House of Commons Hansard Debates for 18 Mar 1993

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The prime objective for this Government, as for any Government, must be economic growth. Economic growth underpins the ability to pay for our public services, such as schools and hospitals ; it enables businesses to invest and prosper ; it stimulates new jobs and underpins the ability of my right hon. Friend the Secretary of State for Employment to introduce the package of measures which form part of the Budget.

It is not taxation which does those things. Taxation merely redistributes money which other people earn. It may be argued, however, that the ability to tax is dependent on economic growth, so my right hon. Friend the Chancellor is right to adopt a neutral fiscal stance for the coming year and to build on the series of measures in his autumn statement aimed at fostering the economic recovery which is taking place even now, as recent evidence from industry and the retail sector illustrates.

Although there is mounting evidence of a more prosperous economic climate, to which my right hon. Friend the Secretary of State for Employment referred in her speech, imposing a significantly heavier tax burden in the coming year could have stifled recovery and been profoundly counter- productive. My hon. Friend the Chancellor has performed a finely poised balancing act and has built in additional flexibility and room for manoeuvre if circumstances turn out, as they have a habit of doing, to be different from those expected. On that point, provided that a firm grip is kept on public sector spending, my right hon. Friend and his advisers in the Treasury may be under-estimating the extent of the recovery in the medium term, and may be erring on the side of caution in respect of the public sector borrowing requirement deficit in future years. Let us hope so, for at 5.5 per cent. of gross domestic product in 1995-96 the forecast PSBR burden is still daunting. Indeed, looking over the next four years, the total PSBR is forecast to be £86 billion higher than the total projected last year for the same period. Therefore, let no one underestimate the difficulties that we face.

As I have said, however, I believe that that forecast may be unduly pessimistic. First, it is conceivable that growth will exceed expectations. For example, the growth forecast for 1992, made by my right hon. Friend as late as his autumn statement, has already proved to be 0.5 per cent. too gloomy. Secondly, we have every reason to be confident that my right hon. Friend the Chief Secretary, in his review of public spending, will not baulk at taking the difficult decisions which circumstances demand. That will be vital to underpin the restoration of a sound and balanced economy.

On a specific point, I give an especial welcome to my right hon. Friend the Chancellor's proposals to reform advance corporation tax. I detected the fluttering of eyelids as my right hon. Friend moved into that part of his speech on Tuesday ; none the less, his proposals represent a significant and welcome reform. The present system, which has caused British-based firms with substantial overseas earnings frequently to end up with an ACT bill on their dividends greater than their entire United Kingdom corporation tax liability, has caused justified resentment for some years. More importantly, it has had the effect of exporting important areas of activity, such as research and development, and with them jobs. I know of a number of international companies with head offices in Britain which were seriously, albeit reluctantly, considering relocating elsewhere, especially

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within the European Community, because of problems with ACT. The measures announced by my right hon. Friend will enable them to stay. That will be as much a relief to them as it will be to all who care about retaining employment in this country and in particular about bolstering London as one of the world's great financial centres. The eventual 5 per cent. reduction in the rate of ACT payable on dividends is also welcome. It represents a redistribution of moneys from gross investment funds into corporate management, which will provide a significant cash flow advantage to business of around £1 billion next year. I hope that business managers whose companies will benefit will resist all temptations, as well as pressures, simply to use the extra moneys to top up their dividend payments. United Kingdom dividend yields are already substantially in excess of those in other developed countries, notably Germany and Japan.

The provisions on ACT, and the extra boost to help export markets, which are welcome and important, will benefit principally large firms. I am glad that my right hon. Friend continues to recognise the vital importance of small firms in generating economic activity and jobs. Small firms have been among the hardest hit during the recession, although there are many more in business than there were only a few years ago, but it will be small firms which will be in the front line of economic recovery. As my hon. Friend the Member for Surrey, North-West (Sir M. Grylls) has said, this is a five-star Budget for small businesses.

My right hon. Friend's finely judged and thoughtful Budget will help foster recovery in the year ahead and beyond. In the medium term, his tax proposals will blend with economic recovery to deliver a sure underpinning to prosperity. I welcome the Budget.

6.36 pm

Mr. John Garrett (Norwich, South) : I want to spend a few minutes on budgetary reform, an important but arcane subject which does not interest many hon. Members. Anyone who goes on about it tends to be thought a crank, so I shall be brief on the subject.

I am pleased that this is the last of the March, traditional, taxation-only Budgets and that in future taxation and public spending measures will be presented together in December. The integrated Budget is a reform which I and others have advocated for many years--not that it will be all that it is cracked up to be. The estimates for Government spending will still be presented in March, so we shall not be able to link the spending of individual Departments with the taxation proposals required to fund that spending.

In addition, while taxation is presented through a Finance Bill, which will be examined for weeks in Committee, changes in social security and other benefits will be introduced through statutory instruments, which are hardly discussed at all and are unalterable. Minor taxation is discussed at length, but the huge sums involved in social security expenditure and the massive changes in entitlement to benefit are often debated for only an hour and a half or less, and nothing can be done about them.

We also have the problem of a flood of financial and statistical data--one cannot call it information--from Departments and agencies. All that is presented on bases that cannot be compared. There is no indication of the

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supposed result of spending. So, as I have said before in the House, we are continually told what we are spending, but we are not told what we are buying. In other words, the Government tell us what the inputs are, in terms of funding and programmes, but not what the outputs are, so we can never establish the effectiveness of Government spending. That is a great weakness of our system. Spending programmes are not related in any way to targeting improvements in health, environmental protection, crime and all the rest. That is not surprising, because the Government do not expect improvements. All the same, we are entitled to better information. Spending is not considered adequately, even on the Floor of the House. Very few Select Committees examine it ; to do so they would need much larger staffs. Much reform is needed in the examination of Government accounts and the results of spending programmes. Although the subject interests very few people, it is of great importance. We have heard that this was a Budget for jobs. In the Norwich travel-to-work area, there are 14,700 unemployed. In the area covered by Norwich city council, there are 8,500 unemployed. In my constituency, the unemployment total is up from 3,300 in 1990 to 5, 600. That is a record for what was a prosperous area a few years ago. As my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) said, this "Budget for jobs" provides only £125 million in new money that can be used to put people back to work. It amounts to less than £1 a week for each person who is out of work. Only one in 10 of the long-term unemployed and only one in 30 of all unemployed will be helped by the Budget proposals on business start-ups, learning for work and the community action programme.

That has to be set against the huge cut in vocational training places since the Chancellor of the Exchequer took office. The fact is that there are 80,000 fewer vocational training places than when the Chancellor came to office. There has been a 14 per cent. cut in Government spending on training from 1990-91 to the present financial year, while unemployment has risen by 87 per cent.

In 1989-90, employment training had 430,000 trainee starts. Last year that number was down to 210,000. It has been more than halved. Spending on employment training and employment action--a scheme which is apparently designed to augment employment training--has fallen from £1.2 billion in 1990-91 to £883 million. The new training for work scheme, which is supposed to roll these two programmes together, involves an even lower level of spending. It has gone down by £87 million on last year's £883 million.

A recession, as we have all learnt since the 1930s and before, is the time to invest in training. We suffer from a massive lack of skills compared with our competitors, a point which is easily verifiable. This is a huge missed opportunity. Look at the difficulty that a mature entrant to, say, a college has in obtaining funding--which is almost invariably discretionary and which, in my case, is from the shire county--for vocational skills training. It is almost impossible to obtain funding for both maintenance and tuition.

We have heard about recovery from the recession. We know that there is a time lag between recovery from a recession--which I assume is shown by an increase in output for three quarters in succession--and a fall in unemployment. I am a member of the Treasury Select Committee. For the last two years at least, the Chancellor of the Exchequer has come before that Committee and

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said in public that there were green shoots of recovery, that recovery was round the corner and that the conditions for recovery were in place. But there is little evidence of it. Next year, according to the Red Book, growth in gross domestic product is forecast to be 1.25 per cent., which is so low that a further increase in unemployment is inevitable. Unemployment is forecast to increase by 200,000.

Investment in either the private or the public sector will barely increase. The forecast for the public sector borrowing requirement, two years on, is £30 billion, even after a £10 billion increase in taxation. In 1992, the trade deficit was £12 billion, and the forecast is that it will be £18.5 billion in 1994. That adds up to a description of an economy that is in a desperate situation. We know from the leaked but now stifled Department of Trade and Industry report on Britain's trading position that we have a long-standing crisis in investment in skills and in research. Even when recovery comes, unemployment will still be over 3 million, even on the cooked figures that we have been given.

The infrastructure is collapsing. We only have to look around London, eastern England and the south-east to see that. Housing is in a desperate state. I represent a city which was the best housed city in the country. The Chancellor did nothing to ease the housing problem. Norwich has over £30 million locked up in receipts from the sale of council houses which it could put to use tomorrow to build more council houses.

House building is a classic way in which to begin to get out of a recession. It puts people back to work. The skills are available. There is a very low import content. It works quickly ; it gets people earning quickly instead of drawing the dole.

The Chancellor of the Exchequer appears to be a late convert to the views of Keynes, for he announced some large public works projects, but two out of three of those projects depend on unnamed private participants. Furthermore, all those projects are in the south-east of England, so the impact on the rest of the country will be very slight.

As for the social impact, the Budget hits the poorest hardest, particularly those just above benefit level. Even if the Government compensate those on benefit, those just above that level will have no prospect of an increase in their income to cover the announced tax and VAT increases. The £6.5 billion tax increase in 1994-95 and the £10.5 billion tax increase in 1995-96 represent the biggest tax increase ever dropped on this country by a party whose constant pledge and whose one claim has been to reduce taxation. The Budget does not meet the needs of the time. It is the product of a fundamentally dishonest Government.

6.45 pm

Mr. David Nicholson (Taunton) : This is my first speech on economic policy since I was elected in 1987, so the House will understand if I refer occasionally to some of the tendencies that have led to the present situation. The Budget and our debates upon it show the very great problems and costs--I emphasise costs--which flow from economic stagnation and recession.

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I welcome the signs that this country may at long last be moving out of recession--before and ahead of European countries which are deep in recession, as I reminded the shadow Chancellor of the Exchequer, the hon. Member for Dunfermline, East (Mr. Brown) yesterday.

I welcome the fall in unemployment announced today. I welcome the measures announced by my right hon. Friend the Prime Minister today relating to value added tax. I also welcome the measures announced today by my right hon. Friend the Secretary of State for Employment and her explanation to me earlier in the debate of their piloting and explorative scope. They are in addition to the very large measures which have already been taken to increase training.

I note that no Liberal Democrat Member is in the Chamber at present, but the hon. Member for North Cornwall (Mr. Tyler), who is normally a vigorous critic, is reported in The Western Morning News , which is always accurate, as describing those employment measures as being "quite clever."

Much use has been made of the Chancellor's remark some time ago about unemployment being a price worth paying. I believe that, on reflection, my right hon. Friend probably regrets having made that remark. I do not believe that it has helped him in coping with the recent slings and arrows of political fortune. However, I believe that the view of the vast number of Conservative supporters and activists in the constituencies and of the vast majority of my hon. Friends--indeed, the common-sense view--is that high unemployment is morally offensive, socially damaging--although it can never excuse crime--and, most relevant for our Budget debates, financially very expensive indeed.

Having said that, I welcome the skill that my right hon. Friend the Chancellor of the Exchequer has shown in his various Budgets since he became Chancellor and also his autumn statement last year. I welcome the measures which, albeit cautiously, will assist British industry and commerce to move towards recovery--in particular the measures relating to export credits and the uniform business rate. I welcome also the measures-- these are particularly relevant to my right hon. Friend the Paymaster General relating to VAT penalties, and the small firms package which my hon. Friend the Member for Surrey, North-West (Sir M. Grylls) described as a five-star package. I welcome, too, the expansion--again cautious--of the 20 per cent. income tax band.

There are two lessons to be learnt from the recent management of the economy, both of which need to be considered not just by Ministers but by Treasury mandarins, economic advisers and forecasters and the whole financial establishment.

First, there was the rapid credit boom of 1987 to 1989, which I criticised in the House and in my constituency and which I believe is now seen as having been a source of grave economic weakness. In view of the consequences of that boom and, indeed, of what my right hon. Friend the Chancellor is doing in relation to mortgage interest relief, I do not think that there is a danger of a return to the sort of property market which distorts investment. The distorting of economic development by diverting investment resources into property has been a feature and a weakness of this country since the early 1970s.

The second weakness was the continuation--in my view, long beyond the need to cure the previous credit

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boom--of the policy of high interest and exchange rates. As I pointed out to the hon. Member for Dagenham (Mr. Gould) during a very interesting speech that he was delivering last Friday, that was not simply a reflection of the exchange rate mechanism--we can argue about the principle of the ERM--but resulted from the level at which we went in to the system and the level that we sustained. British industry has been damaged by high exchange rate policies on at least four occasions this century. It is relevant to point out that those policies were pursued in the past not just as a method of political and economic management but also almost as a religious and moral crusade. That happened under Governments of both parties. It happened in the period 1979-82, under a Conservative Chancellor, as it had happened under Lord Callaghan, a Labour Chancellor in the 1960s. The classic period, of course, was that of the man who was to become our greatest Prime Minister but who, as Chancellor, was very variable indeed. I refer, of course, to Winston Churchill, who was supported by Philip Snowden between 1925 and 1931.

As my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling) pointed out in a powerful speech yesterday, the prospects with regard to Government borrowing are worrying. That ought to underline, above all, the need in present circumstances to maximise growth and to avoid, remove or change policies damaging to industry, enterprise and jobs. This is so whether the policies concern exchange rates or interest rates, to which I have already referred, and which, happily, have now been removed, or whether they concern regulation, be it from Brussels, Whitehall or local government. Such policies have undoubtedly weakened small businesses and cost jobs. These are matters to which we must apply ourselves. The Department of Trade and Industry must also take a more active role in enabling industry and enterprise to take advantage of the export and import substitution opportunities created by last September's devaluation of sterling. Situations have been pointed out to me, in my own constituency and elsewhere, in which business depends on imports of semi-manufactured goods because this country does not have the production facilities or the quality to provide certain important materials. That is a weakness in our economy, and it is vitally important that it be tackled. We are running a massive and worrying trade deficit in the middle of a recession, and it is vital that our industry and commerce be enabled to address those weaknesses.

It is the view of some of my hon. Friends and of The Sun newspaper that the borrowing to which I referred earlier could be reduced by repeated cuts in the budgets of Ministers, as though expenditure on ministerial cars, red boxes and paper clips accounted for the main part of the problem. As a member of the Public Accounts Committee, I can confirm that there are opportunities to remove waste and inefficiency and that there is fraud in the social security field. However, the notion that we could resolve our borrowing and spending problems by being beastly to new age travellers-- although that is very desirable--is extremely naive. There is a limit to the amount of fat that can be removed from public spending. One soon gets to the red meat and bone of valuable spending programmes, which are not only used by readers of The Sun but are also used and valued by their children and their grannies.

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With regard to those expectations, we have to be cautious. I will give an example. In recent months, combating crime has become a very serious issue, not only in the inner cities but also in parts of rural and semi-rural England, such as my constituency and the rest of Somerset. That problem will not be solved on the cheap. We need more police in the inner cities and in rural areas.

My final point concerns the most controversial issue in the Budget--the proposal to extend VAT. This can be justified as a special environmental measure, although we may debate the details. I welcome what the Prime Minister said at Question Time today. We must also bear down on the charges of the electricity and gas industries, whose current profit levels indicate that that ought to be possible. However, I warn my right hon. Friends not to regard the hoped-for acceptance by the House of this special VAT extension to fuel and power as a bridgehead for extension into other zero- rated areas. I do not perceive acceptance of the idea of multi-rate VAT in Government circles. I might consider the idea of a 5 per cent. VAT rate, but I warn that a further extension would be resisted by me and by other hon. Members.

6.55 pm

Mrs. Anne Campbell (Cambridge) The last time inflation was at its current level was in 1967. We had a Labour Government, the economy was growing at a rate of 2.2 per cent., we had a manufacturing trade surplus, and the number of people unemployed was less than 350,000.

Mr. Dobson : Those were the days.

Mrs. Campbell : Indeed, those were the days.

This is a Budget of missed opportunities--a missed opportunity to put Britain back on the road to prosperity and growth ; a missed opportunity to put British people back to work ; and a missed opportunity to correct some of the unfairness of the last 14 years and give back to those on lower incomes what previous Chancellors took away. In fact, the Chancellor has made life worse for those on low incomes and pensions, and the unfairness will continue and worsen.

I welcome the dip in the unemployment figures. I sincerely hope that it is a long-term trend and not a short-term spurt of hope. However, my constituency has record unemployment. More than 4,000 people are unemployed for the first time, and male unemployment stands at over 15 per cent. But the Chancellor has not done anything that will help. What he has done for some small businesses amounts to no more than tinkering. These measures will not help capital investment ; they will not help to improve skills and technical expertise ; and they will certainly not help the transfer of technology from academia to industry which is absolutely vital to the future prosperity of our country.

In yesterday's Financial Times the director-general of the Engineering Employers' Federation complained of the

"apparent lack of understanding of the role of capital allowances in stimulating investment."

Last week, I had the great privilege of going to Germany with the Select Committee on Science and Technology to look at the way in which the German Government help industry there. We saw a whole raft of measures. For instance, the Max Plank institutes are engaged in first-class, high-powered technical innovation and world-class research. We saw the work of Fraumhofer institutes which take the ideas that come from the Max Plank

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institutes and the universities and turn them into research in technological innovation and engineering skills. We saw also the work of the Steinbeiss foundation, which takes ideas and problems from industry and helps to solve the problems. These institutions do not exist without Government help. In fact, they receive a great deal of Government help--assistance which is totally lacking in the British economy. The Chancellor has tried to cure toothache when the patient is suffering from cancer. I say that in all seriousness because I believe that the problems facing our economy could be terminal. In East Anglia, 87,000 people are unemployed. When the Prime Minister loses his job and moves back to Huntingdon, he will have to compete with 28 other people for every job vacancy. If he moves to King's Lynn, he will compete with 322 ; in Cromer he will compete with 246, and in Great Yarmouth with 149.

In the face of overwhelming evidence of manufacturing decline, what action does the Chancellor take? Well, he allows people to assess their own tax ; he makes minor modifications to the small firms loan guarantee scheme--

Mr. Heald : I am sorry to interrupt because I know that time is short. As unemployment in Huntingdon has fallen in the past few months, and as the Prime Minister will be in his job for many years to come, does the hon. Lady agree that her calculation might not be correct?

Mrs. Campbell : I am sure that the Prime Minister would not anticipate a second period of unemployment but, judging by what he said last May, he did not anticipate that the Government would have to increase VAT, so it would be difficult--

Mr. Garrett : We cannot rely on his judgment.

Mrs. Campbell : As my hon. Friend says from a sedentary position, we cannot rely on his judgment.

Are these the measures which will transform the British economy? I think not, because they are a gross underestimation of what our real problems are and what the solutions should be.

I deal now with broken promises, the increase in the cost of heating fuel, the imposition of value added tax and the way it will affect pensioners in my constituency. I have good reason to believe that the Budget will mean a choice between heating and eating for many pensioners in my constituency. Last March, I was privileged to visit many pensioners in their own homes. I clearly remember one pensioner in particular. He was in his early seventies and lived alone. I stayed in his house for about half an hour and he told me of the difficulties he was experiencing. He said that he was no longer able to run a small car to get around. He had stopped buying meat every day and bought it only twice a week. When I stood up to leave, I realised that I was very cold because his heating had been so low that it was not comfortable to sit there for any length of time. Many pensioners are in that position, and the Budget will make things even worse. Many will die of cold or starvation--what a terrible choice to have to make.

We have heard some facile comments from Conservative Members who tried to justify the imposition of VAT on domestic fuel by saying it is a green measure which will reduce carbon dioxide emissions into the

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atmosphere. I do not believe that because people whose heating is determined by cost already have their heating so low that it is not practicable or feasible to turn it down further.

If we really want to take effective green measures, we need to insulate homes. Why did the Chancellor not move in that direction? Why did he not encourage investment to stimulate the building and construction industries and get people to insulate their homes? Such measures would pay for themselves through genuine reductions in heating costs. My constituents will be extremely dismayed by the lack of such measures. We face the prospect of heating bills increasing steadily in the next two years and people being unable to pay them. The rise in petrol duty has also been heralded as a green tax. In my part of the world it will be seen not as a green tax but merely as a revenue-raising tax. I and my family have been fortunate enough to be able to manage without a car for the past five years. We have done so by using bicycles, our feet and public transport, but many people in my part of the world do not have a choice because transport is not available. People need transport to get to work every day and, for many, the only option is to use a car. Therefore, the measure will not be effective in reducing CO emissions but it will be effective in raising revenues because people have no choice.

The Budget is a disaster. It does nothing to deal with the underlying problems of the economy ; it will make people on lower incomes even poorer ; and it will do nothing to put the unemployed back to work or to improve the economy.

7.5 pm

Mr. Iain Duncan-Smith (Chingford) : I am pleased to have the opportunity to follow, at some point, the excellent speech by my right hon. Friend the Secretary of State for Employment. She outlined all the relevant facts, and I shall not repeat them. It is a measure of the importance that the Government place on matters within their brief, such as employment, that the skills and talents of my right hon. Friend and her team have been deployed in this instance. The Chancellor spoke of jobs coming from the private sector, which is an aspect on which I shall concentrate. I listened with great care and interest to the hon. Member for Holborn and St. Pancras (Mr. Dobson) and other hon. Members, and I was amazed by their lack of understanding of how employment is created. Before I came to the House, I used to run a company and was involved in manufacturing industry. It is perhaps relevant to describe to some hon. Members how jobs are created.

Jobs are created as a result of successful enterprise. I know of no business that has been set up solely to create jobs. Businesses are established as the result of an idea or the perception of a gap in the market. People provide goods and services, and jobs flow as a consequence. To listen to Labour Members, one would think that it was the other way round, that the jobs existed and someone looked for something to fill people's time. It is the ideas, drive, perseverance and determination of individuals which create jobs and get the economy going.

I remind the House that, during the 1980s, about 1 million new jobs were created on the basic principle of enterprise and filling a gap in the market. The Opposition still labour under the old idea, which I thought had died in

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the 1960s and 1970s, that the Government create jobs, that they can then pick winners from industry and decide who is to succeed at home and abroad. That idea failed, and it is time the Opposition realised it.

Throughout the 1980s, the Department of Employment focused consistently on training, retraining and re-skilling. It is important that the Budget placed great emphasis on such issues. The Budget was announced against a backdrop of about £2.5 billion spent on training, which is about two and a half times as much as was spent in 1979. I was especially pleased by three aspects of the Budget, which I shall highlight. First, I was pleased by the emphasis on training, vocational education and enterprise which will supplement other measures that we have introduced and which should result in about 100,000 more unemployed people being helped.

Secondly, I was pleased to learn that a community action programme is to be established, which will provide for 60,000 long-term unemployed people to take on voluntary projects. A new project will be set up for 30,000 people, who have been unemployed for six months or more, to be taught new skills. Those two measures are important and should be applauded.

Thirdly, I welcome the fact that the business start-up scheme is to be expanded.

VAT is a subject of particular concern, and in Chingford many people with small businesses have come to see me about it. I was interested to note that my right hon. Friend attacked that subject with gusto, and has introduced some crucial reforms. I was especially interested to find that the VAT threshold is to be raised to £37,600, which I applaud, and that the turnover ceiling for VAT cash accounting schemes is to be raised to £350,000--that subject has been raised with me and, I am sure, with other hon. Members on both sides of the House.

I am pleased, too, that there will be some relief on bad debts. Now they can be reclaimed only when they have been outstanding for a year, but my right hon. Friend has reduced the period to six months, for which he should be applauded. In addition, the misdirection penalty is to be replaced, interest chargeable is to be capped, and VAT penalties for misdirection will no longer be automatic. I wish to highlight all those excellent reforms, which were long overdue. Underlying the speech of the hon. Member for Holborn and St. Pancras was a little row that seems to be going on between him and the shadow Chancellor, the hon. Member for Dunfermline, East (Mr. Brown). On 14 February the hon. Member for Holborn and St. Pancras spoke on "The World This Weekend" about several expensive programmes that he would launch into if he were in power. He talked about saving 100,000 jobs here and 20,000 there, and about stopping various job losses in the public sector. He then refused to cost any of the programmes, saying that that was irrelevant.

However, his hon. Friend the shadow Chancellor says that the PSBR is already too high, and that Labour would not raise taxes--so clearly, they would not be able to introduce the measures mentioned by the hon. Member for Holborn and St. Pancras. There seems to be a schism between the two hon. Gentlemen. First, they talk about spending, spending, spending, and then they say, "We cannot raise taxes, and we have some responsibilities." It is high time that they got their act together and approached the subject in a logical and reasonable fashion that the public can understand.

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The simple fact is that Labour has no policies. We have listened to the speeches, and not once have we heard one policy from Labour Front-Bench spokesmen. They have not said what they would do were they in power. That clearly shows that they see their role at this point as solely to attack Government policy, and put nothing in its place-- [Interruption.] Opposition Members will have a chance to speak later, so I shall press on.

Another important factor in the background has been missed--the minimum wage. Opposition Members all signed up to it, and some time ago the hon. Member for Kingston upon Hull, East (Mr. Prescott) said :

"I knew the consequences were that there would be some shake-out--any silly fool knew that."

For those hon. Members--especially Opposition Members--who do not know what a shake-out means, I shall tell them : it means job losses. On top of that, the Opposition would pile more job losses, because it is clear that they would not now be able to raise the money to spend on all their programmes. It is the same old deal--they would tax, tax, tax and then spend, spend, spend, and ignore the sort of budget that was needed.

The Opposition have no policies. They offer nothing and could produce nothing for us when and if--God help us--they were ever in power. I therefore support the Budget that my right hon. Friend presented in such an excellent speech ; it is an excellent Budget for jobs.

7.13 pm

Mr. Eric Illsley (Barnsley, Central) : For the benefit of the hon. Member for Chingford (Mr. Duncan-Smith), I tell the House that we understand perfectly well how jobs are created. The hon. Gentleman does not understand that a Government can assist by providing contracts and projects for enterprise to take on, so as to produce employment. A Government can also produce available markets, as with the coal industry.

We have been told that the Budget was supposed to nurture the recovery. We have heard about that recovery for the past two years, yet I still see no sign of recovery, and nor do the people at Leyland DAF or Rolls-Royce. Will we see any next week, when we hope that the White Paper on the future of the energy industry, especially the coal mining industry, will be published?

This was a poor Budget for the unemployed. The Chancellor missed the opportunity to put something back into the economy to encourage recovery and reduce unemployment. As we have already heard, it was not a Budget for jobs. We are told that tax increases now would hinder any sign of recovery, yet in a three-year programme the Chancellor has taxed everything, through 1994-95 and even 1996, to ensure that the Government reduce the public sector borrowing requirement.

So confident is the Chancellor of that recovery of 1 per cent. or so that he has already put the taxation measures in place, just in case it does not appear, as it has not done over the past two and a half years. Clearly, people will be worried about their job prospects and the extra costs that they will face next year. That will not stimulate demand and, therefore, the recovery for which the Chancellor hopes. We must also bear in mind that there may be more such measures in November. I dare say that we shall see more tax increases and more promises broken when the next Budget arrives later this year.

The March Budget has been totally regressive. Everything in it affects the poorest tenth of our society,

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while the richest tenth have fared quite well. Why do the poorer sections of our society have to provide the recovery from a recession started in the late 1980s by Chancellors giving tax cuts to the very well off? We have heard that the Conservatives are the party of indirect taxation--and thereby they are the party of inequality. One of the basic rules of taxation is fairness, yet the Government have turned their back on that.

One of the most unfair measures was that involving VAT. That regressive measure will impose VAT on heating and power, which will hit the poorest sections of society--people on low pay, pensioners and other people caught in the poverty trap. The Government have again sought to attack pensioners and the poorest groups. We have been told that people who receive income support will get extra help, but so far we have not heard whether they will be fully compensated for the extra VAT that they will have to pay.

I remember a similar argument being advanced on poll tax. We were told that income support would be increased to help people pay the extra money, but in the end they received an average sum--nowhere near the full amount that they had to pay.

The hardest hit will not be people on income support but people in the poverty trap--those who earn slightly too much to be able to claim income support or other benefits, yet who cannot be classed as anything like well off. Those people will suffer greatly because of the decision to impose VAT on fuel.

We heard earlier that fuel bills had decreased. Where is the evidence for that? Coal prices have fallen every year since 1985, and the price to the generators will fall by 20 per cent. this month. But we have never seen a corresponding fall in the prices that the generators charge the consumer. Instead, the generators' profits have increased. Power workers have been offered a 12 per cent. pay rise this week, when everybody else gets either a pay freeze or 1.5 per cent. The generators are awash with money and are offering pay rises of four times the norm. Why do we not tax the generators on their profits with a windfall profits tax, as the Opposition have suggested? The generators must have the money, or they would not be waving 12 per cent. pay rises about.

The Chancellor is clearly desperate to bring in revenue, and he has decided to raise it in the easiest way--to extend VAT and hit the people who cannot avoid paying it. The "green" argument is that the extension of VAT is a way of reducing CO emissions, so the decision arises from the Rio summit. Why has there been no consultation with the energy industry or the energy efficiency organisations? Why has there been no consultation paper on how to reduce carbon dioxide emissions? All of a sudden, we simply have an increase in VAT. It is not a green measure far from it. There has been no assessment of the impact. The Rio summit did not decide to reduce carbon dioxide levels through increasing hypothermia--nothing of the kind.

Next week, next month or the month after, we are supposed to receive an energy White Paper. Why did the Chancellor not wait until the White Paper was produced before starting to talk about green taxes on heating and power? Surely the Department of Trade and Industry has some input on this in the White Paper. Let us discuss how

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we can juggle our generating capacity to try to reduce carbon dioxide. Forget it : it is not a green measure, but simply a revenue-raising measure.

The idea is that the poorest sectors of our society will have to contribute to the greening of the environment. I quote from yesterday's newspapers :

"Taxes dressed up as green need also to be justified on distributional grounds or the poor will pay disproportionately for the greenness of the rest of us. For green taxes to be fair they must be accompanied by measures that redistribute resources to those on low incomes."

That was said by the director of the microsimulation unit of the department of applied economics at the university of Cambridge. That will do for me ; it is a fair enough quote. The measure is unfair and it is not green. It is a measure aimed simply at hitting the poor to raise revenue.

In March 1992, we heard that there were no plans to extend the scope of VAT. The Chief Secretary now says, "We said that when we were not facing a £50 billion public sector borrowing requirement. We are now." Is that not the real reason? Surely the Chief Secretary is saying that it is not a green measure. He is saying that we have a £50 billion PSBR, which is more than we had in 1992, so the Government must impose VAT on fuel and power to meet that revenue requirement. The Chief Secretary said nothing about it being a green measure. He said that it was simply a measure to increase revenue. Either way, the country knows that it is being lied to, and it knows that it can never trust the Government again on any matter relating to taxation.

We have heard that we should not jeopardise the recovery with tax increases, but the Budget taxes almost everything. Tax increases will be in place until 1996. Tax allowances have been frozen, so more people have been brought into the tax brackets. More people will pay proportionately more tax. National insurance contributions have been increased again. That is a regressive tax which also hits the lower paid. Excise duties have been increased on everything except whisky. Petrol duties have been increased. Surely the increase in petrol duty is a cost to business and a cost to employers. Surely that will come through when they look at their costs at the end of the year. They will see that their transportation costs have increased, and that increase will be passed on to consumers, resulting in job losses. Mortgage interest relief is to be restricted to 20 per cent. All those measures mean that people will pay a lot more tax even before the VAT increases are taken into account.

What is there for employment? What is there to get us out of the recession? The channel tunnel rail link will come into St. Pancras now and not into King's Cross. The northern part of the country is left out yet again. There is nothing in the Budget for employment. There is nothing for recovery. The Chancellor should think again in November and should come back with a Budget for jobs.

7.23 pm

Mr. Oliver Heald (Hertfordshire, North) : I am glad to have the opportunity to speak in this debate, especially as my last speech, in a debate last Friday, lasted 30 seconds. I do not promise to be as good as that this time, although I hope that hon. Members will be heartened by that news.

I welcome the news today of a fall in unemployment, in my constituency and in the country generally. That is good news for a constituency that has been hit hard over the past two years, and I hope that the trend will continue.

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Much of today's debate has centred on the extension of the VAT base, which is not the subject on which I had intended to speak. However, I make the point that it is easy to look at statements made more than a year ago and to ignore what has happened in between. We cannot ignore what happened at the Rio summit, when the Government pledged themselves to a range of environmental measures which have a cost.

It is wrong for Opposition Members to say that such measures do not have to be paid for. Of course they have to be paid for. We need to hear their proposals before we hear their criticism of extending VAT. At the Rio summit, we were pressed to go further, yet we are now told that, in paying for the measure, we are not following a proper path. That is a false approach to the debate.

The hon. Member for Truro (Mr. Taylor) talked about the housing market. It was ridiculous for him to compare the position a year ago with the position now, without mentioning that mortgage interest rates have fallen by 4 per cent. Over the pasts two years, the cost for mortgage payers has halved. It was ridiculous for him to ignore that.

I shall deal with jobs and with the measures in the Budget.

Mr. Illsley : Will the hon. Gentleman give way ?

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