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[Lords] (By Order)
(By Order)
(By Order)
[Lords] (By Order)
[Lords](By Order)
[Lords] (By Order)
Orders for Second Reading read.
To be read a Second time on Thursday 15 April.
(By Order)
Order read for resuming adjourned debate on Question [8 February], That the Bill be now read a Second time.
Debate to be resumed on Thursday 15 April.
1. Ms Quin : To ask the Chancellor of the Exchequer what representations he has received about the levying of VAT on domestic heating announced in the Budget.
The Chancellor of the Exchequer (Mr. Norman Lamont) : I have received a number of representations.
Ms Quin : Does the Chancellor agree that his time before the Budget would have been better spent had he not remained in purdah but talked to a number of the people who will be hardest hit by these proposals? Does he further agree that, as well as the people on benefit who are worried about how they are going to pay those higher bills, people just above benefit level are frightened that this measure will push them further into the poverty trap? Will he think again about this measure before it is too late?
Mr. Lamont : On the first point, the hon. Lady suggested that I should have been out listening rather than reflecting in quiet, but, by doing so I was able to read the manifesto of the Leader of the Opposition in which he said :
"We should consider increased use of the fiscal system to promote environmental protection."
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I also had the opportunity to read Labour's policy document "Looking to the Future", which said :"We will be looking of ways of increasing taxes on environmentally damaging products."
The fact is that when we look at a problem we decide to do something about it, rather than write a lot of words which we then retreat from. That is the difference between being in government and being in opposition and mouthing platitudes.
Sir Terence Higgins : Will the Chancellor give an assurance that in calculating the extra amount to compensate pensioners and those on low incomes for the effect of the tax--which will be paid in advance of the tax coming into operation--he will not take account of any change in the underlying level of fuel prices which may have occurred in the interim? If that is so, will he announce the amount now rather than wait until autumn?
Mr. Lamont : I note my right hon. Friend's point. He knows that we have announced that we will bring forward the extra help so that it will be available from April 1994, at the precise moment that the bills will arrive. We have done that because we wish to help. We have made it very clear that while we regard this measure as necessary on both fiscal and environmental grounds, it is not our intention that poorer people should suffer. I have made that abundantly clear.
Mr. William Ross : Since the Chancellor has now broken through the zero-rated barrier, does he realise that no one will believe him when he says that he will maintain the zero rate principle on many other items? Does not he see the danger that this very unpopular tax will, for the Tories, eventually prove to be the equivalent of the poll tax in the previous Parliament?
Mr. Lamont : What the British public expect from the Government is that we should pursue sound finance. That is the overwhelming and first commitment of the Government.
Mr. Wilkinson : When Lord Barber introduced VAT on April fool's day 20 years ago, he boasted that the British rates of VAT were the simplest to implement within Europe. Would it be reasonable to say that from 1995-96 and beyond that to 1996-97, if the Government get their budget deficit back under control, there could still be a hope of getting VAT on domestic fuel down again?
Mr. Lamont : We have only just put our proposals forward and intend to legislate for them. It would be quite wrong for me to speculate about future years. I make this observation to my hon. Friend : Britain's average rate of VAT, measured across all products, is one of the lowest in the Community.
Mr. Gordon Brown : Should not the Chancellor have been reading his own election commitments, when he said that there were no circumstances in which value added tax on fuel, gas or electricity would be raised? Is not that the reason why the country will never trust the Chancellor again? Will he confirm that, as a result of the changes in VAT, the typical British family will soon be paying £15 a week in VAT, compared with £1.86 when the Labour party left office, and that the biggest element in that is the VAT on gas and electricity, which will cost £2 a week. Is not it a disgrace that the Government, who believe that unemployment is a "price well worth paying" for their
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economic failure, also appear to believe now that poverty among pensioners is a price well worth paying for their economic failure? Will he now answer-- [Interruption.] Conservative Members do not like it because we are telling the truth about what is happening. Will the Chancellor answer one simple question? Is he now proposing that, on top of VAT on the use of fuel, he will also impose VAT on standing charges for gas and electricity--yes or no?Mr. Lamont : I assure the hon. Gentleman that, far from not liking what he says, we always love everything that he says in the House. I know that the hon. Gentleman yesterday had a briefing and a lunch with British Gas, as a result of which he was informed that VAT applied to standing charges. If it did not apply to standing charges, that would be an obvious case of avoidance. [ Hon. Members :-- "Answer!"] I have answered the hon. Gentleman's question and will not take any lectures on the subject from the Labour party which, when it was in office, increased electricity prices by 168 per cent.--an average of almost 20.7 per cent. a year. As I observed in my wind-up speech in the Budget debate, we know who the Minister of State at the Department of Energy was at that time--the Leader of the Opposition. We also know why the Government of the day did it-- because they were so in hock to the International Monetary Fund that they had to shove up electricity prices. We will not take any lectures from the hon. Member for Dunfermline, East (Mr. Brown).
2. Mr. Stephen : To ask the Chancellor of the Exchequer what is the differential between the level of corporation tax in the United Kingdom and equivalent taxes in other EC countries.
3. Mr. Robathan : To ask the Chancellor of the Exchequer what is the difference between the level of corporation tax in the United Kingdom and equivalent taxes in other EC countries.
The Financial Secretary to the Treasury (Mr. Stephen Dorrell) : The proposed main rate of UK corporation tax for the financial year 1993 is 33 per cent. The main rates on distributed profits in other European Community states vary between 33nd 40 per cent.
Mr. Stephen : Does my hon. Friend agree that it is much better for British industry and commerce to have a simple system of company taxation at the lowest possible rate, rather than the complex system of capital allowances much favoured by the Opposition parties, as they distort investment decisions and are open to abuse?
Mr. Dorrell : I agree entirely with my hon. Friend. The consequence of the corporation tax changes introduced in the 1980s is that we have cut the marginal rate of corporation tax on profits from 52 per cent. when we came to power to 33 per cent. now--the lowest rate in the European Community. That is one of the factors which make this country an attractive place for business to invest. That must have been one of the factors that Mr. Delors took into account when he correctly described this country as a paradise for Japanese investment.
Mr. Robathan : My hon. Friend mentioned inward investment. How much encouragement does he believe
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that the low rate of taxation has given foreign companies in the past? Does he believe that the low rate of corporate taxation will continue to encourage inward investment into this country?Mr. Dorrell : I believe that a low rate of corporation tax is an important part of the Government's total commitment to attracting a high rate of inward investment--a policy which has been startlingly successful. Some 40 per cent. of Japanese investment in Europe is based in the United Kingdom and one third of all inward investment into the European Community in 1991 came to the United Kingdom. That is because we have set out to make this country an attractive place in which business can invest in order to employ people and create wealth.
Mr. Sheldon : Is not it a misleading over-simplification to talk about the corporation tax rate of other countries without going into the complicated ways in which they give allowances for capital investment, particularly on plant and machinery ? In this respect, while I understand that the Treasury will not increase the level of capital allowances in the way that I, for one, would wish to see, will the hon. Gentleman give an undertaking that the increase from 25 to 40 per cent., due to expire on 31 October this year, will be extended ?
Mr. Dorrell : No, but I can give the right hon. Gentleman the undertaking that we will carry out the policy that we announced in the autumn statement : to have time-limited investment allowances of the sort that were written into the Labour party's manifesto at the last election. It is rather odd that the right hon. Gentleman should seek to move away from it. What is not an over-simplification is that plant and machinery investment in Britain today is running over 50 per cent. higher in real terms than it was when the Labour party left office in 1979. There is an investment boom in this country by firms that recognise that Britain is an attractive place in which to do business.
Mr. Nicholas Brown : Will the Financial Secretary confirm that to state the rate is not to state the tax burden and that, in the United Kingdom, company taxes account for 4 per cent. of GDP while the European Community average is 3.1 per cent. of GDP ? Will he further confirm that in the OECD only Australia, Japan, Luxembourg and Norway have higher corporate tax takes than we do ?
Mr. Dorrell : To state the rate is to state the incentive, which is the important thing when considering whether an investment is to go ahead. The hon. Gentleman quotes a series of selective figures, which discount the fact that the figures for other countries for business investment should take account of the much higher rates of tax that they impose, for example, through their national insurance systems. Furthermore, the hon. Gentleman discounts the fact that British business has been successful at generating profits--more successful than it was when the Labour party was in power.
Sir Anthony Durant : Is my hon. Friend aware that, only this morning, I took two Japanese business men to the Board of Trade because they have looked at the whole of Europe and decided that this is the best place to come, with quite large sums of money ? They feel that the atmosphere, taxation and everything is right for setting up business.
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Mr. Dorrell : I congratulate my hon. Friend on his actions and on the fact that he is drawing the attention of his Japanese business friends to the attractive nature of the regime for investment here. It is not only Japanese or overseas investors who find this an attractive place in which to do business. It would occasionally be nice to hear congratulations from Labour Members on the fact that 10 of the top 20 European companies are British companies which are successfully doing business in this country and proving themselves in the marketplace to be more successful than their competitors.
Mr. Skinner : The Japanese are probably doing exceptionally well because they know the difference between threes and fives. The Minister referred to 33 per cent. corporation tax. Did he get that figure from the Chancellor of the Exchequer? If he did, how do we know that it is correct? It could be 55 per cent. I throw out a challenge to the Chancellor. I will play him at fives and threes at dominos and I will win every time and give the money to the pensioners to pay the extra VAT.
Mr. Dorrell : The hon. Gentleman might like to reflect on the fact that the £35 billion worth of public expenditure commitments that the Labour party made in its manifesto at the general election might have been £53 billion.
4. Mr. David Shaw : To ask the Chancellor of the Exchequer if he will estimate the number of taxpayers in 1993-94 who will be paying income tax solely at a rate of 20 per cent. and the number of taxpayers whose incomes are at a level where more than half the income tax they pay is calculated at the rate of 20 per cent.
Mr. Lamont : The figures are 4.9 million and more than 8 million respectively.
Mr. Shaw : Does my right hon. Friend accept that many of my constituents are among those millions who are benefiting from the 20 per cent. band of income tax? Is not that 20 per cent. rate of income tax, as it is being implemented, a firm example of the way in which we meet our manifesto commitments? Can he explain why the Labour party refuses to support the 20 per cent. band?
Mr. Lamont : My hon. Friend makes a good point. I should have thought that it was eminently desirable that our starting rate of tax should come down to a level comparable with that of many other countries. The Labour party used to support that policy, but when the Conservative party implements it, it suddenly becomes wrong and the Labour party no longer supports it.
Mr. Rooker : Will the Chancellor confirm that, as a result of freezing personal allowances, 300,000 more people will pay tax at 20 per cent. rather than at zero ? Before the right hon. Gentleman brings the order to the House to implement that outrageous policy, will he invite his hon. Friends to sound out the 500 people in each of their constituencies who will have a tax increase from zero to 20p in the pound in order to discuss with them the fairness of such a policy before his hon. Friends vote on it ?
Mr. Lamont : What the hon. Gentleman ignores is the fact that, as a result of the Government's policies, almost 1.5 million more people are non -taxpayers than would be the case had we carried on with the tax regime that we
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inherited from the Labour Government when we came to power. Furthermore, when one takes into account the Opposition's promises and their public expenditure consequences, they cannot give us any lectures about taxation. We shall listen to the Opposition on income tax only when they join us in promising to work to reduce the basic rate of income tax to 20p in the pound.Mr. John Townend : Does my right hon. Friend agree that low marginal rates of direct income taxation are not only an incentive to hard work and enterprise, but are a significant factor when overseas companies are deciding where to put their manufacturing plant and, even more importantly, their European head offices ? They will not invest in countries where their highly qualified executives are excessively taxed. Is not that why the previous Labour Government, with a marginal rate of 83 per cent., had a much worse record than this Government in attracting inward investment ?
Mr. Lamont : My hon. Friend is right. Britain has one of the most attractive and competitive direct tax systems in the world and we have made it clear that we intend to maintain it that way. The Opposition favour high rates of tax and, in the past, such high, confiscatory rates of tax have been counter-productive because they raise less revenue.
5. Mr. Cohen : To ask the Chancellor of the Exchequer what discussions he has had with employees' and employers' organisations about his plan to increase national insurance contributions.
The Chief Secretary to the Treasury (Mr. Michael Portillo) : National insurance contributions were mentioned in a number of representations received before the Budget.
Mr. Cohen : Did not those organisations tell the Chancellor and the Minister that an increase in national insurance contributions would be a tax on employment, with the result that about 18 million employees and 2 million self-employed people will be worse off and 500,000 people who have earned too little to pay income tax will have to pay the increase in national insurance contributions? Leaving aside the Prime Minister's statement last January that he had no plans to increase national insurance contributions, which now looks like an election con, does not the Government's insurance policy seem to be to up the premiums while cutting the benefit payouts?
Mr. Portillo : The hon. Gentleman ignores the fact that we are paying about £37 billion a year in contributory benefits. Is that to be paid mostly by people in work or by taxpayers in general? If the hon. Gentleman's solution is that it should be paid by taxpayers in general, he is asking pensioners, people who have retired and people who are not in work to contribute to the ongoing benefits of other people. I do not believe that the hon. Gentleman wishes to support such a policy. We have a national insurance fund and it is a sound principle that, taking one year with another, as much as possible of it should be balanced.
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Mr. Luff : Does my right hon. Friend agree that as long as we have a national insurance fund it must be adequately financed and that it is right to increase contributions when demand rises and reduce them when it falls?
Mr. Portillo : The Government have shown some flexibility on that point in that, during the recession, when less money has come into the fund, we have been willing to see a Treasury supplement paid into it. But my hon. Friend must be right. We are paying out a huge amount in benefits. The average working person is now paying £10 each working day for social security benefits. It is right that people should be aware of that and, in principle, over a period of time, our national insurance fund should be balanced.
Mr. Stevenson : Will the Minister confirm that the proposed increases in national insurance contributions are not only a complete abdication of the promises given by the Conservative party at the election, but another increase in the overall level of taxation that the country is suffering? Will he further confirm that the overall level of taxation is now higher than it was when the Government took office in 1979?
Mr. Portillo : If the hon. Gentleman holds views so strongly, why did he sign up to a manifesto that intended to increase national insurance contributions by 9 per cent., on top of income tax increases of 10 per cent? He wanted to increase the burden on the country's wealth-creating sector by 19 per cent., yet he has the cheek to criticise the Government.
6. Mr. Roger Evans : To ask the Chancellor of the Exchequer if he will make a further statement about the measures announced in the Budget involving deregulation.
Mr. Lamont : The Budget proposals will make an important contribution to the Government's deregulation initiative. The changes announced have been warmly welcomed in the business
community--particularly the proposals on the statutory audit. In the longer term, the burden on the self-employed will be substantially eased by my proposals for simplified self-assessment.
Mr. Evans : I congratulate my right hon. Friend on his answer. Does he understand the importance to small business men in particular of the introduction of self-assessment as a system of deregulation and in relieving the burden?
Mr. Lamont : The self-assessment proposals were warmly welcomed by the Federation of Small Businesses and the Forum of Private Business. There are strong arguments for self-assessment. It is a simpler, better system for the ordinary citizen and it is a good thing that the people of this country should know the tax consequences of Government spending.
Mr. Cryer : Will not the self-employed who disappeared owing £114 million in tax in 1991-92 be delighted with self-assessment, because it is wide open to corruption? The Chancellor claims to reduce the burdens of business, but is not every extension of value added tax an imposition on small businesses, which have to act as tax-gatherers without receiving any money for doing so? Last year, the Government produced more statutory instruments--
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which are in the main burdensome regulations, affecting the community at large, including small businesses-- than ever before in the history of Parliament. Does not that demonstrate that the Government are all words and no action?Mr. Lamont : I am slightly surprised about the hon. Gentleman's remarks about VAT, bearing in mind his first comments. The more that taxation is shifted towards indirect tax, the easier it is to deal with the black economy and to collect tax in that direction. The hon. Gentleman's comments are difficult to understand. I am sure that everybody, including small business organisations, recognises the hon. Gentleman's first point, when he seemed to characterise small business men as a lot of tax cheats. That is not our view.
7. Mr. Clifton-Brown : To ask the Chancellor of the Exchequer what reaction he has received from environmental organisations about the measures announced in the Budget statement.
The Economic Secretary to the Treasury (Mr. Anthony Nelson) : The Budget measures designed to encourage more efficient use of energy have been welcomed by a number of environmental organisations.
Mr. Clifton-Brown : Is my hon. Friend aware that Friends of the Earth, no less, commenting on my right hon. Friend's fiscal measures to help the environment, said that the Budget was bad for energy wasters, gas guzzlers and perk company cars? Is not it hypocritical of the Opposition to portray themselves as green, but they squeal like mad when it hurts them in the pocket?
Mr. Nelson : My hon. Friend is absolutely right. Friends of the Earth welcomed the Budget measures and if the Opposition are so incensed about the tax, one is bound to ask why they do not promise to reverse it.
Mr. Alex Carlile : In reacting to the Budget, have environmental organisations reminded the Treasury that substantial investment is being made in renewable energy sources, such as wind farms? If so, will the Minister take steps to ensure favourable fiscal treatment of electricity suppliers that are able to draw part of their supply from renewable energy sources?
Mr. Nelson : The hon. and learned Gentleman speaks on behalf of wind farms and does so with vigour and passion. I hear what he says and I am sure that there is something in it. The main objective must be to comply with the Rio targets and conventions and the hon. and learned Gentleman's proposals would go hardly any way towards reaching that ambitious target.
Mr. Andrew Smith : Before the Minister drowns in
self-congratulation, will he acknowledge that Greenpeace, no less, said of the Budget that the overall proposal was a setback for the environment? If the Minister is really interested in helping the environment, will he put into practice Labour's national energy efficiency programme, which would save four times the CO that the Government claim through the imposition of VAT? Will he bring forward environmental improvement measures that can
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generate jobs as well as save energy? Should not the Minister be insulating pensioners' homes rather than inflating their fuel bills?Mr. Nelson : As I said earlier, Friends of the Earth welcome our proposals. It is impossible always to please every environmental group. If the hon. Gentleman objects to the cost of imposing the taxation, it strikes me as strange that he should now propose that we go even further.
In the forthcoming year, the Government will spend some £40 million on the home energy efficiency scheme. That will greatly benefit nearly a quarter of a million households.
8. Mr. Bates : To ask the Chancellor of the Exchequer if he will make a further statement about measures to assist exports announced in the Budget.
Mr. Lamont : The reduction in export credit premiums and the £1.3 billion extension of cover that I announced in the Budget will enhance the ability of British exporters to compete in some of the most important, fastest growing markets in the world.
Mr. Bates : I thank my right hon. Friend for his answer. Is he aware that the measures that he has announced to help exports will be particularly welcome in the north-east, which already exports a larger proportion of its manufacturing production than almost any other region ? Does he recognise that export success has as much to do with individual endeavour and enterprise as with Government support and assistance ? Will he join me in welcoming the establishment of a self-help programme--the manufacturing challenge for north-east industry--which has been launched with the twin aims of doubling the region's manufacturing base and tripling exports in the next 10 years ?
Mr. Lamont : I certainly agree with my hon. Friend, and I am grateful to him for mentioning the north-east manufacturing challenge. He can be assured that we will do all that we can to encourage agencies and business men in the north-east to support that initiative. Given their energy and commitment, I am sure that the outstanding export performance of the north-east will be enhanced further.
The measures that I announced in the Budget have been strongly welcomed-- particularly by the British chambers of commerce--as a major boost for exports. The availability of lower premiums and more cover will enable us to compete in some of the markets that are particularly important to us.
9. Mr. Foulkes : To ask the Chancellor of the Exchequer what percentage of an average household's income is forecast to be spent on VAT (a) in 1993-94 and (b) in 1994-95.
Mr. Nelson Around 5 per cent. of income in 1993-94 for a family on average earnings.
Mr. Foulkes : Does the Minister accept that while the top 10 per cent. of earners spend less than 3.5 per cent. of their income on fuel, the bottom 10 per cent. spend more than 13 per cent of their much smaller income on fuel ?
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Does he accept that a couple on income support, with two children, will have to pay an extra £2 a week for fuel as a result of the Chancellor's Budget proposals ? Will he now end people's agony, suspense and misery by giving an assurance that they will be compensated in full ?Mr. Nelson : The Budget as a whole ensures that the better off will pay more. It is undoubtedly true that, as my right hon. Friend the Chancellor has said, substantial help will be made available to assist people with the VAT costs that they will have to pay next year. As for the burden of tax generally, real take-home pay has risen considerably since the Government came to office. All in all, we should be judged according to our deeds rather than our words. We have protected those most in need, and everyone else is better off.
Mr. Nigel Evans : Will my hon. Friend confirm that the Government's policy has been to shift the burden of taxation away from incomes and on to expenditure? Over the past 14 years, the top rate of income tax has fallen from 83p to 40p, and the bottom rate has fallen from 33p--the rate under the last Labour Government--to 20p.
Mr. Nelson : My hon. Friend is absolutely right--there has been a progressive move away from direct taxation and towards indirect taxation. This party, and this Government, believe that people should be left with as much as possible of the product of their own earnings and savings to spend as they think best.
Ms Harman : Will the Minister clarify the position? The Chancellor was deliberately confusing on this point? Is it now admitted that VAT will be imposed on standing charges for gas and electricity as well as on the fuel actually used? If so, will the Minister explain how it can be an environmental matter to impose VAT on standing charges which do not vary according to thre to add.
10. Mr. Rathbone : To ask the Chancellor of the Exchequer what consideration he is giving to relieving registered charities of the present VAT costs.
Mr. Dorrell : There are a number of measures in the Budget to assist charitable giving, as well as a special transitional scheme to help charities which receive income from dividends.
Mr. Rathbone : I welcome those measures in the Budget and my hon. Friend's reminder, but could he not see his way to removing some of the VAT disincentives to contributors to charities as well as the burden on charities, which are now doing more and more and better and better, as needs must?
Mr. Dorrell : My hon. Friend is right to praise those involved with charities for the increasing contribution that they make. We welcome that, and we have given extensive support to it. We believe that the best way to help the charity movement to carry out its task is to provide incentives to those who give money to charity. That is why
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we have increased substantially the range of tax reliefs available--the majority of them on the giving of money to charities rather than the expenditure of money by charities. In total, those tax reliefs now have a value of £1 billion, of which £150 million amounts to direct VAT reliefs.Mr. Mandelson : In view of the additional burden on charities created by the extension of VAT to fuel, will the Minister clarify once and for all whether the VAT extension will apply to standing charges on fuel bills, and will he tell us clearly what exactly is the environmental justification for that?
Mr. Dorrell : There is absolutely no secret about this. It has been said from the Dispatch Box repeatedly since Budget day that the answer is yes, it does apply to standing charges. [Hon. Members :-- "Why?"] As my right hon. Friend the Chancellor of the Exchequer made clear to those who were listening to his answer a few moments ago, to try to levy VAT on energy without levying it on standing charges would be to establish an easy and obvious avoidance loophole.
11. Mr. Patrick Thompson : To ask the Chancellor of the Exchequer what is the growth in unit wage costs in (a) the United Kingdom and (b) other EC countries over the past year.
Mr. Portillo : While over the latest year manufacturing unit wage costs in Germany rose by more than 9 per cent. in Britain they fell by 1 per cent. That is excellent news for British jobs.
Mr. Thompson : I thank my right hon. Friend for that reply, which confirms that manufacturing productivity in Britain is better than it is in Germany--and also, I believe, in Japan. Does my right hon. Friend agree that there has never been a better opportunity for manufacturing firms in Norwich and throughout the country to exploit opportunities in world markets and in the single market, and that it is bad news that there are those in this country at this time who are willing to encourage strike action in any part of the economy?
Mr. Portillo : My hon. Friend is right. We expect competitiveness to be about 20 per cent. better during the year ahead than in the year gone by. Strikes are the worst possible advertisement to those thinking of investing in this country. Those who are thinking of investing in this country will want to hear clearly from the Labour party that it condemns the strikes and sees that strikes are pointless and self-defeating. They will also want the hon. Member for Dunfermline, East (Mr. Brown) to get up now and condemn the strikes.
Mr. Flynn : Will the Minister confirm that we have some of the lowest unit wage costs in Europe, which accounts for some of our attraction to overseas industry, but that a major part of the budget of pensioners and others on low incomes will be the standing charges on their fuel bills ? Those standing charges will amount sometimes to 50 per cent. and sometimes to three quarters of their fuel bills. That has nothing to do with fuel consumption. Do the
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