House of Commons Hansard Debates for 26 Apr 1993

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

Mr. Butterfill : No. I must conclude my speech.

The Budget is admirable and well suited to the prevailing economic conditions. It shows that our measures over the past two years are beginning to bear fruit because our economy is coming out of recession faster than most other western countries. If we maintain a curb on public spending we shall continue to prosper at a greater rate than those economies.

6.58 pm

Mr. Jim Cunningham (Coventry, South-East) : The hon. Member for Bournemouth, West (Mr. Butterfill) spoke about cuts in public expenditure and accused us of wanting to increase it. Over the past 14 years, and even in those years which, according to the Government's definition, were good years, there were major cuts in public expenditure. Therefore, the argument is not about vast increases in public expenditure but, as it has been over the past 14 years, about maintaining certain levels of public expenditure. Nobody is advocating hefty increases in public expenditure but, even in the good years when there has been no necessity to make cuts in public expenditure, the Government have seen fit to impose vast cuts. I have said before, but it is worth saying again, that Coventry city council has lost £200 million over the past 10 years, and that included the good years of the Tory Government.

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

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Mr. Cunningham : No, not at this stage.

Mr. Butterfill : Will the hon. Gentleman give way on this point?

Madam Deputy Speaker (Dame Janet Fookes) : Order. The hon. Member for Coventry, South-East (Mr. Cunningham) has made it clear that he will not give way.

Mr. Cunningham : Tory Members have used the events of 1976, when we had a Labour Government, in support of their arguments. However, they omit the facts. What happened in 1976 was the aftermath of the three-day week imposed by a Tory Government, and inflation in the United States was running between 26 and 28 per cent. Those factors worked their way into the British economy but are ignored by Tory Members now.

The nearest parallel to the events of 1976 were the events of September last year. In a roundabout way, the bankers, the money lenders or the Government creditors--whatever language one wants to use--were telling the Government that they wanted them to put their house in order, put the economy in order and start paying off some of the debts incurred before September. We must look at the Budget against that economic background.

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

Mr. Cunningham : No.

Another major factor that must be taken into consideration when we look at the future and at the Budget is the balance of payments problem. In a recent interview the Prime Minister, when asked what he was going to do about that problem, said that he would think about it. That is no substitute for an economic strategy. My fear about the Budget is that, although we have seen one or two green shoots, 18 months down the road we may find ourselves in another economic crisis because the Government have failed to take measures to deal with the balance of payments problem. That problem will not go away, and it will come back to haunt the Government.

The Government's strategy on VAT has been disguised. Because they have set their face against massive direct tax increases, they will use increases in VAT to fund their borrowing and debt requirements, and they will extend it to other goods and services beyond fuel.

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

Mr. Cunningham : I have said that I will not give way. I want to limit my speech as much as possible so as to allow others to speak.

Mr. Butterfill : On a point of order, Madam Deputy Speaker.

Madam Deputy Speaker : Is the hon. Gentleman sure that it is a point of order?

Mr. Butterfill : Yes, Madam Deputy Speaker. I know that you are anxious to protect the reputation of hon. Members. In my speech, I referred to the increase in public expenditure. As the hon. Member for Coventry, South-East (Mr. Cunningham) said that there had been no such increase, he was implicitly saying that what I said was untrue. He knows that there have been substantial increases in public expenditure under the Government. Therefore, I hope that you will defend the integrity of hon. Members and allow them to redress comments made by Opposition Members.

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Madam Deputy Speaker : That is very ingenious, but it is a point of substance, not a point of order.

Mr. Cunningham : I can answer that last point. I said that the real argument was about maintaining levels of public expenditure against a background of cuts.

To return to the subject of VAT, one could live with the Budget--

Mr. Butterfill : I was right. Public expenditure has increased in real terms every year.

Madam Deputy Speaker : Order. I recall that the hon. Member for Bournemouth, West (Mr. Butterfill) is keen on points of order. Let me tell him that it is not in order to make seated interventions.

Mr. Cunningham : The fundamental question about VAT that the Government have not answered, although it has been repeatedly put to them, is whether the people affected by increases in VAT--pensioners, single- parent families, needy families and those on low incomes--will receive full recompense for those increases. All that the Government have given us on that is nods and winks.

There is nothing in the Budget about the provision of cre che facilities to allow one-parent families to retain a bit of dignity and get employment or training where necessary. There is nothing for women. In particular, nothing addresses the social problem of battered wives. The Budget could have introduced measures to encourage better voluntary services to deal with such issues. Many voluntary organisations do valuable social work among the ethnic communities, unemployed young people and others, but the imposition of VAT on such charities would impose a tremendous burden on them. We should welcome any measures in the Budget aimed at reducing unemployment and helping small businesses. However, there is no recognition of the heavy costs for industry of research and development. The directors of large firms all say that they badly need Government assistance in that sector.

When trying to judge the Budget in social terms, we must look at the other side of the coin. A cost will have to be paid for the lack of measures to ensure safer inner cities. Safer city projects and urban aid grants are being phased out in Coventry, even though they play a tremendous part in dealing with some of the inner-city problems of cities such as mine. There has been no attempt to deal with education, with proper training for young people or with providing a proper education service. Outside the Budget, but in a way still part of it, is the confrontation between the Government and the teachers. The Government should be conciliatory and sit down with the teaching profession, parents' organisations and all other interested parties to try to resolve the frictions in education. The Budget was a golden opportunity to help industry. If Britain is to retain a role in Europe as a major industrial power, it has to restore its manufacturing base, but that can be done only with co-operation between the interested parties and organisations which play a part in the maintenance of the manufacturing base. I am disappointed with the Budget. For the sake of the unemployed, I hope that it will succeed, but I am worried that 18 months down the road the erosion of our manufacturing base will continue and we shall still have a major balance of payments problem, when all those problems should be addressed now.

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7.8 pm

Mr. Matthew Carrington (Fulham) : The real test of the Bill is the effect that it will have on, and the help that it will give to, the recovery of our economy. The purpose of the Finance Bill is to ensure that the groundwork is laid to encourage the recovery that is now so apparent in our economy.

We heard from my right hon. Friend the Chief Secretary to the Treasury that the last three quarters have shown growth in our economy. That is greatly to be welcomed because it supports, in a concrete form, with statistics from the Central Statistical Office, the anecdotal evidence, which has been clear all around us for some time, of how economic activity is picking up.

Let me give one example of that from my constituency. House prices have started to go up, houses are starting to sell and activity among estate agents and surveyors is starting to pick up.

My constituency, which is in inner London, has been badly affected by the recession. Some of the measures in the Bill designed to help house purchase, such as the raising of the stamp duty threshold, will have relatively little effect on the average house purchase in inner London. Therefore, it is good that anecdotal signs of recovery are beginning to become apparent in statistics. The economy is now poised for a period of fairly rapid economic growth.

Of course, it is not enough simply to help economic growth through the Finance Bill ; external factors are also necessary. The USA economy needs to recover from recession, and there are now unmistakable signs that its growth rate is recovering and that the USA will come out of its recession strongly. That will help our exports. Indeed, our exports to non-EC countries have risen by 12 per cent. over the past year, which shows the effect that the USA economy has on our economy and exports.

Most important of all is what happens in Germany and other EC countries, whose economies are already in recession and heading into even deeper recession. We need to encourage our European partners to take the measures necessary to come out of recession. One of those measures is a reduction in German interest rates, which are now being cut month by month. Those cuts affect the strength of the deutschmark, which has been far too strong, to the disadvantage of other EC countries. As the deutschmark weakens, that will do nothing but good to all our economies.

Britain already has a great deal in place to facilitate our recovery, such as lower interest rates--

Mr. Salmond : At what stage of the recovery would Britain have been in if the Prime Minister and the Chancellor had had their wish and kept Britain within the exchange rate mechanism at the rates previously set? What is the hon. Gentleman's estimate of how that would have impacted on economic recovery?

Mr. Carrington : The hon. Gentleman has asked me to support something that I have never supported--our position inside the ERM. I always felt that the mechanism was not sustainable and would break apart, for the very reasons that eventually caused that to happen. I was pleased when Britain left the ERM, although I am sure that we would all have wished that to happen under different circumstances.

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Mr. Ken Purchase (Wolverhampton, North-East) : The hon. Gentleman is singing in his bath.

Mr. Carrington : If the hon. Gentleman had ever heard me sing, he would welcome the fact that I do not sing in the bath.

Britain's low interest rates are now having the desired effect on our economy, and our competitive exchange rate is beneficial to business recovery. However, we need to be concerned about the level of interest rates. Given the nature of the housing market and of housing finance, if interest rates are too low, the market will take off again, just as it did in the 1980s. None of us wants that. I hope that the Government will bear in mind the need to keep relatively high interest rates. I was glad to note that Ministers have said that they believe that the current level of interest rates is about right for the economy. I strongly support that view. The problem in our economy is one of timing. Most of the elements necessary for recovery are now in place, but we must wait patiently for the reduction in interest rates and the competitive exchange rate to work through. That will result in a stronger economic, industrial and commercial base.

The other problem is the public sector borrowing requirement, with all the inflationary pressures that that causes, and the great danger it poses to the health of the economy in the short and medium terms. I am glad that the Government have taken steps to ensure that, first, there is nothing in the Budget to damage the recovery ; and secondly, that the right signals are given to ensure that people understand that the Government take seriously the need to reduce the PSBR. That is in everybody's interest.

There are three ways to reduce the PSBR. One is economic growth, and I hope that growth will be even faster than projected in the Red Book, so that the PSBR will be reduced even faster. The second way is to keep public sector spending under tight control. It must be more efficient and targeted more effectively, so that the taxes raised are used to produce the greatest benefits for those in need.

The third way, which is regrettable but necessary, is to raise taxation. The measures to do so contained in the Bill are, sadly, inevitable but correct. It is also right that, by and large, they will not impact res will start to bite next year and the year after. No tax increase is ever popular. The Government had a choice, and they correctly chose to increase two taxes. First, there is to be an increase in the national insurance contribution, which is another form of direct taxation. The extra revenue from that will impact directly on the increasing burden of the social security budget. It is right to increase that form of taxation--

Mr. Ronnie Campbell (Blyth Valley) : The hon. Gentleman did not say that during the election.

Mr. Carrington : During the election, the economic problems in the world generally were not envisaged to be as great as they have proved to be subsequently. It was always implied that Britain had to come out of recession, and that if it continued for longer than expected, the

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Government--indeed, any Government--would have to take whatever measures were necessary to correct the imbalances in the economy. The other tax to be increased is VAT, through its extension to domestic fuel. When coming out of a recession, it is right to increase indirect rather than direct taxes, because an increase in direct taxes has a direct effect on people's incentive to work. In general, people see what they get in their pay packet as the reason for working, so it would be wrong to affect that position through an increase in direct taxation.

The imposition of VAT on domestic fuel has another benefit. As my right hon. Friend the Chief Secretary said, as well as reducing the PSBR, it will help to meet Britain's commitments under the Rio convention. The extension of VAT will assist the environment and is to be greatly welcomed. To some extent, it reverses the reduction in the real costs of domestic fuel under privatisation during the past few years. I believe that most people will be able to tolerate that increased tax, even if they do not welcome it.

Many people will find, however, that change painful and hard to afford. I look forward to measures in the autumn to make certain that those hardest hit by the imposition of VAT on domestic fuel will receive assistance with paying their bills. The most vulnerable will be those whose incomes are just above income support level, whom the present scheme does not assist. They must be given help in overcoming the substantial burden that they will be asked to bear.

The Bill's provisions are needed in our present economy. It does relatively little in the current year, which is right at this stage in our economic recovery, but sends all the right signals, to the markets in particular, that the Government are determined to reduce the massive public sector borrowing requirement, and take that task seriously.

This year, we have the advantage of another Budget in November. Having seen how the recovery shapes up over the next few months, I hope that, in November, the Government will reconsider some of their Budget decisions, will think hard on whether they are the right measures at that time, and will take whatever further steps are necessary in November--possibly even increasing taxation more--to ensure that the PSBR comes down and that the recession continues apace--I mean, that recovery from the recession continues apace. 7.21 pm

Mr. Alex Salmond (Banff and Buchan) : The hon. Member for Fulham (Mr. Carrington) made a slip at the end of his speech, but at least he did not make the same mistake as the hon. Member for Bournemouth, West (Mr. Butterfill), who described borrowing as immoral. If the hon. Gentleman holds to that view, he must fear for the future of the Treasury team in the after-life, because its members are some of the biggest borrowers of all time.

Mr. Butterfill : The hon. Gentleman completely misinterprets my remarks. I said that it was immoral to build up borrowing that has to be paid off by future generations. It is moral only if we pay it off ourselves.

Mr. Salmond : By either test, the Treasury team would stand condemned. The hon. Gentleman may not have studied the alarming PSBR statistics in the current Budget. I do not know what tax changes the hon. Gentleman

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would propose to get rid of that borrowing quickly. Also, if he studies the Good Book, he will find arguments that the lenders of money are also immoral--so perhaps there is no hope for any of us. I will concentrate my remarks on petroleum revenue tax. Right hon. and hon. Members who attended the Budget debate will know that on that occasion I commented on the general shape of the Budget. No doubt the Treasury team has been poring over my remarks in the past few weeks. Tonight, I shall comment only on PRT changes.

For the Treasury team, there is a big difference between tonight's debate and that on the Budget. Those changes were not considered the most controversial in the Budget, and when it came to the vote--as the deputy leader of the Liberal Democrats pointed out earlier--only Scottish National, Liberal Democrat and Plaid Cymru Members moved against the PRT changes. There was no recognition at that stage of the general concern that is evident now in contributions from hon. Members on both sides of the House.

All but three of the right hon. and hon. Members who have spoken so far made reference to PRT changes. I hope that the Treasury team is fully aware that if the issue were put to the test again--one hopes that it will be in Committee--the Government will not have anything close to the 264 majority that they managed to clock up when that measure was tested at the end of the Budget debate. There is general recognition now of the implications of the PRT changes.

I will examine the Government's three arguments for those changes, to test whether there is anything to be said for them. The Government argue, "We can't continue PRT as it now is because it has become a negative tax." In 1991-92, it actually cost the Exchequer £200 million. The Government say that it is ridiculous to retain the present form of PRT.

There are three contrary points to that argument. In 1991-92, the picture was much affected by what was, one hopes, the one-off Piper Alpha disaster and the tax treatment of the insurance claims that followed--so it seems unfair to pick that year as representative. In that year also, oil taxation as a whole was not negative, but raised more than £1,000 million for the Treasury.

Because PRT is a profit-related tax, it is sensitive to oil prices. When oil prices are high--they have been for long periods of Conservative Government--one would expect the Treasury to draw in vast sums from a profit-related tax such as PRT. Conversely, when oil prices are relatively weak, one would expect the PRT return to be relatively modest. A wise Government and Treasury would take the rough with the smooth. I did not hear any member of the Treasury Bench complaining, when oil prices were high and the Treasury was raking in up to £14 billion--as much as £20 billion per year at current prices--about the nature of the PRT system. At a time when oil prices remain relatively modest, the Treasury should accept a low tax take as an investment in the North sea's future profitability. Petroleum revenue tax is sensitive also to development and exploration levels. It is mistakenly thought by many people, particularly in the Treasury, that the North sea is a declining oil province, but that is not the case. By no measure could the North sea be fairly described as an oil

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province in decline. On the contrary, oil and gas production levels are increasing and are expected to peak in 1996 or 1997.

The Minister for Energy himself stated in a Department of Trade and Industry press release dated 27 January :

"While the overall level of exploration and appraisal drilling fell last year--not surprising in difficult times of low oil prices and record levels of expenditure on field developments--such activity continued to bring home results. Better than one well in four proved to be a discovery. Historically, since drilling began in the North Sea, the ratio has been roughly one in five."

In other words, the current strike rate is better than the historical average. One well in four is successful in terms of a hydrocarbon accumulation being found. Although it is true that accumulations found today are smaller than before, by no standard for qualifying or judging an oil province can it be said that the North sea is a province in decline.

Therefore, it is an act of ultimate folly to devise a tax system that benefits continued production from existing accumulations at the expense of discouraging the exploration of future accumulations, when the statistics give every indication that such explorations would be very beneficial and productive. The Government's argument that the PRT was not doing its job is far from proven.

The second argument deployed by Treasury Ministers since the Budget is, "What's the point of giving money to international oil companies? Why should anyone support that prospectus?" But one consequence of the Government's tax changes is that certain, highly selective oil companies will be given lots of money.

There is something highly incestuous about the way in which some companies have commented on the changes. British Petroleum representatives said that they are wonderful, but given that BP is one of the companies, because of its production profile, that stands to benefit by tens or even hundreds of millions of pounds, it is hardly surprising that it is enthusiastic about them. Very few companies, if offered tens or hundreds of millions of pounds by the Treasury, would not say, "Yes, these are tremendously good tax changes."

For the Government then to cite BP's reaction as proof that the industry supports the Government's approach is at best disingenuous and, at worst, incestuous. The Government should be able to quote some independent advice to support the position that they have taken. Of course, that independent support would be very difficult to obtain at the present time.

The idea of winners and losers is very misleading. I hope that Treasury Ministers have studied the excellent letter in the Financial Times on 2 April from 10 managing directors of the smaller and highly active exploring companies in the North sea at the moment. A great deal of wisdom is found in that letter. The phrase that impressed me most was :

"Finally, the polarisation of companies into winners and losers is not really accurate. Almost any company can become a winner' by cutting UK exploration".

That is the fact of the matter in these oil tax changes. To be a winner under the fiscal regime proposed by the Treasury team, it is necessary only to stop exploring ; it is easy to become a winner in terms of the tax changes.

Wood Mackenzie, the respected oil analysts, suspect that taxation windfall and gain that the Treasury

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anticipated from these changes will not come about because it has failed to understand the impact of these changes on behaviour. This is not just a matter of the petroleum revenue tax giving dollops of cash to international oil companies. It is a misunderstanding of who is going to feel the consequences of the oil tax changes. It will not be the international oil companies. If exploration in the North sea province becomes unattractive, they will move their exploration budget elsewhere in the world. It is an international industry and they can move their exploration activity to other oil provinces. The people who will lose from the oil tax changes are not the international oil companies but the service companies and the workers in the North sea. Thousands of jobs are on the line as a result of these apparently ill-thought-out proposals in the Budget. The third and final argument of the Treasury team is that the long-term tax regime being put forward for the North sea is very attractive and that international investment will be sucked in to take advantage of that tax regime. That is a fundamental misunderstanding. A tax regime that applies only a 33 per cent. corporation tax rate on an oil province is attractive in international terms--and would be looked upon as such--but very few people in the oil industry actually believe that, if there was a hike in oil prices, that tax regime would stay in place. What the Treasury is sowing in the current tax regime are the seeds of its own destruction ; there will inevitably have to be further changes in the future.

We do not need a crystal ball to prove that point. All we need to do is look at the track record in the United Kingdom. One of the first acts of the present Conservative Government, when they came to office in 1979-- facing a sharply increasing profile of oil prices--was to increase taxation in the North sea, as, indeed, any sensible Administration would have done at that time. They sharply increased the taxation regime that had been formulated by the right hon. Member for Chesterfield (Mr. Benn). So a Conservative Government were increasing taxes set by one of the demons of the Labour Government. No one in the oil industry believes that if we have a sharp increase in prices, as is quite likely towards the end of this decade, any Government would leave in place a 33 per cent. corporation tax rate pick-up from the North sea. Therefore, not even the incentive of a low tax regime is going to be effective in the impact of these overall tax changes. All three arguments put forward by the Government fall down very badly.

There are specific questions that I wish to ask because the Government, in written answers, have been carefully avoiding giving the information that many hon. Members require. We want to know if there was any consultation between the Treasury and the two Departments immediately concerned--the Department of Trade and Industry, responsible for energy policy, and the Scottish Office, which presently has some responsibility for the impact on employment north of the border.

As the hon. Member for Aberdeen, North (Mr. Hughes) said, the indication that has been creeping out from these closed briefings is that the DTI and the Scottish Office were not consulted ; that this was a big shock and surprise to them. The best way to describe their reaction to these briefings is, "It wisnae me ; somebody else is to blame. It was all the idea of the Treasury team."

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It is an extraordinary prospect. Here is a tax change which is going to affect a minimum of perhaps 10,000 jobs north of the border and the Secretary of State for Scotland is allowing it to be known that he was not even consulted before the tax change was put in place.

One of my predecessors for the old East Aberdeenshire seat--Bob Boothby-- perfectly described the position of the Secretary of State for Scotland as the "scullery maid" of the Cabinet. Here is a fine example of that reduced position if it is true that the Secretary of State for Scotland had no knowledge before the Budget of a tax change that put in jeopardy 10,000 jobs or more north of the border.

Mr. Robert Hughes : And all over the country.

Mr. Salmond : Of course, it is all over the country ; I have developed that point.

The point that I am particularly making--I am sure the hon. Member for Aberdeen, North understands it--is that a Secretary of State who has a particular responsibility for Scottish industry and employment, according to the briefings that he is allowing people in his Department to give out, is indicating that he had no knowledge of this taxation change, which will have an enormous impact on Scotland.

These briefings are very curious. The Press and Journal is the local paper of many hon. Members in the north-east of Scotland and I think that everyone would accept that its coverage of this matter since the Budget has been first class in terms of the detailed examination it has given to the impact of the taxation changes. It reported--appropriately, on April fool's day, 1 April--the briefing given by a senior Treasury official. The direct quote from that briefing reads :

"For 10,000 (job losses) we are securing £400-£500 million a year in taxation."

When we heard the President of the Board of Trade and the Prime Minister last autumn--in a callous, indifferent, almost casual way--announce the impact of the coal closures in terms of the overall job losses and the impact that that would have on communities, and the furore, uproar and political controversy that followed, many of us thought then that the Government might have learnt their lesson. However, we see from the briefing by senior Treasury officials that 10,000 job losses are a price well worth paying so that the Treasury can achieve its objectives in terms of the overall shape of the oil industry taxation proposals.

I will conclude my remarks by focusing on the economy of the north-east of Scotland. The hon. Member for Aberdeen, North noted that many parts of our area have enjoyed a comparatively good time throughout the recession-- although it has to be said that there are pockets in my constituency, in Moray and elsewhere, which have very high levels of unemployment--but it seems that the Government are determined to level out economic development throughout the country by making sure, just as the rest of the country is emerging from recession, that the north-east of Scotland is plunging into recession.

The key industries in our area--farming and fishing--are already experiencing difficulties. If oil, the third key pillar of the economy of the area, is plunged into major job catastrophe, as is threatened by these Budget proposals, we have a triple whammy being visited on the north-east of Scotland by the Conservative Government.

The big increases in taxation on petrol, the taxation increase which is threatened on domestic fuel, the prospect

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of people in the most energy-rich area in the whole of the European Community being unable to afford to turn on their electric fires, and these taxation increases on the oil industry, will have a very severe impact on the energy-producing areas of the country.

There are ways out of the mess that the Government have landed us all in. Suggestions have been put forward by, among others, Professor Alexander Kemp, the adviser to the former Select Committee on Energy. I hope that the Government have taken on board the measures suggested by Professor Kemp in his North sea study occasional paper No. 41. He suggests that we extend the transitional arrangements for relief in such a way as to avoid the effects on exploration.

Let me end on a cautionary note. I do not think that any Opposition Member will embark upon the fool's errand upon which the hon. Member for Kincardine and Deeside (Mr. Kynoch) has apparently embarked. He has been told by the Treasury team that if only he, in Kincardine and Deeside, can think of some means of achieving the same results, in terms of Treasury revenue, by applying a different shape of taxation change, the Treasury team will be only too anxious to look at it. I am certain that it would. The Treasury's objectives have nothing to do with employment in the north- east of Scotland and elsewhere, but everything to do with the amount of money that it can grab from the North sea oil industry. I am certain that the Treasury would be glad to look at another way of getting an extra £700 million out of the North sea.

That, however, is not the issue that we wish to debate. We wish to debate whether the proposed taxation changes are sensible and whether they will have the impact that even the Treasury itself admits is possible in terms of the number of jobs lost. We do not want to embark upon finding another way for the Government to get an extra £700 million, thus damaging the North sea oil industry at a time when prices are not strong and when the industry needs investment for the future. I am confident that the Government will be forced to respond to the concern expressed by hon. Members on both sides of the Chamber as people come to understand the potential damage that will be done to the industry, in terms of the loss of tens of thousands of jobs. In Committee, we shall expect a climbdown by the Chancellor on this taxation proposal.

7.41 pm

Mrs. Angela Browning (Tiverton) : The 1993 Budget is different from Budgets of previous years, not least because of the economic background against which the Chancellor had to work--in particular, his need to address the public spending borrowing requirement problem. It has also set a new precedent, in that measures have been announced in this Budget not just for the forthcoming year but for future years. That is important. It is helpful when planning economic policy to be able to look further ahead than 12 months. The Chancellor has taken a bold initiative.

Many constraints were placed upon the Chancellor when he outlined his Budget. It was apparent that it would not be a giveaway Budget. I was pleased to be able to make representations to the Chancellor before he made his Budget statement and tell him that it was particularly important that the axe should not fall on the small business community. Many small business organisations--for example, the Forum for Private Business--have paid

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tribute to the way in which the Chancellor managed his Budget and allowed the small business sector the opportunity to grow and to increase the economic prosperity of this country, which we are now beginning to see.

I intend to draw attention to other matters, particularly those that affect people in my rural constituency of Tiverton in Devon. My hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) made a compelling case for the grievous impact that VAT on domestic fuel will have upon certain groups in the community. I know that my right hon. Friend the Secretary of State for Social Security has promised that those who are on means-tested benefits will be properly cared for in the autumn statement and that their benefits will be uplifted. There has also been a promise to take into account the impact of VAT on fuel in the retail prices index increase, which will also have an impact on other benefits, such as the state retirement pension. My hon. Friend the Member for Kemptown referred to the fact that certain groups spend much more on domestic fuel than other groups. It is important that that should be recognised when benefits are uplifted. It would be impracticable to promise that everybody who is affected in this way will find that there is a mechanism for dealing with the increase, to the nearest penny, in fuel bills. Whatever averaging formula is used to measure the effect on fuel bills of VAT, account must be taken of the greater amount of fuel that is used by the elderly and the housebound.

My hon. Friend the Member for Kemptown made a strong case for the elderly. I agree with him. I attended a meeting of Tiverton Age Concern on Saturday last. When I entered the hall where the meeting took place, I was hit in the face by the heat. However, the temperature needed to be high because the elderly, the frail, those who are confined to wheelchairs or who are otherwise immobile feel the cold far more than those who are mobile.

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