principle in the White Paper issued by my right hon. Friend the Secretary of State for the Environment by introducing a differential in favour of diesel fuel and of vehicles powered by diesel engines. That might have been done in the scale charges, by the special car tax or by the vehicle excise duty. It should certainly have been done by introducing a differential in the hydrocarbon tax on diesel fuel, which was previously introduced for unleaded fuel.
Nor is there any reason in equity why employment of workers in respect of company cars be penalised by the national insurance contribution provisions for the
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provision of fuel. I am not aware that that happens in the provision of tools to any other worker or with the provision of free coal for miners. Why is the motor industry being singled out once again as the milch cow of taxation to support the rest of the Government's expenditure plans?The motor industry has been singled out for increased taxation at a time when it is contributing signally to the reduction of the trade imbalance in manufactured goods. It is demonstrating increased investment, sustained output and increases in skills and quality. These are all the objectives that the Government are trying to achieve, and the motor industry is achieving them. It is doing so despite the Opposition's attacks. Why has it been singled out as I have described? I look forward with interest to the reply of my right hon. Friend the Chancellor of the Exchequer.
7.31 pm
Mr. Doug Hoyle (Warrington, North) : I do not understand how the hon. Member for Bromsgrove (Sir H. Miller) can attack Opposition Members, who have defended the motor industry when it was in need of defence. We have advocated investment in the industry. It is especially difficult to understand how such an attack could have come from someone who was in favour of Jaguar being hived off as a route to its being a world success. Jaguar is now part of a multinational company that is having to plough in a great deal of money to sustain it. It is clear that the hon. Gentleman has not learnt from the bitter experiences of our motor industry under the Government. Indeed, Conservative Members have learnt nothing.
Sir Hal Miller : The industry is a success.
Mr. Hoyle : If it represents success, I should not like to see failure. The industry is experiencing serious difficulties, and the hon. Gentleman knows it. It is doing so because of the difficulties of the market. The hon. Gentleman is right that the Budget will do nothing except add to the industry's difficulties.
We listened this afternoon to another lacklustre performance from the Secretary of State for Trade and Industry, who opened the debate. One wonders for how much longer he will remain in his present position.
Mr. Ian McCartney (Makerfield) : The right hon. Gentleman is unemployable.
Mr. Hoyle : It would be better if he were made unemployed immediately. It will not be long before unemployment comes to him. He is now outside the main stream of his party and the policies that it is following. The right hon. Gentleman spoke about his knowledge and the knowledge of his departmental team, of industry. He would not know a manufacturing plant if he fell over one. He talked about decisions being taken by production directors and marketing managers. When did he last talk to production directors and marketing managers? There are many industrialists and executives who would like to be able to talk to the Secretary of State.
The Budget will only tinker with the problems that face the nation. It will do nothing for the ills that have befallen industry. It will do nothing for investment, output, the balance of payments and jobs. When the Secretary of State was boasting about increased investment, I wondered where he had been. Had he been dreaming about such
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investment? There has been no net increase in investment since 1980 ; indeed, there has been a shortfall in investment since 1979. Even the Government's forecasts show that there will be another 10 per cent. fall in investment. That is the way to disaster, not success. Output has been falling. It reached its low point in April 1990 and it has fallen every month since then. Where is the success story to be found in output?Last year, the balance of payments was £13 billion in deficit. Despite all the suffering this year from high interest rates, record levels of bankruptcy, rising unemployment and joining the exchange rate mechanism--we joined it at the wrong figure, which makes life difficult for British industry and export markets--the balance of payments is still running at a deficit of £12 billion. The Economic Secretary shakes his head, but the deficit will not improve. Indeed, it will become worse. That is a fact.
Training should be the Government's flagship. Instead of that, 50 per cent. of workers in British industry have never received any training. A third of them have no qualifications. Few firms are planning to introduce any training. The Government rely solely on the training and enterprise councils. They intend to move training from the public to the private sector. In February, an article in the Manchester Evening News, which is not well known as a Labour party newspaper, said this :
"Whether direction from British industry, which has one of the worst training records in the West, will bring new impetus to training is open to doubt."
That is an understatement. We can be certain that TECs will be no substitute for the previous approach to training. That form of training has been the backbone of the success of the German and Japanese economies.
The Budget contains no provisions that will create more jobs. Unemployment will continue to rise. Shortly after the Budget statement, and very soon after 5,000 jobs were lost at British Shipbuilders at Barrow, 4,700 jobs were lost in the aerospace industry. That loss was announced on Thursday. It seems that there is no end to the recession. In the north-west, one in three manufacturing jobs has been destroyed since the Government came to office.
The hon. Member for Bromsgrove talked about the success of the motor industry, but the motor car division of Rolls-Royce in Crewe is in serious trouble. The division of DAF that produces trucks at Leyland is in serious trouble. The shipbuilding division at Cammell Laird is also in trouble. I have already mentioned the trouble at Barrow. Under this Government, the textile industry has been in perpetual trouble. If something is not done rapidly for the textile industry, we shall not have one.
The Government have produced no strategy to aid the companies that are engaged in producing defence equipment. There are more redundancies to come, but the Government have introduced no policy to enable the companies to create civilian jobs. As a result, we shall lose design teams and skilled engineers. That will bring misery to the families of those concerned and adversely affect the nation's economy.
We cannot expect any help from the Department of Trade and Industry. What are the Secretary of State and his Ministers? I suppose that the answer is the horsemen of the apocalypse. They are destroying British industry. That is not surprising because the ministerial team of the Department believes totally in free market forces. Those
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Ministers do not belong to the mainstream of the Tory party. I believe that they are all members of the No Turning Back group. No doubt they have already submitted their applications to the Conservative Way Forward group. I wonder how much longer the Secretary of State and his Ministers will stay in office. The danger is that they fiddle while industry is destroyed. British industry has no future as long as the Tory Government remain in office. 7.49 pmMrs. Teresa Gorman (Billericay) : As suggested by the hon. Member for Dunfermline, East (Mr. Brown), I have been in my constituency this weekend talking to the people and finding out what they think about the Budget and the other changes that were proposed last week. I promised that, given the opportunity, I would not tell the House my views on those issues but would report back to the Treasury spokesmen about what the people in Billericay and Thurrock think, and which of the topics that were raised last week they dislike most.
Their comments filled me with trepidation because I thought that, as a Back Bencher, my speech would lose me brownie points. However, having heard my right hon. Friend the Member for Blaby (Mr. Lawson), my hon. Friend the Member for Bridlington (Mr. Townend) and one or two others, state their views on the community charge and its future, I am encouraged to add to that the opinion of most of the people to whom I spoke in Billericay.
My constituents feel that, if we are to have a different system, the Government should change it completely to central taxation. They are fed up to the back teeth with the high-spending Labour councils of Basildon and Thurrock, which keep adding to my constituents' costs in exchange for no real benefits at all. They think that, if central taxation takes over the small proportion still collected locally, central Government will be able to exercise some control over local government spending, which is what is required. Therefore, I am pleased to add my support to the view that has already been expressed several times this afternoon. It also means that I need not waste too much of my precious 10 minutes repeating that view.
My constituents were pleased about the measures for small businesses. Small business is big business in Billericay. It is a testimony to the success of the Government's economic policies in the past 10 years that, in parts of my constituency, jobs still chase people. New enterprises are opening, work is increasing and people are moving into the district simply because there are jobs and houses are still being built. Many new estates are going up and properties are reasonably priced, so people are attracted to the area. In Billericay, one does not have the gloomy view of the economy that is sometimes expressed in the House.
My constituents were, however, exercised by some of the small details in the Budget, particularly the daft idea of taxing portable telephones. They do not regard portable telephones as a luxury but as a tool of the trade which, although irritating to people in posh restaurants, are now a necessity. I sincerely hope that my right hon. Friend the Chancellor will reconsider taxing portable telephones. If we are to tax things that irritate us, perhaps we should tax walkmen, karaoke machines in pubs and one-armed
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bandits. Personally, I find men with facial hair irritating--to say nothing of social workers, who irritate me enormously--so perhaps we should tax them too.Mr. Maples : Those are no doubt annoying things, but the difference between them and mobile phones, which we propose to tax, is that they are not provided by employers.
Mrs. Gorman : I thank my hon. Friend. However, employers pay the tax on cars for their employees, which is only £100 a year. The tax on mobile phones is likely to be twice as much. I should not like to be without my little car phone, which is important to help me keep in touch.
My constituents were pleased about the measures to relieve small businesses of many VAT problems. VAT has always been a major bugbear for small businesses. When I was chairman of the Alliance of Small Firms, the Government's report "Burdens of Business" said that VAT was the main problem. I always felt that the Keith committee, which added enormously to the penalty, was a positive disgrace. I am glad that the penalties for late payment are being relaxed, although they will have to be relaxed a great deal more before my constituents are pleased. Nevertheless, the Government have taken some steps in the right direction.
Women members of my constituency had interesting views on the measures relating to child care. In addition to going to my constituency at the weekend, I also gave speeches to women audiences in Spalding and Cambridge. They were disappointed that the Budget did not do more to help working women. The Budget discussion today is about work and the success of our economy. One of the great successes of the Conservative Government is that they have not only changed but modernised the economy. We have moved away from the old, heavy industrial occupations to light industry, service industries and information technology, all of which are highly attractive to and make great demands on the labour of women. It is a growth area for which women, with their high level of dextrous manual skills and their ability to handle half a dozen problems at the same time, are very much in demand.
Half the work force now consists of women, but women have a dual responsibility--they are responsible for their families as well as their jobs. They are good at juggling problems, but they have to pay for help in the home while they are out at work. Whether they look after children or elderly relatives, the cost of help is now much higher than it was. Women were hoping that my right hon. Friend the Chancellor would develop the theme in the last Budget and allow tax deduction on the cost of providing nursery provision at the workplace. The majority of working women do not have small children of nursery age, but children of school age. One working woman in two has a child at school and has to cope with the problem of what to do with the children first thing in the morning, what to do if they cannot get home when school closes in the evening, and what to do in the school holidays. They often have to pay to resolve those problems. Many women work part time and, once they have been taxed, the cost of care gobbles up so much of their earnings that they are hardly worth while.
Those women work not to buy lipstick and tights but to supplement the family budget, to help pay the mortgage, and to help keep elderly relatives. They look to the Chancellor in the next Budget--I am getting in my
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