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Will the Treasury Minister think about one issue that I have looked at recently? One of my constituents wrote to me and said, "Tommy, do you remember the hated poll tax, when the Minister came up with a rebate to get us out of the hole that we were in?" The people of Britain went bananas, they wanted rid of the poll tax.

Now the Government are committed to the council tax, and they have had to decide how to cover it. They increased VAT to 17.5 per cent. to provide an acceptable form of local government taxation because of the Government's absolutely massive blunder on local council finance.

The Treasury is producing these ways of balancing the revenue because they clearly got it wrong. They increased VAT to 17.5 per cent. VAT when the poll tax was abolished. Now the Minister expects elderly, disabled and unemployed people to pay 17.5 per cent. more for fuel and power.

I shall be glad to hear the Minister's reply in summing up. I find it amazing that VAT has been increased from 15 per cent. to 17.5 per cent. to cover the council tax. Now they expect 9 million elderly folk, 3 million unemployed folk and all the sick and disabled folk to pay extra. It is absolutely incredible. I am delighted to give way to the Minister.

Mr. Dorrell : I have summed up. I have certainly said all I have to say on the subject, but I should like to correct one wrong figure I used in my speech and in an intervention in

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that of the hon. Member for Perry Barr--and I apologise to him for that. I flattered the record both of the Government and our predecessors in terms of the effect on the real take-home pay of those on half average earnings. The figures should be that, between 1974 and 1979, those people saw their real take-home pay rise by just over £3 a week, and since 1979 by just over £25 a week.

Mr. Graham : When the Labour Government were in power, some folk in the House of Commons were still in primary school. I do not need a history lesson from any Minister. I remember the days when I started work. There was a Labour Government and I was employed in an apprenticeship. When I finished my apprenticeship, I went to work. I had a good job with good pay and could afford to go on holidays and buy my clothes : I definitely did not need to go to jumble sales and bag sales. That is what the Government have inflicted on the low-paid, the unemployed and the disabled. The Minister should come with me and see the result of his economic plan.

Mr. Brian H. Donohoe (Cunninghame, South) : Will my hon. Friend tell me how many charity shops there are in his constituency? If it is anything like mine, he will find that in the past five years the only expanding industry is charity shops. What is the situation in his constituency?

Mr. Graham : I am grateful for my hon. Friend's intervention. I can see the Minister's face getting whiter, but it is not as pale as some pensioners will be in the winter, when they cannot afford heating because of the Government's VAT policy.

My hon. Friend is right. In my area, there has been a tremendous boom in charity shops. The Government have cut charity funding so much that they have had to open shops while folk have a wee bit of money. It is not the wealthy people who make contributions to charity ; it is folk like mothers, aunties, brothers and sisters who do not have a lot of money, but will not go by the tin can.

I make this point to the Minister, and I will make him an offer. I would love the whole Cabinet to come with me on those visits. It would probably help them to make a bit more sense of their taxation regime. I would love them to come to the jumble sales, the boot sales and the charity shops. I would like to take them on a Friday and Saturday night to some of the supermarkets, where they will see the elderly women scurrying about to try and buy goods which are near their sell-by date at half-price. They will see something that I never thought I would see again--the queues for the second-hand clothes and all the women scrabbling for something that costs 50p. That is what the Government taxation system has created for our folk ; it has got them begging.

My offer is a sincere one. I notice that the local Conservatives in my constituency have jumble sales, and do very well. They occasionally go along and buy the boots that the lords have thrown in--or even Tory Members have thrown in. We do very well ; we may buy a pair of boots for 50p that will give us a couple of weeks more wear. Then they announce in the local paper that the local Conservative fete made a few hundred pounds this week.

Then, in the next couple of weeks, we notice that they are asking local Conservative Members if they will donate old clothes--there is a great need for old clothes in my constituency--so that they can sell them to make a few

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bob in order to return a regime which imposes a taxation system on the low-paid and which cripples and kills the elderly behind their doors in winter.

Already the price of fuel--coal, gas and oil--is so high that pensioners are dying behind their doors. This is absolutely genuine--I am not conjuring up a fairy tale. I can see from all hon. Members' faces that they know I am telling the truth. The taxation system has been wrong for the last 14 years. For 14 years, the Government have plundered this country's resources ; they have squandered the money raised by privatisation and thrown it into the bin--the dustbin of unemployment. They have wrecked the economy by squandering North sea oil and gas.

I only wish that we could have a general election tomorrow. I am sure that a general election tomorrow would not just produce a change of Government, but would enable the elderly folk, the disabled and the unemployed to walk with pride again. They could look forward to a future with jobs, to where the grass grows green and is not made dry and arid by this barren Government. They are a hopeless Government ; they have had their day. Let us give them a real knuckleduster. If they are so confident of their tax regime, let us have a general election now.

Mr. Nicholas Brown : During the excellent speech of my hon. Friend the Member for Renfrew, West and Inverclyde (Mr. Graham), I distinctly heard Conservative Members shout, "Tommy for Chancellor." I know that they are desperate to get rid of the present incumbent ; nevertheless, I urge my hon. Friend not to cross the Floor to take over the job.

I also understand my hon. Friend's desire to take Conservative Members to charity shops, but he would probably get more for their suits than he would for their Government. I believe that the consumers in his constituency are a fairly discerning bunch : while they might purchase, at a knockdown price, suits that Conservative Members can clearly afford, I doubt that they would purchase a Government whom the country clearly cannot afford.

Let us not obscure the main point of today's debate--that the Government hope to raise an extra £2.7 billion in the financial year 1995-96. That is an awful lot of money. Of course the Government are trying to obscure the way in which it will be done ; of course their proposals are not set out bluntly in the form of direct tax increases, as a number of my hon. Friends have pointed out. None the less, that will be the effect of the freezing of these allowances.

Interestingly enough--as my hon. Friend the Member for Kingswood (Dr. Berry) pointed out--the recession is affecting people with savings and people with private-sector debt in a similar way. Those with savings are trying to hold on to them, because they are frightened of spending and uncertain about their future. Labour believes that the only way to weather the present crisis is to deal with unemployment first : it is the core issue, and the Government should concentrate on it first.

Of course the public sector borrowing requirement, and indeed the revenues available to Government, are affected by growth rates. Of course, if the Government were able to restore economic growth to the point at which it should now be, more revenue would be available and they would be able to reduce the deficit. That, however, is not the history of recent years : we have experienced 10 successive

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quarters of negative economic growth. That affects not only the PSBR, but the tax burden required to service or even reduce it. I agreed with the Financial Secretary when he cited the work of the Institute for Fiscal Studies about the distributional effect of the whole of the Chancellor's Budget--although, of course, that same distributional effect does not apply just to the details of the allowances that we are discussing.

However, although what the IFS said about the distributional effect of the totality of this year's measures was correct, that does not apply to the whole range of tax changes that the Government have made since 1979. The main change has been the substantial shift from direct to indirect taxation, particularly through VAT increases : that has had a regressive effect on the poor.

The Financial Secretary's favourite line seems to be that real take-home pay has increased throughout the Conservatives' period of office. They are proud of that. The hon. Gentleman, however, is talking about--I believe--58 per cent. of our fellow citizens, who are in work. What about the other 42 per cent.--the unemployed, and pensioners? What has happened to their real earnings since 1979? They have not been as well off under the measures promoted by the present Government.

If we take the lower rate band alongside the freezing of allowances, it is clear that those earning below median earnings will be adversely affected by the Government's proposals--not the very poor ; not those who do not pay income tax, and therefore are not affected by the positioning of allowances in lower-rate bands ; but those on low earnings. As if that were not enough, I believe that there is widespread public resentment about the way in which the Government have gone about raising the taxes they need in order to deal with the current deficit.

Before the election, we were told that the Conservative party was committed to reducing taxation ; then, in the Budget, we are told that VAT must be extended to domestic electricity and to charities. That is probably the most regressive single VAT adjustment that could have been made. We are told that employees' national insurance must be increased, not just for those earning above average incomes--the Labour party's proposal before the general election--but for everyone. That was after the Conservative party promised at the election that they would do no such thing. Moreover, we now have the adjustment of allowances proposed in the Bill.

What is done is regressive. It is a substantial increase in tax--£2.7 billion. I do not think that the Financial Secretary has made the case against the amendment, so I urge hon. Members to vote for the amendment standing in my name.

Question put, That the amendment be made :--

The Committee divided : Ayes 236, Noes 277.

Division No. 266] [7 pm

AYES

Abbott, Ms Diane

Adams, Mrs Irene

Ainger, Nick

Ainsworth, Robert (Cov'try NE)

Allen, Graham

Alton, David

Anderson, Donald (Swansea E)

Anderson, Ms Janet (Ros'dale)

Armstrong, Hilary

Ashdown, Rt Hon Paddy

Ashton, Joe

Austin-Walker, John

Barnes, Harry

Barron, Kevin

Battle, John

Bayley, Hugh

Beith, Rt Hon A. J.

Bell, Stuart

Benn, Rt Hon Tony

Benton, Joe

Berry, Dr. Roger

Betts, Clive

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Blair, Tony

Blunkett, David

Boateng, Paul

Boyce, Jimmy

Boyes, Roland

Bradley, Keith

Bray, Dr Jeremy

Brown, N. (N'c'tle upon Tyne E)

Bruce, Malcolm (Gordon)

Burden, Richard

Byers, Stephen

Callaghan, Jim

Campbell, Mrs Anne (C'bridge)

Campbell, Menzies (Fife NE)

Campbell, Ronnie (Blyth V)

Campbell-Savours, D. N.

Canavan, Dennis

Cann, Jamie

Carlile, Alexander (Montgomry)

Chisholm, Malcolm

Clark, Dr David (South Shields)

Clarke, Eric (Midlothian)

Clarke, Tom (Monklands W)

Clelland, David

Clwyd, Mrs Ann

Cohen, Harry

Cook, Frank (Stockton N)

Corbett, Robin

Corston, Ms Jean

Cousins, Jim

Cryer, Bob

Cunningham, Jim (Covy SE)

Cunningham, Rt Hon Dr John

Dafis, Cynog

Darling, Alistair

Davidson, Ian

Davies, Bryan (Oldham C'tral)

Davies, Rt Hon Denzil (Llanelli)

Denham, John

Dewar, Donald

Dixon, Don

Dobson, Frank

Donohoe, Brian H.

Dowd, Jim

Dunwoody, Mrs Gwyneth

Eagle, Ms Angela

Eastham, Ken

Enright, Derek

Etherington, Bill

Ewing, Mrs Margaret

Fatchett, Derek

Field, Frank (Birkenhead)

Fisher, Mark

Flynn, Paul

Foster, Rt Hon Derek

Foster, Don (Bath)

Foulkes, George

Fraser, John

Fyfe, Maria

Gapes, Mike

Garrett, John

George, Bruce

Gerrard, Neil

Gilbert, Rt Hon Dr John

Godsiff, Roger

Golding, Mrs Llin

Gordon, Mildred

Gould, Bryan

Graham, Thomas

Grant, Bernie (Tottenham)

Griffiths, Nigel (Edinburgh S)

Griffiths, Win (Bridgend)

Grocott, Bruce

Gunnell, John

Hall, Mike

Hanson, David

Harman, Ms Harriet

Harvey, Nick

Henderson, Doug

Heppell, John

Hill, Keith (Streatham)

Hinchliffe, David

Hoey, Kate

Hogg, Norman (Cumbernauld)

Hood, Jimmy

Hoon, Geoffrey

Howarth, George (Knowsley N)

Howells, Dr. Kim (Pontypridd)

Hoyle, Doug

Hughes, Kevin (Doncaster N)

Hughes, Simon (Southwark)

Hutton, John

Illsley, Eric

Jackson, Glenda (H'stead)

Jackson, Helen (Shef'ld, H)

Jamieson, David

Janner, Greville

Jones, Ieuan Wyn (Ynys Mo n)

Jones, Jon Owen (Cardiff C)

Jones, Lynne (B'ham S O)

Jones, Martyn (Clwyd, SW)

Jones, Nigel (Cheltenham)

Jowell, Tessa

Kaufman, Rt Hon Gerald

Keen, Alan

Kennedy, Charles (Ross,C&S)

Khabra, Piara S.

Kinnock, Rt Hon Neil (Islwyn)

Leighton, Ron

Lestor, Joan (Eccles)

Lewis, Terry

Livingstone, Ken

Lloyd, Tony (Stretford)

Llwyd, Elfyn

Lynne, Ms Liz

McAllion, John

McAvoy, Thomas

McCartney, Ian

Macdonald, Calum

McFall, John

McKelvey, William

Mackinlay, Andrew

McLeish, Henry

Maclennan, Robert

Madden, Max

Mahon, Alice

Mandelson, Peter

Marek, Dr John

Marshall, David (Shettleston)

Marshall, Jim (Leicester, S)

Martin, Michael J. (Springburn)

Martlew, Eric

Maxton, John

Meacher, Michael

Michael, Alun

Michie, Bill (Sheffield Heeley)

Michie, Mrs Ray (Argyll Bute)

Milburn, Alan

Miller, Andrew

Mitchell, Austin (Gt Grimsby)

Morgan, Rhodri

Morley, Elliot

Morris, Rt Hon A. (Wy'nshawe)

Morris, Estelle (B'ham Yardley)

Morris, Rt Hon J. (Aberavon)

Mowlam, Marjorie

Mudie, George

Mullin, Chris

Murphy, Paul

Oakes, Rt Hon Gordon

O'Brien, Michael (N W'kshire)

Olner, William

O'Neill, Martin

Parry, Robert

Pendry, Tom

Pickthall, Colin

Pike, Peter L.

Pope, Greg

Powell, Ray (Ogmore)

Prentice, Ms Bridget (Lew'm E)

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