House of Commons Hansard Debates for 17 Mar 1993

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"Zero-rating on items such as food, fares, books, and children's clothing should remain."

Hon. Members should note that, cunningly, the document did not mention fuel and power. A most significant omission, Watson. The document went on to say :

"We will look at ways of increasing taxes on environmentally damaging products".

Aha! I deduce from that passage that Labour was planning to put VAT on fuel and power all along. Elementary, my dear Watson--but there is more.

A Labour document produced after the election, entitled "Agenda for Change", talked of

"developing a range of green taxation incentives"

and "fiscal incentives". Most tellingly of all, only a month ago Tribune stated :

"Labour's Shadow Chancellor is expected to announce proposals for green taxation".

What a dreadful end. Hanged, Watson, with words from his own mouth!

The Budget helps business. It helps exporters, by increasing export cover ; it helps British companies, and foreign-owned companies that want to invest in Britain, by tackling the problem of surplus advance corporation tax ; it helps small firms by encouraging fixed-rate lending ; it helps entrepreneurs by letting them reinvest the capital gains that they make from selling their businesses ; it helps the construction industry by setting out new plans to build the channel tunnel rail link and the Heathrow Express ; it helps the self-employed by offering them perhaps the greatest ever package of deregulation for small businesses, covering self- assessment, statutory audit, VAT cash accounting, bad debt relief and VAT penalties ; and it helps every one of the 800,000 businesses that were facing large increases in their rates bills.

The hon. Member for Dunfermline, East concentrated much of his speech on unemployment, but I found his lack of grasp alarming. His prescription is "First tackle unemployment ; recovery will follow." Dr. Brown treats the symptom first, rather than the disease. In fact, Governments must first provide for recovery ; then they can secure lower unemployment. The order cannot be reversed. In his speech today, the hon. Gentleman was hopelessly confused on that point, expressing the belief that reducing unemployment would produce recovery. That is a complete misunderstanding of the position.

In a Guardian interview on Saturday, the hon. Gentleman committed the Labour party not only to full employment, but to full and fulfilling employment for everyone--not just jobs, he said, but good jobs. That is an admirable aspiration, but, with the hon. Gentleman's policies, it is an impossible dream. The hon. Member for Peckham has been more cautious. I think that she may be developing some chief secretarial tendencies after all. Interviewed on Channel 4 by Vincent Hanna, the hon. Lady said :

"What we are committed to is full employment redefined to take account of the changing circumstances of the economy."

Vincent Hanna said :

"So it's not full employment."

The hon. Lady replied :

"No, it's just a new definition of full employment."

However redefined, full and fulfilling employment for all would not be achieved by Labour. The party's claims are a sham, a cruel deceit of the unemployed and a remarkable piece of political dishonesty. The truth is that

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Governments cannot spend their way out of unemployment ; what we can do is help the unemployed to improve their skills. The long-term unemployed can lose both skills and motivation, but the Budget contains measures specifically designed to help them. A total of 30, 000 long-term unemployed will be able to take courses at colleges of further education, and will receive an allowance based on their benefit. We shall enable 60,000 more to tackle the tasks that are crying out to be performed in our communities.

On top of that, we shall set up innovative pilot schemes, paying a subsidy to employers who take people on to their books after they have been out of work for a long period. The subsidy will be based on benefit rates. It will be withdrawn in stages, but we hope that, by then, many of the people concerned will have proved themselves, and that their employers will be happy to keep them on. Those are truly pioneering schemes, and they have been widely welcomed.

These Budget schemes cost money--£230 million in all. Our latest proposals add to the large amount that the Government already spend on training and help for the unemployed. We are now spending £2.8 billion a year on helping the unemployed, and offering 1.5 million opportunities. If those whom we are now training are to find jobs in future, however, we need sustained recovery and a sound economy. Unemployment can be brought down ; jobs can be created. Between 1984 and 1990, the United Kingdom economy produced 3 million extra jobs. That was the best performance in Europe. Even now, Britain still has more people in work than it had 10 years ago, and more of the work force are employed than in any other major European Community country.

We have the conditions for recovery and job creation. We have the lowest interest rates in Europe ; inflation is below the European average and at its lowest level for a quarter of a century ; we have the lowest corporation tax rates in the European Community or the G7 ; we have a top income tax rate of 40 per cent., which is much lower than the top rate in Italy, Germany and France ; we have rising manufacturing investment, rising productivity--it is rising faster than it has for five years--rising manufacturing exports, the highest level that we have ever had, and rising business optimism : it is at its highest for five years. Moreover, the punitive regulations of the social chapter will apply to others, but not to us. For that reason, foreign companies are flocking to the United Kingdom.

The Budget has created the conditions for a lasting recovery. It helps business and tackles Government borrowing : it provides a climate for growth. British business is enjoying low inflation and low interest rates. It knows that the Government are responsive to wealth creators ; it sees that we have established a clear strategy to control spending and raise revenue. That is the achievement of this Budget and that is why I commend it to the House.

4.48 pm

Mr. A. J. Beith (Berwick-upon-Tweed) : As I listened to the Chief Secretary, I recalled that he had written a pamphlet entitled "A Vision for the 1990s". I wondered whether this was the Chief Secretary who argued in the pamphlet for

"an ultra low tax, high growth economy."

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He is the Chief Secretary who has to describe to us an economy which is not growing and who is trying to defend a Budget which includes significant tax increases. However, he is also the Chief Secretary who wrote in the pamphlet :

"No Conservative can want to rest at present levels of taxation in Britain."

He has certainly given a new meaning to that phrase.

It has now become clear that the Government are a tax-raising Government. Of course, that was the case before it was less clear. The Government have raised taxes regularly and consistently. The question that the Chief Secretary left with us, even at the end of his speech, is how much more are the Government prepared to raise taxes in order to deal with the public sector borrowing requirement which they forecast? Even on the Government's own assumptions about recovery, there is a £30 billion PSBR at the end of the period described in the forecast. From what the Chief Secretary said, that does not sound like something he is prepared to accept or approve. Is there a further strategy of more tax increases if the Government are shown to have been too optimistic and if the recovery does not occur? That is the question that Ministers must answer in the debate. It is a question asked not only by hon. Members but by the markets and those who lend to the Government. If the Government are so confident, one wonders why they are prepared to offer such a high real rate of return on gilts to the market. If inflation is going to be kept down to the extent that the Government prophesy, they are offering a very favourable rate of return on gilts.

The Budget confirms failure and does not build success. The price of that failure is visited heavily on the many families and individuals on low and modest incomes, through the 1p on national insurance and the 17.5 per cent. value added tax for fuel. The useful aspects of the Budget, such as the adoption--on a limited basis--of our proposal to convert benefits into a job subsidy for the long-term unemployed, are simply not enough to speed up recovery.

Of course, I welcome the fact that the Government have shown an interest in our proposal, but I was surprised that they want to limit it to people who have been unemployed for two years. Many more people who have been unemployed for between six months and two years could also benefit from the scheme. The idea of introducing only a pilot study will mean that, on the Government's best assumptions, a maximum of only 10,000 people can be helped. We believe that many more could be helped without significant cost to the Exchequer. The idea is to transfer benefits to a job subsidy. Our proposals involved transferring only part of the benefits so that any displacement costs would be covered. However, the job-encouraging projects are not sufficient to speed up recovery, and nor are the capital projects. Very little is new in the capital projects which the Chancellor chose to mention yesterday. The Heathrow link has been with us for ages, and proposals and Bills have been before the House for a long time. It is no great new bonus to the construction industry. The channel tunnel link has been thrown into absolute confusion by the Government's announcement. British Rail has done all its work for a King's Cross terminal, but the terminal is now to be at St. Pancras. We hope that the project will go ahead, but it will be delayed and further confused. It seems that crossrail will disappear without trace on the basis of yesterday's announcement.

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Let us consider the autumn statement. We were told, very disingenuously, that the Jubilee line was to go ahead. That announcement was made in the autumn statement, but the line is still not going ahead because the private sector does not think that the funding which the Government have so far offered is adequate. That was the case when the announcement was made, and it is still the case. The capital projects are far too limited to promote a real recovery.

What does the Budget tell us about the general economy? It tells us how big a mess the Government have got us into--a £50 billion deficit and little sign of the promised post-election recovery. We were promised, as soon as it was announced that the Conservatives had won the election, that recovery would take off. It did not happen. Instead, we have massive unemployment, which makes the debt problem spiral. We cannot tax our way out of that spiral. We must reduce unemployment if we are to give confidence to business and to individuals.

Individuals do not rush out to buy goods in the shops, even if interest rates are lower, because they fear that they or their families will be hit by unemployment. They may now fear that they will be hit hard by the tax changes which are to come. Even if it is relatively cheap to borrow capital, businesses will not borrow if they see no prospect of selling the goods that they make because they will not have a return on that capital.

It is necessary to have capital spending of a kind that will benefit the construction industry. It is necessary to have a job start scheme on a much larger scale. It is also necessary to help small businesses--an area in which the Government have taken up a number of the ideas that we and small business organisations suggested to them.

In some cases, the Government could have done more. The VAT threshold for accounting could have been raised to a much higher level. The Chief Secretary must bear in mind that companies which have tried to cut their costs or have tried to expand by moving premises will not benefit from transitional relief, so they still have the problem of the uniform business rate. There were some helpful changes in that sector, but they do not add up to enough to make the vital difference.

A more comprehensive programme of the kind that we advocate would need to be backed by an anti-inflation monetary discipline, but we do not have that. The Chancellor was fascinating and revealing on the subject of the exchange rate mechanism. He explained what a good thing it had been and how valuable in reducing inflation but how much better off we were going to be now that we were out of it. He made it sound as if we had been to a health farm for a couple of weeks to lose weight, but, thank goodness, we did not need to go back again. It is not like that. Sooner or later we shall need to apply an effective anti-inflation discipline again, but we do not have it. All that we have is a series of indicators from which the Chancellor can pick and choose, depending on how he feels when he gets up in the morning. That is not a coherent or understood basis for monetary policy, and not one on which the Government and the markets can rely.

With neither the type of programme nor the discipline that I have described, we face the prospect of sustained high unemployment as well as a continuing high public sector borrowing requirement, even if the Chancellor's optimism is justified. How is that hole to be filled? That question has not been answered.

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Let us consider the tax measures that the Government have introduced. The Chancellor announced the tax on domestic fuel with a thinly veiled attempt to curry the support of the Eurosceptics in his party. That technique has not been developed very successfully by Government Whips in any event but, in this case, the Chancellor tried to curry that support by arguing that it would be not a European but a British tax. The Eurosceptics might be expected to oppose the harmonisation of VAT rates, but the Chancellor said that there would be no nasty European energy tax for us as we have a much nastier tax of our own.

It is much nastier because it is not an energy or resource tax. It is not directed at resource use or pollution. Orimulsion and windpower are taxed on the same basis under VAT. Oil and solar power have the same impost levied on them under VAT. They will attract VAT of 17.5 per cent., as will the standing charge which is so hated by pensioners who try to keep down their energy costs. All will be subject to 17.5 per cent. VAT. The new arrangement does not discriminate as a carbon, energy or resource tax would.

Just such a tax is on the agenda of the Council of Ministers and will come up in April under the Danish presidency. It appears that it is backed by a great deal of Danish commitment. The Chancellor has sought to pre-empt the decision by substituting a tax which does not draw any distinction on the basis of energy efficiency, of pollution or of resource use. It is a tax designed to raise revenue, but the Chancellor would be a very disappointed man if it achieved its effect. If the tax had the effect of drastically reducing energy consumption, he would not get his revenue.

The tax will not have that effect because it is targeted at those whose demand for energy cannot be elastic. It is directed not at industry but at the ordinary domestic consumer. It will bear heavily on families who have no choice, especially tenants of badly built houses, which are not energy efficient. Those people have no choice about where to live--they probably live in the only house allocated to them when they applied to the council. The tax will hit pensioners hard, especially in the north and in Scotland where energy costs are necessarily higher. The unspecified benefit changes, which the Chief Secretary was unable to define or explain, will not help those who are just above the benefit levels.

It is a stock response of Governments, when introducing a new penal impost, to say, "There is no need to worry, because poor people will be helped by benefits." On the basis of what we have heard today, I do not think that they will--but apart from that, it is on the many people who are struggling to pay their way and who are not entitled to any benefits at all that such a tax bears so heavily. Pensioners with just a little bit of capital saved for their retirement, who receive no benefits because of those savings, will receive no compensation for the energy tax. Working families just above benefit levels are among the people who will be hit hard.

The Chancellor should remember his election campaigns. He should remember the way in which he attacked other parties for the possibility that they might introduce taxes on energy. He has proposed a far more drastic petrol tax than we did, and without any of the safeguards for rural areas. Would he be kind enough to trawl through the

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stock of Conservative leaflets that argued so vigorously and bitterly that anybody who voted Liberal Democrat risked higher energy charges, especially charges on petrol? The Government have gone far beyond anything that we proposed in either direction.

Let us examine the other key taxation element in the

Budget--personal taxation. The most devious tax increase is the raising of employee's national insurance contributions. In all but name, that is an increase in income tax--something that the Conservatives said that they would not introduce. It is even worse than an increase in income tax, because it is not as fair. It does not apply to higher levels of income, and makes the anomalies of the national insurance system even worse-- national insurance does not apply to perks and all the other factors that the income tax system covers. That is because of the distinctive, and now outdated, character of the national insurance contribution.

The Chancellor tried to justify the increase in national insurance contributions by saying that there was a shortfall in the national insurance fund. But Ministers know perfectly well that the fund has become a fiction, and that there will still be a shortfall in it. This is a tax increase, and it was designed to be a tax increase--but it is a badly designed tax increase.

The broadening of the 20p income tax band is worth only £25 next year for someone earning as little as £5,500 a year. That will not even offset the increase in employees' national insurance contributions. Someone on average earnings will be £125 worse off because of the increase in national insurance contributions, even after the extension of the 20p income tax band has been accounted for. When the freezing of the personal allowance has been taken into account such a person will be £215 worse off. Ministers' descriptions of what they are doing have not been entirely accurate or fair. Mortgage interest tax relief is another subject on which Ministers have consistently attacked other parties for considering measures on which they themselves are now embarking. I vividly remember how, during the general election campaign, our proposals for radical reform of mortgage interest tax relief were furiously attacked by Ministers who implied that Conservatives would never touch this sacred benefit--it was to be preserved for all time. Now they have restricted mortgage tax relief further, but there has been no genuine radical reform. The Government are not transferring help to poorer people so that they can buy houses.

The basic trouble with the system, even when it is modified by being restricted to the 20p rate, is that it still gives a lot more help to people who can afford to buy larger and more expensive houses, with larger mortgages. Furthermore, people paying little or no tax cannot benefit from the relief. There is no longer the old alternative of the option mortgage scheme that used to direct help to people on low incomes who were trying to buy houses.

The Government seem to recognise that mortgage interest tax relief is not a good system. Indeed, I believe that there is increasing recognition of that fact even among Conservatives who fought the election pledged to preserve the system for ever. However, if the Government intend to reform the system, they should do so in ways that genuinely help people suffering hardship, and assist the housing market, too.

There are in the Budget measures helpful to industry and small business. Some of them, such as the cash

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accounting on VAT, are cut-down versions of our proposals. Several measures have, rightly, been welcomed by the CBI and other industrial organisations.

The advance corporation tax proposal is so complicated that I decline to give a more considered judgment on it until I have examined it for a lot longer--but action clearly needed to be taken, because the old system operated against the interests of some of our best and most efficient exporting companies. I hope that the Government have got it right. We shall discover whether they have when we examine the measure in more detail in the Finance Bill. My anxiety is that the changes do not add up to a programme that will restore confidence, let alone a programme to rebuild the manufacturing industry about which the Prime Minister now says that he has always been concerned. The Budget is the bill that taxpayers are having to meet for the catastrophic mismanagement of the economy under the Conservatives. It does not relieve that bill with any adequate stimulus for recovery, and it exacts payment through the very taxes that the Prime Minister and the Chancellor promised not to increase--the very taxes that they accused other parties of favouring. That is not so much the Clinton approach as the Bush approach--one goes into an election campaign denouncing things which one then goes on to do. Perhaps the Conservatives will be able to demonstrate that that is the only way to win general elections. That would be a cynical commentry on the way in which politics have developed. The Conservatives have debased politics by seeking election on a platform of low taxes while pursuing a policy of high taxes.

Mr. Rod Richards (Clwyd, North-West) : Does the right hon. Gentleman recall his party's document, "The Policy Declaration for the Social and Liberal Democrats", dated 1988 which says : "The party should therefore not be afraid to extend VAT over several years to food, children's clothing, domestic fuel, newspapers and financial services"?

Will he comment on that?

Mr. Beith : I recall that document vividly, and also how totally it was repudiated within six hours of its having been produced by the two then leaders of the party. I recall that occasion with special affection, because I was one of those who was most determined to repudiate the document. On this matter it was plain wrong, and I am sorry that the hon. Member for Clwyd, North-West (Mr. Richards) has not only read it but been influenced by it, and is pursuing part of the policy set out in it. In that respect it was plain wrong. I said so at the time, and so did my parliamentary colleagues, which is why the document never became party policy.

I was arguing that the Government have bebased politics by seeking election on a platform of low taxes while pursuing a policy of high taxes. They have reduced the economy to the point at which, according to their own forecasts, even the large tax increases proposed will achieve not a balanced budget but a £30 billion deficit. The Government should go.

I believe that the British public are entitled to a re-run of the general election, in which the Conservative party is required to stand on the policies that it is in fact pursuing. I invite the Prime Minister to arrange just such a re-run of

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the general election. I am sorry that, for the saddest of reasons, it is only the voters of Newbury who will have the opportunity to deliver that judgment.

5.7 pm

Mr. Michael Jopling (Westmorland and Lonsdale) : I hope that the right hon. Member for Berwick-upon-Tweed (Mr. Beith) will forgive me if I do not follow him exactly, except to say that I was interested to hear another example of the typical Liberal Democrat party posture of having a new policy every day. If the policy that they have tomorrow does not suit them, they change it for the day after tomorrow.

The right hon. Gentleman used words such as "catastrophic failure of economic policy" to describe the Government's performance. I guess that, in the middle of the recession, opposition parties all round the world are using that parrot cry about the Governments with which they are confronted. It is not very constructive.

I hope that my remarks will be short, and I shall divide them into two parts. First I shall speak about the Budget ; secondly, I want to express my significant anxieties about where it leaves us for the future.

I welcome the Budget, which I believe is constructive and helpful. I especially welcome some parts of it. In my constituency, where there are many small businesses, the measures proposed by the Chancellor, especially those on VAT, will be a huge help. I hope that the House will endorse those measures when the time comes. I declare an interest as a director of Blagden Industries. We have been enormously penalised by the imposition of advance corporation tax, so I welcome the proposed changes to that.

I want to be brief, so I shall not dwell further on the Budget, except to say that I have grave anxieties about a public sector borrowing requirement of £50 billion this year. That is too much. Although the Government are right to spend more in a recession and to put up their borrowing requirement--Keynes is not yet dead, I guess--I point out to my right hon. Friend the Chief Secretary that I told him some weeks ago that there should be significant increases in taxation, given that level of public sector borrowing requirement. I hope that the Government have gone far enough in the Budget. I am enormously concerned to read the public sector borrowing requirement projections for the years ahead. They are summarised on the second page of the pamphlet published by the Treasury yesterday which is entitled, "The Budget in brief". Table 1, which deals with the public sector borrowing requirement, shows that, starting from £50 billion in 1993-94, there is a continuing PSBR, ending with £30 billion in the financial year 1997-98. When one adds up the figures, one realises that the horrific figure for the PSBR in the six years up to and including 1997-98 is no less than £233 billion. That figure should cause every one of us, especially Opposition Front-Bench Members who have been pleading for more and more Government spending, to hesitate.

I am really alarmed when I see in the Red Book what is projected to be the cost of servicing that massive debt. I invite the House to turn to page 73 of the Red Book and to look at the figures for central Government debt interest. The figure is due to rise from £17.5 billion in 1992-93 to £26 billion in 1995-96. What the Red Book does not make clear is the figures that are made clear in "The Budget in

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brief". In the extra two years up to 1997- 98, there is a further PSBR of £35 billion in 1996-97 and another £30 billion in 1997-98. It is almost impossible to avoid the conclusion that, in 1997-98, we are likely to have to look for £30 billion in debt interest. We shall be in the most uncomfortable position in that year, because, while borrowing £30 billion, we shall have to find another £30 billion to pay the interest on the debts that we have incurred.

Mr. William Ross (Londonderry, East) : I am interested in what the right hon. Gentleman says, because I have also noticed the figures. Does he think that the figures given for debt interest are too low, given that the total debt at that time must be more than £400 billion? Surely the Government must be projecting a debt interest rate of about 7 or 8 per cent. per annum. I fear that, with that level of debt, we shall not get money at such a rate of interest.

Mr. Jopling : If the hon. Gentleman looks at table 1 in "The Budget in brief", he will see just above the figures I mentioned for PSBR for six years the figures for the percentage of gross domestic product. It is all right to have a relatively high percentage in a single year, or even for two or three years. I commended the Government for that. However, to continue that for six years--as I said, the figure is £233 billion over six years--should cause anxiety to all of us.

I attempted to examine the implications of that huge bill in debt interest for the future rate of taxation necessary to pay for it. Having consulted the autumn statement tax ready reckoner, which the House has before it, I am forced to this conclusion. Revalued to 1993-94 prices, the increase in central Government debt interest from £17.5 billion in 1992-93 to £26 billion in 1995-96 is equivalent to about £6 billion. To raise that additional revenue at 1993-94 income levels would require an increase in the standard rate of VAT of about 2.75 per cent. or an increase in the basic rate of income tax of about 3.5 per cent., assuming that the increases applied for a full year.

I have made it clear that the figures in the Red Book take us only up to 1995-96 whereas the PSBR projections go up to 1997-98. There is a further £65 billion of debt added in the final two years. Extrapolating from those figures, the implication of what is in the pamphlet is that paying for that debt would require either an increase in VAT at that time of 4 per cent. or an increase in income tax of 5 per cent.

Mr. Townend : Does my hon. Friend agree that there is an alternative? That alternative is to take a long and hard look at public spending.

Mr. Jopling : I am coming precisely to that point, but I am grateful to my hon. Friend for raising it. My hon. Friend has arrived at the next point in my thought process slightly before I got to it. The figures for debt interest in the years ahead just will not do. The Government really cannot go on on the basis of those figures for the years ahead.

The Treasury has three options for dealing with the situation, which will otherwise be intolerable. The first is to increase taxation. The second is to spend far less, as my hon. Friend the Member for Bridlington (Mr. Townend) suggested. The third is to engineer much faster growth in

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the economy. The Government are likely to have to do all three. I hope that they will not cringe from further taxation in the November Budget or after that.

I hope that my right hon. Friend the Chief Secretary will be more than usually tough and hard in the public expenditure survey round, which I presume will be, as usual, in the summer and autumn. I hope that the Chancellor will continue to do what he has been doing to encourage business, to encourage the economy and to get more growth. Clearly, that is a way in which we can find the funds to deal with the extremely worrying situation that will develop.

To sum up, the Government have been correct this year, but the projections for the next four years are unacceptable. There is a great deal of hard work to be done, and the Government will have to take a great many tough decisions. I urge them not to shrink from taking them.

5.19 pm

Mr. Dennis Canavan (Falkirk, West) : There were great hopes that yesterday's Budget would be a Budget for jobs. Sadly, however, those hopes have been dashed. The whole country needs a Budget for jobs, given that, even according to the Government's official figures, there are 3 million people unemployed. We all know that the Government have tried to fiddle the figures more than 20 times and that the real level of unemployment is over the 4 million mark, which means that unemployment has quadrupled since the Tories came to power.

Much has been said about the social cost of unemployment, but the economic cost is also considerable. It costs the Treasury about £9, 000 per year to keep a person on the dole rather than in work. That means that, even on the Government's figure of 3 million, the total cost per year is £27 billion. It is surely common sense to ask why we cannot invest that kind of money in the creation of real jobs and real training opportunities for unemployed people. Why cannot we invest in the construction industry, in housing improvement and insulation programmes, in the provision of infrastructure, in the electrification of the railways and in the many socially useful as well as economically viable projects required throughout the country? The Chancellor specifically mentioned the Heathrow Express and the link from the channel tunnel to St. Pancras. But what about high-speed rail links with the channel tunnel from Scotland and the north of England? I detected no mention of them in the Chancellor's statement.

The Chancellor announced only a few measures that might help a maximum of 100,000 unemployed people--a mere 2.5 per cent. of the total. In Scotland alone, 62,000 manufacturing jobs have been lost in the past three years and more than 10,000 businesses have collapsed in the past year.

The Scottish manufacturing base has been decimated to such an extent that we are surely entitled to look to the Government for special measures to assist what industry we have left in Scotland. Take the Scotch whisky industry, for example. Taking into account the employment generated indirectly by that industry--in bottling, packaging and so on--it employs about 70,000 people, which is a considerable number. Yet a few weeks ago,

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United Distillers proposed 700 redundancies and several plant closures, including the closure of the Rosebank distillery in my constituency.

Part of the problem facing the industry and those employed in it is the unfair competition that is the direct result of the lack of fairness in the Government's own tax regime. It is no use blaming the European Community, because the Government have the power to take unilateral initiatives to try to create a level playing field. Although they took one small step in that direction yesterday, there is still a long way to go to end the tax discrimination against the Scotch whisky industry, the unfair competition from imported wines from France, and so on. I urge the Chief Secretary to pass on that message to the Chancellor. We are grateful for small mercies, but it is about time that the Government took much more radical measures to help the industry.

The Budget is also a Budget of broken commitments. The Government have clearly reneged on their election promises not to extend the scope of VAT and not to increase national insurance contributions. They have done both. The 1 per cent. increase in national insurance contributions is, in reality, a tax increase. In fact, it is worse--and more regressive--because it will hit people on lower incomes even harder.

Probably the worst feature of the Budget, and the one that has deservedly come in for the most scathing criticism, is the proposal to impose VAT on domestic fuel and power. The Chanceller tried to justify it yesterday by claiming that other European countries do not zero-rate domestic fuel and power. Let me give him another European comparison. There has been a higher percentage increase in the number of winter deaths in this country than in other European countries of a similar climate. Many of those deaths are caused by hypothermia and other cold-related diseases.

Pensioners and families on low incomes are suffering from fuel poverty to such an extent that, particularly during the winter months, many of them face a choice between eating and heating ; they cannot afford both. In Britain today, there are about 6 million homes that cannot be heated to the basic standards for healthy living set by the World Health Organisation. The 17.5 per cent. increase in domestic fuel bills will make matters considerably worse.

The Chancellor said yesterday that there will be additional help from the Department of Social Security for people on income support, but the Chief Secretary gave no commitment to my hon. Friend the Member for Dunfermline, East (Mr. Brown) who asked whether that additional help would meet the whole of the additional fuel burden that people on low incomes face.

The Campaign for Cold Weather Credits has been fighting for some time for a more equitable system of assistance to help people on low incomes meet their fuel bills during the winter. It suggested the extension of the £6 per week cold weather allowance--which is not very much, after all- -to all recipients of income support during the months December to March inclusive. I understand that the total cost of that would be about £550 million. However, when I wrote to the Secretary of State for Social Services suggesting that that scheme be adopted, I received an unsympathetic and negative reply, so I am not hopeful. We shall have to wait and see what the Secretary of State comes up with in his statement, which I hope will be made soon.

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The fact remains that there are many individuals and families on low incomes who do not qualify for income support and, according to the Chancellor's statement yesterday, they will get no assistance whatever to help them meet the 17.5 per cent. increase in their fuel bills.

It is ironic that many of the victims of fuel poverty are literally sitting on top of hundreds of thousands of tonnes of viable and workable coal reserves which are in danger of being abandoned because of the Government's nonsensical energy policy and proposed pit closures.

As the Liberal spokesman, the right hon. Member for

Berwick-upon-Tweed (Mr. Beith), said, it is undoubtedly a feature of the Budget that people on low incomes are being asked to pay for the Government's economic failures. From when the Conservative Government came to power until the end of the last financial year, the Treasury received £132 billion in revenue from North sea oil and proceeds from privatisation of various industries and public services. What have the Government done with that money? Instead of investing it in our future, they have frittered much of it away in tax benefits to their rich friends.

Investment in manufacturing industry is 6 per cent. lower than it was in 1979. Manufacturing trade has been in deficit since 1983. As the right hon. Member for Westmorland and Lonsdale (Mr. Jopling) said, the public sector borrowing requirement is at an intolerably high level. The Government's own estimate for the next financial year is £50 billion. The Government have brought the country to the brink of economic ruin and we would be down the plug hole completely if it were not for the proceeds of privatisation and North sea oil revenues.

Sadly, the Budget is a missed opportunity. It will do nothing to promote economic recovery. It will do nothing to create real jobs or training opportunities for unemployed people. It will do nothing to create or redistribute wealth. It will reduce the living standards of people on low incomes and try to make them pay for the economic failures of this discredited Government.

The only consolation is that yesterday's Budget statement will probably be the last to be made by the present Chancellor of the Exchequer. His departure will not be regretted and I hope that he will take the Chief Secretary to the Treasury with him.

5.31 pm

Mr. Michael Brown (Brigg and Cleethorpes) : I shall dwell on the last comment of the hon. Member for Falkirk, West (Mr. Canavan) because it is frightfully important. I very much hope that my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) delivers the next Budget and the next public expenditure round with my right hon. Friend the Member for Enfield, Southgate (Mr. Portillo). It is essential that the policy which my right hon. Friend the Chancellor of the Exchequer announced yesterday is seen through.

I have never suggested to my right hon. Friend the Prime Minister whom he should or should not have in his Cabinet, but I intend to do so today. I hope that he will bear it in mind. It is essential that my right hon. Friend the Chancellor of the Exchequer should present the next Budget, and especially the one after that, because he must see through the strategy that he produced yesterday for economic recovery and to deal with the public sector borrowing requirement.

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