House of Commons Hansard Debates for 22 Mar 1993

Ms Harman : Could the hon. Gentleman repeat his question? His hon. Friends were shouting and I could not hear him.

Dr. Fox : I am glad to give the hon. Lady more time to think about my question. We have had a lot of confusion from Labour Members in the past week about whether a Labour Government would revoke the VAT on fuels. Can the hon. Lady clear up the confusion and give the House and the country a clear answer--would a Labour Government revoke the imposition of VAT on fuels?

Ms Harman : The question before the House tonight is whether those Conservative Members who promised their constituents that they would not increase VAT and extend its scope will vote against the VAT increase. During the election campaign the Prime Minister said : "We have no plans and no need to extend the scope of VAT." Labour Members will vote against the measure tonight to make the Government keep their election promises.

The Prime Minister also said :

"I have no plans to raise the top rate of tax or the level of national insurance contributions."

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In the first Budget after the election, the Government have increased taxes and national insurance contributions and put VAT on gas and electricity. It is hard to overstate the cynicism and betrayal that that represents.

The pledges on VAT and national insurance were not side issues : they were the centrepiece of the Conservative election campaign to cut taxes. It was put precisely by the President of the Board of Trade in a Conservative election release of 21 March 1992 : "This election in the first week is about tax, in the second week is about tax and in the third week is about tax."

Following the re-election of the Conservatives, we know that the first year is about tax, the second year is about tax and the third year is about tax.

Mr. John Bowis (Battersea) : The hon. Lady and her party will vote against taxes, especially the tax on domestic fuels. Can she now tell us whether a Labour Government would repeal it?

Ms Harman : I have made it absolutely clear that we shall be voting against the imposition of VAT on gas and domestic fuel. We shall not support the Government in breaking their promise--and if the hon. Gentleman had any conscience and sense of accountability to his constituents, neither would he. [Interruption.]

Mr. Nicholls : On a point of order, Mr. Deputy Speaker. I cannot hear whether a Labour Government would repeal the imposition of VAT or not.

Mr. Deputy Speaker : Order. The noise seems to be coming from both sides of the House.

Ms Harman : If 11 Conservative Members voted against the measure, it would be defeated. I hope that that will happen tonight. The pledges were echoed in speeches and Tory political broadcasts nightly : "You can trust the Tories--they won't put up your taxes." No one can be in any doubt now-- the Government have put up taxes and they can never be trusted again.

Last week the hon. Member for Brigg and Cleethorpes (Mr. Brown) boasted that the Chancellor had sought his views. If ever we were in any doubt about the Chancellor's judgment, there is the evidence. The hon. Gentleman told us :

"The only thing I asked my right hon. Friend"--

the Chancellor--

"to do was tax, tax hard, tax heavily and tax as soon as possible."--[ Official Report, 17 March 1993 ; Vol. 221, c. 317.] That is not what he told his constituents when he asked for their votes less than a year ago. I shall give him the opportunity to remind the House what he told his constituents before I quote from the election special in the Evening Telegraph.

Mr. Michael Brown (Brigg and Cleethorpes) : The hon. Lady should be aware that, since 1979, I have always told my constituents that, when it comes to a public sector borrowing requirement, we will have none of it.

Ms Harman : Curiously enough, I find it difficult to reconcile that with what the hon. Gentleman said in the Grimsby Evening Telegraph in the election special headed "The Last Words". The hon. Member for Brigg and Cleethorpes, seeking election, said :

"Only a Conservative Government can continue the process of empowering the people with lower taxation."

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Not only have the Government broken their election promises, but they are hitting the poor hardest. When money is to be given away, the Tories give it to the richest. When money is to be taken, they take it back from the poorest. Chancellor Lawson gave £6 billion to the richest in 1988, and £6 billion is to be taken back in 1993 by the present Chancellor from everyone. The department of applied economics at Cambridge has calculated that all households will eventually be hit, but the full implementation of the measures over the next three years will cost the poorest tenth twice as much as the wealthiest tenth.

Mr. Ian Bruce (South Dorset) : When Labour presented its Budget for jobs--eight pages of A3--why were the only proposals for taxation a tax on water, a tax on gas, a tax on electricity and a tax on telephones? Why is Labour's so-called windfall tax, which would have hit both industry and the poor, good for Labour while the tax which has been introduced by the Conservatives, which will protect the poor, is somehow flawed?

Ms Harman : That neatly illustrates the difference between Labour and the Government. We suggested using the accumulated profits. That would have had no impact on the ordinary consumer whereas the Government tax ordinary people, including pensioners and the low-paid, in order to protect the vested interests of their friends whom they put on the boards of the privatised utilities.

Taken together, the Budget's proposals for 1p on national insurance contributions, 17.5 per cent. VAT on fuel, a real cut of 2.6 per cent. in tax-free allowances, the limiting of the married couple's allowance to relief at 20 per cent. and the reduction of mortgage tax relief to 20 per cent., impose a tax increase on all households. Most will lose about 2 per cent. of their income in extra tax under the measures in the Budget, but on average the 10 per cent. of households with the highest incomes will lose less than 1.5 per cent. of their income while those with the lowest 10 per cent. of income will lose twice that and 3 per cent. extra of their income will go in tax. The increase in tax will begin in April this year when 200,000 people who currently do not earn enough to pay tax start to pay it for the first time. Not only has the Chancellor increased taxes, but those least able to pay will pay most and those most able to pay will pay least. As my hon. Friend the Member for Pendle (Mr. Prentice) said, the 1p increase on national insurance will mean that half a million people who do not earn enough to pay income tax will have to pay an extra 1p in the pound.

The Financial Secretary owned up on the ITN "Talking Points" programme on Wednesday when he explained to us why the richest must pay least. He said :

"We mustn't kill the goose that lays the golden egg."

That is the discredited trickle-down theory of economics. But while trying to protect the geese which at some future date may lay some golden eggs, the Chancellor has refused to answer the concern that the poorest will be hit by the increase in their fuel bills. Let us examine what Ministers have said about compensation for pensioners and people on low incomes. There has been Government confusion before breakfast, before lunch and before dinner. The next day we get up and the Government are in confusion again. On Tuesday the Chancellor said that he would take the VAT rise into account. On Wednesday the Chief Secretary said that it was all a matter of swings and roundabouts. On Thursday the junior Social Security Minister said that the rise was

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nothing special and not out of the ordinary. By lunch on Thursday, the Social Security Minister said that extra help would be provided. On Sunday, the Chancellor ruled out full compensation as too expensive and too complicated.

So what is the Government's position ? We know that that they have to compensate people for the rise in retail prices. They must give us a commitment tonight that they will compensate pensioners and people on low incomes in full for the rise in value added tax. Pensioners and families on low incomes spend £1 in every £7 on fuel. The average bill is £12 per week, so for many people VAT will mean up to £2 more per week on their fuel bill. Will the Chancellor compensate them in full ? Will he not just say that there are swings and roundabouts, but compensate in full ? Will he not just dismiss it as nothing special, but compensate in full ? Will he not just give extra help, but compensate in full ?

The Government went to the electorate with a commitment. They did not say that they had no plans to raise VAT ; they said that they would not raise it. When they went to the electorate, they did not say that they might not raise VAT ; they said that there were no circumstances in which they would raise it.

Mr. Forman : Will the hon. Lady give way?

Ms Harman : No, I have given way at least eight times and I shall not do so again.

If Conservative Members vote with the Government this evening they, too, will be guilty of breaking their election promises and no one will trust them again. Having said that they would not put VAT on fuel, they did so. Having said that there will be compensation, they are refusing to say how much. How can people trust them? The Government expect the House to vote for tax measures that we know will hit the poorest, but they have given no details of the compensation scheme. I suppose that we are expected simply to take them on trust.

Mr. Forman rose--

Ms Harman : I shall not give way.

Mr. Forman rose--

Mr. Deputy Speaker : Order. The hon. Lady has made it clear that she is not giving way.

Ms Harman : Last Wednesday, the Chief Secretary to the Treasury explained to the House how those promises came to be broken. He said that the Government had not intended to put up VAT, or to increase national insurance contributions. After the election, no one was more surprised than the Government to discover that the recession went from bad to worse--for reasons which were quite out of their control, of course. So the Government put VAT on gas and electricity and increased national insurance contributions, and the Chancellor told us that that was the plain truth. What are we to make of that? The Chancellor also blamed circumstances beyond his control for the state of the economy in an interview with The Independent on Sunday on 14 March, when he said :

"what I think happened last year was that the situation deteriorated very much internationally".

But the Treasury forecast for the economy cannot have been blown off course because in the 1992 Budget forecast just about the only prediction that the Government got

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right was about the world economy. Either their judgment about the economy was disastrously wrong, or they were practising the politics of deception, or they made those promises without bothering much whether they would be in a position to honour them.

They used to say that George Washington could not tell a lie and that Richard Nixon could not tell the truth. Our Prime Minister cannot tell the difference. Under this Government, it is not merely the pound that has been devalued, but democracy itself.

If the Government's economic judgment was so disastrously wrong, why should the British people ever trust them again? They stand condemned not only for an unforgivable lack of foresight, but because they did not have the wit to listen to people who were warning them about the true state of the economy. Did they engage in deception, or did they fail to understand what was happening in the economy? The answer probably lies somewhere in between the two. The Government have such contempt for the electorate that they did not care whether they would be in a position to stand by their promises, just so long as they got in again.

There does not appear to be any sign of anguish on the Government Bench--no sign of regret for breaking their promises. The brows of the Chancellor and of the Chief Secretary remain unfurrowed. In fact, they have both been smirking their way through these debates and through radio and television studios. They think that they have pulled a fast one on the electorate and that they will be able to get away with it. It is the true sign of a party that has been in government too long when it sees the democratic process as nothing more than something to be manipulated to secure one more term of office. The British people will not be treated with such arrogance and contempt, and the party that did it will never stop paying the price.

I suggest to Tory Members, particularly those on the Back Benches, that if they have a conscience, now is the time that they should examine it. Tory Members have a choice tonight : what we have before us is an election fraud, and they can either go along with it or reject it. They can either follow discredited Ministers through the Lobby, or they can keep the promises that they made to their constituents and vote with us against the Budget.

9.30 pm

The Chancellor of the Exchequer (Mr. Norman Lamont) : This is the fourth day of the Budget debate. Inevitably, I have been unable to listen to all the speeches, but I have read the Hansard reports of all the speeches that have been made hitherto.

Almost everyone has acknowledged that the Budget was framed against exceptionally difficult circumstances. That was the theme of the speeches made by my hon. Friends the Members for Aylesbury (Mr. Lidington) and for Staffordshire, Moorlands (Mr. Knox). I have had to make some very difficult decisions and face up to some very unpalatable choices. We know that the Labour party can never face up to difficult decisions.

Above all, in framing my Budget, I believe that I had to do two things. First, I had to ensure that nothing should damage recovery this year. Secondly, I had to address the problem of mounting Government debt to ensure that the nation's finances are put on a sound footing for the future.

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I have no doubt that, unless Government borrowing is kept under firm control, it will be the biggest threat to sustained recovery in the 1990s. That was the theme of the speeches of my hon. Friends the Members for Rutland and Melton (Mr. Duncan), for Brigg and Cleethorpes (Mr. Brown), and for Cirencester and Tewkesbury (Mr. Clifton- Brown), who made a powerful speech--one which his predecessor, Lord Ridley, whom we remember with affection, would have agreed strongly with and commended.

Beyond those two specific objectives, I also wanted to show the country that the Government have a clear strategy for getting Britain back on the road to sound finance. As I said, that is the way in which to sustain recovery. That is the lead for which I believe the country was looking, and it was given in the Budget.

I have spelt out the tax and revenue plans not just for one year, but for three. With public spending ceilings now firmly established for the years ahead, I have laid down a medium-term fiscal strategy to match our medium- term financial strategy. I have made it clear that the strategy should be legislated for as far as possible in this year's Finance Bill so that it should carry credibility with the markets.

The result of my measures will be to reduce borrowing over the years by up to 1.5 per cent. of GDP and to cut the deficit by more than half in the next five years. Difficult decisions are involved, but those reductions represent a considerable step towards addressing the problem that must be addressed today.

In the year ahead, I have been able to give extra help to industry, so strengthening the recovery in its early stages. The Budget contained a huge variety of measures to help business in the short-term. First, there are measures to help the self-employed and small businesses, which have played such a crucial role in the past in the British economy and which can, again, lead us out of recession in the 1990s.

I doubt whether there has even been a Budget that has contained such a wide range of deregulatory measures that will sweep away so much of bureaucracy and red tape, which are extremely aggravating to, and time-consuming for, so many small businesses. I know from the speech of my hon. Friend the Member for South Hams (Mr. Steen) that that is of particular interest to him.

There are proposals to lessen the burden of the statutory audit. I am also making far-reaching changes to the VAT penalty regime--moving from a regime of automatic penalties to one that is more discretionary. I know that those changes will relieve much of the burden and many of the anxieties felt by many small business men. The changes have been widely welcomed by the organisations for small businesses.

I have proposed to introduce self-assessment for up to one third of all taxpayers. My right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) was worried that some people might find that difficult, but there is a choice. There is no compulsion over the matter. However, I believe that many people will find it an attractive option. It goes together with the drastic simplification of the taxation of the self-employed that I announced at the same time. Taken together, those proposals represent the most fundamental reform to the administration of tax since the pay-as-you- earn system was introduced in 1944.

I announced proposals for extending and improving the loan guarantee system in a way to give an added incentive

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to fixed-rate borrowing, of which there is too little in this country. Over future years, it could give stability and security for small businesses.

Those measures add up to formidable package of help for small businesses. It was welcomed by my hon. Friends the Members for Cambridgeshire, South- West (Sir A. Grant), for Ribble Valley (Mr. Evans) and for Surrey, North- West (Sir M. Grylls), who rightly called it a five-star Budget for small business. One might have thought that the Opposition would welcome at least one of the measures, but they did not welcome any of them.

I have introduced a range of measures to help larger British businesses. The first of those is a massive increase in the Export Credits Guarantee Department facilities for companies operating in the most important and fastest-growing markets around the world. As a result of what I announced on Budget day, British firms will be able to go out and compete knowing that they do so on equal terms with their competitors.

Secondly, I introduced measures to deal with the admittedly highly technical problem of advance corporation tax. My hon. Friend the Member for Surrey, East (Mr. Ainsworth) said that he thought that he noticed some fluttering of the eyelids among hon. Members during that part of the Budget speech. That may be so, but, nevertheless, the proposals responded to great concern and were of great interest to some of the international businesses that operate in this country. The proposals will help to make Britain an even more attractive location for inward investment than it already is. I also took action over the uniform business rate to ensure that no business will face a real increase in rates this year. That will help 800,000 premises, many of them in the south, whose owners have given the move a warm welcome.

Finally, I made announcements about some private infrastructure projects, including the channel tunnel rail link. Those announcements have been widely welcomed ; they followed on from the policy changes that I announced in the autumn statement. As my right hon. Friend the Member for Guildford (Mr. Howell) said, they will enable this country to do what many other countries do : tap private savings in order to finance large infrastructure projects in cities and elsewhere. Those are substantial measures. Therefore, it is little surprise that, contrary to what the hon. Member for Peckham (Ms Harman) said, the Budget was warmly welcomed by organisations representing British industry and commerce. We heard a few quotations from Opposition Members who have tried to find the odd organisation here and there with critical views of the Budget. In a Budget that raised revenues by £6.5 billion and £10 billion, it would be surprising if somebody did not have something critical to say.

The list of organisations that have given a warm welcome to the Budget include the Confederation of British Industry, the Association of British Chambers of Commerce, the Institute of Directors, the Society of Motor Manufacturers and Traders, the Council of Mortgage Lenders, the Forum of Private Business and the Federation of Small Businesses. The chairmen and chief executives of many individual companies went on record as welcoming the Budget. They included GKN, GEC, Coats Viyella, Abbey National and BP. They are some of the most successful companies in the country, and they know that this Budget is good for them and good for business.

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Mr. Stuart Bell (Middlesbrough) : Will the right hon. Gentleman deal with a significant point that I have not heard mentioned so far? Value added tax is a tax on value added, obviously, for those who wish to buy goods. Why, then, did he use VAT on heating and fuel bills to hit poor people who need to use electricity anyway?

Mr. Lamont : Much of this debate has centred on that very point--my decision to extend VAT to domestic fuel and power. I fully recognise the concern felt about the effect that these proposals will have on poorer households, particularly those of poorer pensioners. That is why I clearly stated in my Budget speech that we fully intend to give extra help to those on income-related benefits, over and above the automatic impact on pensions and other benefits through the higher retail prices index. I wholly understand the anxiety of some households, but we have clearly said that we will bring forward the uprating of income-related benefits so that the extra help that we provide will be available at the time that it is needed- -before the increased fuel bills arrive next spring.

Mr. Gordon Brown (Dunfermline, East) rose--

Mr. Lamont : This party has an excellent record of helping the worst -off, not by keeping expensive, across-the-board subsidies, benefiting both rich and poor, but by doing what should be done in any modern welfare state : targeting the resources on the most needy and the worst off. That has been our priority. No Government have done more for poorer pensioners and families with children--

Mr. Brown : Will the Chancellor accept that he said during the election campaign that there would be no circumstances in which a VAT increase would be imposed? Will he give us a straightforward answer to a simple question? Will he compensate pensioners and others on low income in full--yes or no?

Mr. Lamont : I have explained exactly what we are doing, and I assure the House that it will be our intention to protect the poorest people in the country. [Interruption.] The hon. Gentleman can shout all he likes. We do not want to put poorer people in a position in which they cannot pay their fuel bills because of the changes. We have made it clear that we will adjust the income-related benefits. We have an excellent record on that, and since 1988 we have provided additional help for less well off pensioners and disabled people--help that will be worth about £700 million in real terms next year. We have continued to increase the income-related benefits even while average fuel charges have been falling, by more than 8 per cent. in real terms since 1986. There is still downward pressure on domestic electricity and gas bills.

Because of these reductions, my proposal to put VAT on fuel will not necessarily mean that prices rise by anything like 17.5 per cent. over the next three years. Those on income support will also be able to keep the additions made to their benefits to reflect their liability to pay 20 per cent. of the community charge, even though they will not be required to make any contribution to the council tax. That alone is worth £2.80 to a married couple and £1.60 to a single person from next month. That shows our commitment to looking after those who are worst off.

Mr. Gordon Brown : Why cannot the Chancellor give a straightforward answer to a simple question? Does he not

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understand that it is because he fails to do so that no one in the country trusts him? Will he compensate pensioners and others on low incomes in full--yes or no?

Mr. Lamont : I have answered the question. I will take no lectures from a party which, when in government, put up electricity bills by 30 per cent. in real terms. We know who the Minister at the Department of Energy was at the time. It was the Leader of the Opposition. That was what he did for poorer people then ; what price his rhetoric now?

Mr. John Smith : The Chancellor has been asked a very simple and clear question--will he compensate pensioners in full ? Why cannot he say yes or no ?

Mr. Lamont : The right hon. and learned Gentleman, as always, cannot face up to the facts of his own record. I note that when he put forward his manifesto for the leadership of the Labour party, he even told us in his election address :

"We should consider the increased use of the fiscal system to promote environmental protection and conservation."

According to the Opposition, the idea of VAT on fuel and power never crossed their minds ; they never considered it. How strange it is then that, in their policy document "Looking to the Future", under the heading "Value Added Taxation", they say :

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

But where, the country will want to know, was fuel and power--the zero rate that did not bark ? I expect that the right hon. and learned Gentleman will tell us that it was a typing error. The trouble is that in the very next sentence the document says : "we will look at ways of increasing taxes on environmentally damaging products."

This Government went to the environmental conference in Rio, fought for a reasonable and achievable deal, and have taken steps to reach it. The Opposition have wrapped themselves in greenery and chanted incantations about global warming, yet they now oppose the very steps that we are taking to deal with that. They are the people whose word means absolutely nothing.

Mr. Morgan : The Chancellor cannot have it both ways. At one point he told us that the reason for the imposition of VAT on domestic fuel was the unexpectedly high increase in public sector borrowing subsequent to the election, of which he was wholly unaware at the time of the election. What he has just said directly contradicts that : he now says that the Rio summit is the reason. If my memory serves me right, the Rio summit was held before the election. Which is it ?

Mr. Lamont : The hon. Gentleman is completely wrong ; the Rio summit was in June last year.

As always, the most important question asked in the debate was the one asked not by the Opposition, but by Conservative Members. It was the question posed by my right hon. Friends the Members for Shropshire, North (Mr. Biffen) and for Westmorland and Lonsdale (Mr. Jopling)--whether the action that I propose in the Budget is extensive enough and early enough to meet the objectives that I have set. That is the real question and it is precisely the most difficult and central matter on which I had to make a judgment.

I very much took the view taken by my right hon. Friend the Member for Worthing (Sir T. Higgins) and my

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hon. Friend the Member for Woodspring (Dr. Fox), that we had to take account of the fact that confidence had been knocked hard by the length of the recession and that large tax increases too early would undermine recovery. Therefore, in my opinion, it was right not to raise taxes this year, but to go for a neutral Budget which, as my hon. Friend the Member for Woodspring said, would increase taxation as economic growth gets fully under way. I believe that to be a reasonable and appropriate reaction to the position that we face. For those of us on the Conservative Benches, raising revenue is never a welcome task ; it is something which we consider only when that is vital for the public finances. In this Budget, I had in mind two objectives in deciding how to raise revenue--first, that my particular tax measures should not hit particular sectors that would impede recovery ; secondly, that the tax changes that I made should be sensible tax reforms in their own right. For that reason, I concentrated on tax measures that accord with the philosophy of this Government and of this party--that is, rather than increasing marginal tax rates, I concentrated on broadening the base of the tax system and on reducing the value of allowances.

Above all, I reconfirmed in many of my changes--particularly the reduction to 20 per cent. of certain allowances--our commitment as a Government to getting the basic rate of income tax down to 20p in the pound eventually. That remains our target and our objective. As my hon. Friend the Member for Bridlington (Mr. Townend) pointed out, raising revenue is just one side. We must look additionally at public spending, which must also be expected to take part of the strain. We made a start on that process in last year's autumn statement. The settlement that we achieved then shows that the growth of public spending will be under control, because the growth in the new control total is set to be below the trend growth in the economy as a whole. The long-term review of public spending under my right hon. Friend the Chief Secretary is designed to address the problem. If we want to control public spending, we must continually re-examine each and every Department and function of government and question whether it is appropriate and necessary to continue with it today.

This Budget is genuinely addressed to meeting the problems of the country. It is not something which Labour would ever understand because it is a Budget designed to do what is right--not to curry favour or popularity. It is a Budget designed to give the country hope for the future, by giving a clear lead.

What has been Labour's reaction? In four days of debate, we have heard not one word of policy. The hon. Member for Dunfermline, East (Mr. Brown) seems to have made a conscious decision not to have a policy. He is the first shadow Chancellor to give an hour-long speech about the economy, as he did the other day, without ever mentioning monetary or fiscal policy.

In all the hon. Gentleman's outpourings, sound bites, new approaches, fresh starts, agendas for the 1990s and new beginnings, he has not told us whether he thinks that Government borrowing is too high, too low or just right. The hon. Gentleman cannot tell us whether taxes are too high or too low. In four days of debate, the hon. Gentleman has not produced one constructive suggestion. Since the hon. Gentleman became shadow Chancellor he has, we are told, made two important speeches about the economy. One was about agriculture. It was an

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interesting speech, but the hon. Gentleman is certainly the first would-be finance Minister to talk more about the suckler cow premium than about narrow money.

What of the hon. Gentleman's right hon. and hon. Friends? The right hon. and learned Member for Monklands, East (Mr. Smith) had just one suggestion. Replying to my Budget statement, he said that I should abolish Budget purdah. That certainly would not affect him very much, because the right hon. and learned Gentleman does not have any policies to hide.

All we heard from Labour in the debate was endless whining and harking back to the last general election. The right hon. and learned Member for Monklands, East is the last person who should complain about the general election. He did not do badly out of it. First, he lost the election for his party with his own tax proposals--then had himself made party leader as compensation.

If Labour wants to talk about the last general election, let us talk about it--I am happy to do so. The Labour party, as always, needs to have its myths if it is to exist. We heard in the debate the myth that somehow Labour was cheated at the last general election. In 1992, as in 1979, the Conservative party was elected as the party of sound finance and of low taxation--particularly low direct taxation. In 1979 and in the two years thereafter, the needs of the times dictated a rise in taxes. That happened in 1979 and 1981, but once we had borrowing down, taxes and spending were steadily reduced as a percentage of gross domestic product.

Mr. John Smith : Does the right hon. Gentleman remember saying, during a Channel 4 news broadcast-- [Interruption.] I know that Conservative Members do not want to hear this. He said :

"We will not have to increase taxes. I cannot see any circumstances in which that will be necessary."

What meaning did the right hon. Gentleman wish to convey to his listeners then?

Mr. Lamont : I have explained, and explained fully. I believe that not to have addressed the problem of the budget deficit would have been to run away from the most fundamental promise that we made to the British people.

There is a real difference and distinction between the two parties, and it is one that cannot be fudged or obfuscated. In 1992--as was shown by the speeches of all Opposition Front Benchers--the Labour party was committed to massive increases in public spending, and high public spending means high taxes : the two go hand in hand. It is impossible to pretend otherwise ; to seek to deny the connection is truly to deliberately deceive the British people.

Opposition Members should listen to the hon. Member for Dagenham (Mr. Gould). He talks a lot more sense, especially after his lunches with my right hon. Friend the Chief Secretary. The other day, he said :

"I think the Labour party ought to accept that we will always be likely to have a higher tax burden than our opponents".

We know that, he knows that and so do the British people. If the Labour party wants to know why it lost the last general election, let me explain. It was for two reasons. First, there was the disastrous shadow Budget introduced by the Leader of the Opposition. This is the difference between the tax increases that he proposed, and the tax increases in this Budget : he proposed tax increases to expand public spending. He was trying to bribe one part of

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