House of Commons Hansard Debates for 13 Jul 1993

The Chief Secretary to the Treasury (Mr. Michael Portillo) : I beg to move, That the Bill be now read the Third time.

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It is some time since the Budget. We have been involved since then in detailed discussion of the Bill in Committee, and it is perhaps timely to set the Finance (No. 2) Bill once more in its strategic context.

Recently, there has been a lot of good news about the economy. We have had growth in the gross domestic product for the past three quarters and encouraging statistics on inflation and industrial production. We have seen the latest figures for retail sales rising by 3 per cent., and there has been good performance on exports. Business optimism is at its highest level for 10 years and today's figures for manufacturing output show that it rose by 1.8 per cent. in May. In the first five months of the year, manufacturing output recovered by more than half the total loss it sustained during the recession. In the past four months, even the figures for unemployment have been encouraging, very much against the expectations of many commentators.

The Organisation for Economic Co-operation and Development forecasts that Britain will have the fastest growth of any major European Community country in 1993, and that that will be repeated in 1994. Those are all encouraging statistics. The principal threat to our economic prospects now comes from the size of our fiscal deficit.

The threat posed by the size of the deficit is not removed by the series of good figures that we have had, although recovery is now clearly established across a range of indicators in the economy. Part of our deficit is caused by the cycle, by reduced receipts to the Government, and by extra money that the Government have to pay out in benefits to the unemployed. None the less, the Government have made provision in their new public spending plans to count separately those elements that are due to the cycle, and to focus upon the new control total.

Whatever the extent of the cyclical elements within the present fiscal deficit, to say that some elements are cyclical is not the same as saying that they will unwind automatically at the end of the recession. If one went to one's bank manager and said that one's large overdraft did not matter because it was merely cyclical, the bank manager would not be impressed, and would not let one off paying the debt interest.

That is the position in which the Government find themselves. The burden of debt interest is rising sharply and, over the next few years, it will rise by £10 billion a year. That is money that cannot be devoted to the public spending programmes that many of my hon. Friends and other hon. Members might regard as desirable. There are important reasons why the Government should maintain control of the public sector deficit. I do not believe that the people of this country who have had to make great sacrifices during the recession, or those in business who have had to retrench during the recession, have any desire to see their Government living beyond their means on a sustained basis, and there can be no moral case for doing so.

That is why the Government have developed a medium-term strategy for dealing with our public sector borrowing requirement. We have also embarked on establishing a rhythm of good decision making, which is a vital ingredient for the restoration of confidence.

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The autumn statement was made in November by my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont). It set out for three years ahead the Government's public spending plans. In March this year, the Budget set taxation policy in a medium-term context, setting out the tax increases that will occur over the next three years.

That has been translated into the Finance (No. 2) Bill, consideration of which we are completing today. I believe that the rhythm of decision making --of decisions well thought out, well presented and stuck to--is a vital ingredient in restoring confidence. Its effects can now be seen in growing confidence, in the business optimism survey, which I have already quoted, which is the best for 10 years, and in the performance of the markets, with recent pressure on the pound being, if anything, upward rather than downward.

Mr. Betts : Of the £50 billion deficit this year, will the Chief Secretary tell the House how much he regards as cyclical, which will unwind naturally as part of any recovery, and how much is structural and will not unwind? Does he accept that there could be considerable damage to the unwinding of the cyclical element if the Government acted at the wrong time in the cycle to tackle the structural element?

Mr. Portillo : I should make it clear that to say that something is cyclical and that it will unwind is not the same thing. For example, the increase in the burden of debt interest is clearly cyclical, inasmuch as it is caused by the fact that the Government are borrowing more because they are spending more and receiving less. The fact that we have made those extra borrowings will not lead, at the end of the recession and when recovery is well under way, to our being let off the debt interest payment. The debt interest payment will still have to be made on the borrowings that have been incurred. So that which is cyclical and that which will unwind are not the same.

That is why, although one could make guesses about the cyclical element within the PSBR, the Government are rightly wary of pursuing that argument too far, because they recognise that not all the elements will unwind at the end of the period.

The Government are headed in the direction of reducing the public sector borrowing requirement by three routes : growth in the economy, which will help to reduce the cyclical elements to which the hon. Member for Sheffield, Attercliffe (Mr. Betts) referred and which will mean that there will be less to spend on social security and that the Government's receipts will increase ; the constraint of public spending ; and the tax rises announced in the Budget.

I recognise that some of the measures in the Bill are unpopular with my hon. Friends and in the country. That is why I should like to thank my hon. Friends for the support that they have given to the measures in the Bill. It is in no way satisfying to me to have to propose tax increases to my hon. Friends, but I hope that at least it has dealt with the myth that, in some way, to raise taxes is an easy option, whereas to constrain public spending is not.

Both constraining public spending and raising taxes are extremely difficult. My hon. Friends have been willing to support the difficult measures proposed in the Bill because they value the objective of achieving, above all, sound public finances. They are committed to restoring the

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Government's financies. They recognise that the Government must not live beyond their means, and that that is what is expected of us by the people we govern.

Fairness is extremely important in the package that we put together. My hon. Friends have found difficult the proposals to extend VAT to fuel and power. I remind them that we have taken care in the Budget and the Bill to ensure that the extra taxes that we have to raise fall proportionately across the various divisions of income.

In the full year of the effects of the Bill, we will be raising an extra £10.5 billion of revenue. Of that, only £2.3 billion comes from the extension of VAT to fuel and power. The money will also come from the changed taxation of dividends, the change in taxation for the married couples allowance for those on higher tax rates, changes in taxation on company cars and the different treatment of mortgage interest relief, again confined to 20 per cent., and therefore affecting in particular those people on higher rates of tax. Therefore, I believe that we have produced a package that is fair to people across the income ranges and I think it has been recognised as such by independent commentators.

Ms Harriet Harman (Peckham) : Since the Chief Secretary says that fairness is important, can he tell the House, and in particular his hon. Friends whom he will ask to vote to impose VAT on gas and electricity, how much money he will put into the compensation scheme to ensure that it does not disadvantage the poor, the elderly and those with disabilities?

Mr. Portillo : No, I cannot give an exact answer. The appropriate time to make that announcement will be in the autumn. My right hon. Friend the Secretary of State for Social Security is under an obligation to make an uprating statement to the House in the autumn, and when he does so he will take into account all the factors which at the time affect his judgment about what the appropriate uprating should be. I do not believe that it is right to try to prejudice the decision that is best taken at that time.

Mr. Alex Salmond (Banff and Buchan) : The Chief Secretary said that there were three routes for controlling the Budget

deficit--restraining spending, increasing taxes and growth. He did not give any idea of the proportions that he thought would be contributed by each of those avenues. Can he give us a broad-brush idea of, for example, how much of the PSBR he expects to be dealt with by increased growth?

Mr. Portillo : The present prospects for the course of the PSBR and all the assumptions on growth and on other matters are set out in the Red Book. They show a declining path for the PSBR over the next five years. If the hon. Gentleman wishes to study those assumptions, he will find them all set out. What can be answered with absolute precision is the contribution to be made from taxation, which is an extra £6.5 billion in 1994-95, and £10.5 billion in 1995-96. The Government are concerned not just with borrowing, important though that is, but also with the level of public spending. That has now reached a level of around 45 per cent. of GDP. The Government believe that the burden imposed by public spending on the

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wealth-creating sector should be kept to a minimum. If that burden is allowed to grow too much, it will choke off the wealth-creating sector.

We believe that those who create the wealth in our society should be left with the lion's share of that wealth. We do not believe that the state has a pre-emptive right to help itself to more than half of what is produced by the people of the country.

The Government are wary of the burden that is imposed by the state, and we have therefore now embarked upon a new public spending round. We confirmed, following last month's Cabinet meeting, that the new control total figures in cash that we intend to achieve for 1994-95 and 1995-96 are the same as those that were announced at the time of last year's autumn statement and which were confirmed in the Red Book, published at the time of the Budget.

The targets that we have set ourselves are challenging--perhaps more challenging than my hon. Friends realise. They assume virtually no growth in real terms, either between this year and next year or between next year and the year after.

Within the total of public spending that has been so restricted, important pressures have been set up by programmes that are demand-led. In particular, I think of education ; many more students are predicted to go into higher education in the years ahead. There are also the demands from social security, which is far and away the largest public spending programme.

The task that faces us is to find ways of reducing the trend rate of growth of programmes. If public spending is limited as a total to zero growth in real terms, but some programmes within it, such as social security, are growing by 3 per cent. in real terms, that obviously sets up a problem. We must reduce the trend rate of growth of those programmes, and probably make savings in other programmes. I have been gratified by the support that my hon. Friends have given to the Government's objectives for the control of public spending. Their support makes the task a great deal easier. I hope that, when we come to propose specific measures to the House, we shall find the same support for the specific measures which are necessary to deliver those totals which have the support of my hon. Friends. Public spending control is important, because it plays a vital part in establishing Britain's competitiveness.

During the 1980s, Britain's proportion of GDP that was taken up by public spending moved from close to and sometimes above the EC average to a level well below the EC average, and much closer to the American average, although still some way above the Japanese average. That is still true today.

The amount of public spending within GDP is an important component in the competitiveness of this country. It has enabled us to run low rates of taxation that are attractive to investors and to people who want to do business, and has also provided good incentives to people in this country who are doing business. We forget the attraction of low rates of direct taxation at our peril.

The Bill is crafted to impose the minimum disincentive upon our economy, and to maintain incentives to help industry to keep costs low. Of all the recent statistics on the British economy, the improvement in competitiveness has been the most satisfying and perhaps the most important. We have seen productivity grow by 8 per cent. in the past year to its highest ever level. Unit labour costs have fallen

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by about 3 per cent., whereas German unit labour costs rose last year by 10 per cent. The wage increases in British industry today are lower than at any time for 25 years.

I pay tribute to British management for many of those achievements. One would not expect productivity to rise during a recession. One would expect businesses to find it difficult to cut their costs as fast as they are losing orders. But British business has improved productivity to a record level and, as a consequence, we expect that competitiveness will improve by 20 per cent. in a single year. We also expect British business to improve its share of world trade for the first time in three decades.

Exports are at a record level, up by 6.5 per cent. on a year ago. Competitiveness should concern not only this country but the rest of the EC. The Community has been out-performed in economic terms by Japan in the 1960s, 1970s and 1980s. The EC was also out-performed by the United States in the 1980s. The prospect, I am afraid, is that the EC will continue to be outperformed by both the US and Japan. That is why it is important to maintain competitiveness and protect incentives in the way that the Bill does. It is also important, of course, that we remain firmly outside the social chapter of the Maastricht treaty, which would drive up our costs to the highest levels in Europe, and would affect our competitiveness.

Mr. Beith : The Minister pays tribute to British management. What about the British workers? They, after all, have shown great flexibility and have adapted to new technologies. A fair proportion of their colleagues and friends have now found themselves out of work as part of the process of bringing about lower costs for some manufacturing companies.

Mr. Portillo : I agree that the costs of the recession have been felt by everyone in Britain. That is one of the reasons why the Government must not be the only institution in Britain not to feel the effects of the recession.

I recognise that immense costs have been paid by those who have become unemployed. I also recognise the flexibility of the British labour market, which is and will continue to be one of its great strengths in the years ahead. It may be too early to tell, but one of the reasons why the unemployment figures have turned may be the greater flexibility of the United Kingdom labour market. If so, I pay tribute to both management and to work force.

I also pay tribute, if I may, to Government policies, which have, in the face of opposition from the Opposition parties, created a more flexible and more responsive labour market, which has enabled Britain to be competitive and unemployment to fall.

I hope that unemployment falls more quickly, as the recovery comes upon the economy, than it did in the 1980s. All the strategies that I have talked about are clearly exemplified within the Finance Bill, and demonstrate the Government's clear medium-term policy for the British economy.

I am bound to ask myself, "What has been offered to us by the Opposition? What have they put up by way of reasonable alternatives during discussions on the Bill?" First of all, I turn to the hon. Member for Peckham (Ms Harman). Ideally, a Chief Secretary to the Treasury should be flinty-faced, stony-hearted and odious. I believe that I

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fit the bill. But the shadow Chief Secretary also should be flinty-faced, stony-hearted and odious. To what extent does the hon. Lady fit the bill? Is she flinty-faced? No, she is kind and radiant-faced. Is she stony-hearted? No, she is open-hearted. She is generous to a fault. She wants to spend money on any good cause that is put her way. Those are not the natural instincts of a Chief Secretary.

Is the hon. Lady odious? Do Opposition spokesmen tremble over their pens when writing their speeches, worrying that they may inadvertently commit the Labour party to a new promise on public spending that has not been approved by the shadow Chief Secretary? I fear that they do not fear the hon. Lady. Indeed, I am afraid that they could not fear the hon. Lady. I am tempted to say that she has fragrance, and fragrance is not something which any Chief Secretary or shadow Chief Secretary should have.

My hon. Friends may protest that the hon. Member for Dunfermline, East (Mr. Brown) may appear better qualified for the job of shadow Chief Secretary. He is Grim Gordon, Gloomy Gordon, Glowering Gordon--indeed, anything other than Gay Gordon. He probably would make an admirable shadow Chief Secretary. Unfortunately, the hon. Gentleman is shadow Chancellor of the Exchequer, and it is incumbent upon him to come up with an economic policy. What have we had from the hon. Gentleman? He wishes to spend the receipts that are held by local authorities. He wishes, he says, to bring down unemployment to bring about a recovery. Both those aims demonstrate such complete economic illiteracy that I want to share it with the House. If one were to spend the receipts of local authorities, which have after all been set aside against their debts, one would increase public borrowing and public spending. To say that one would be able to bring about recovery by reducing unemployment is nothing but a fudge. The House knows perfectly well that a recovery produced by the economic policies that we follow can reduce unemployment. It is not possible to reverse the process and say that one can reduce unemployment and thus bring about recovery.

The economy needs sound finances. It needs policies for sound finances. The hon. Member for Dunfermline, East offers sound-bite finances. His policies were described by the right hon. Member for Chesterfield (Mr. Benn) as sound bites strung together, and they do not constitute an economic policy. Unfortunately, that is all that the hon. Member for Dunfermline, East has to offer.

Moving up the scale, we come to the right hon. and learned Member for Monklands, East (Mr. Smith), the Leader of the Opposition. He is the man who stands at the Opposition Dispatch Box and amuses the House. He is the man who makes speeches about hotels falling off cliffs and the grand national not starting properly, blames that on the Government and gets a laugh. One would think that he was auditioning to be the host of "Clive Anderson Talks Back". He is supposed to be auditioning for the role of Prime Minister. It is an extremely sad reflection on him that he is unable to come up to scratch. All around the country--

Madam Deputy Speaker (Dame Janet Fookes) : Order. I am sorry to sound like a spoilsport, but, before the right hon. Gentleman continues, I must ask what this has to do with the Third Reading of the Finance Bill.

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Mr. Portillo : The connection with the Finance Bill, Madam Deputy Speaker, is that, during the passage of the Finance Bill, we had hoped to hear an exposition from the Opposition spokesmen about the Labour party's policies. Unfortunately, and to conclude this section, we have instead found a complete failure by the Opposition to put themselves forward as a reasonable Opposition and an alternative Government.

There is not a boardroom, factory floor or council estate in the country where any confidence is felt in the policies of the Opposition, even when people have read carefully the proceedings of the Finance Bill upstairs.

Mr. Robert Sheldon (Ashton-under-Lyne) : So that the House can get him off the hook of that last passage, will the Chief Secretary now turn to serious matters and discuss the situation that will arise in the autumn when we will have the combined Budget? He has decided so much of the public expenditure that is settled for the next few years, much of which cannot be changed during the autumn Budget. What he can do in that Budget is raise taxation. He cannot adjust the balance between expenditure and revenue, because so much of the expenditure is already settled on.

Mr. Portillo : The right hon. Gentleman, by his tone, puts that forward as a criticism. The Government established a medium-term strategy for public spending, which is set out in the Finance Bill, and in all logic it will now bring together in a single statement both our plans for public spending--the details of how those totals are to be achieved--and our plans for taxation--any changes that may need to be made from the plans set out in the Finance Bill. The right hon. Gentleman is criticising, apparently, the medium-term clarity that has been established by the Government. That clarity is, in my view, one of the great underlying strengths of our approach. That is also the view of the markets, which have shown their confidence over recent months.

Our economic strategy, as shown by the Bill, is clear. It extends beyond the three years covered by the public expenditure survey and beyond the years covered in the Bill. It clearly tells the nation what the Government want to achieve over the medium and long-term. We have a strategy for low inflation, and a clear medium-term framework to restore public finances. We have set fixed spending ceilings, above which we will not go. The Bill contains further measures for tackling the deficit in future.

We look forward to the unified Budget on which the right hon. Gentleman has just questioned me. In it, we will continue the steady and purposeful progress that we have made in achieving our economic objectives of low inflation, restored public finances and sustained growth. We shall make our choices. However difficult they may be, we shall make them. There will be many difficult decisions to take, but they will be taken well. We shall confirm that rhythm of good decison making about which I have spoken and which now underpins confidence. A party that does not choose, or a party that cannot choose, is a party that does not govern. We are not afraid to choose, and that is why we now govern. When the critical economic decisions ahead have been made, the Government will present their package to the House, and

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we will then look to my right hon. and hon. Friends to support that package--as I know they will support the Finance Bill which is before us.

7.5 pm

Ms Harman : The Finance Bill makes it clear beyond all doubt that, because of the Government's failure on the economy over the past 14 years, the Conservative party is now the party of high taxation, high borrowing and high unemployment. Although the rhetoric is still there--we heard it again tonight--and although it was in the election addresses of Conservative Members and in the Tory manifesto, the Government's economic failure has led to a situation in which the rhetoric is wholly separate from reality. Conservative assertions about low taxation and sound public finance are now nothing more than an old aspiration that they have proved completely incapable of achieving.

It was clear from last night's debate that the Conservatives are divided, the Government are on the defensive and, worse than that, they have no strategy. Having failed to make the economy work properly, they are now-- partly through desperation but also partly through dogma--planning this autumn to dismantle the welfare state. The autumn battle to defend public services will be a battle to defend the very heart of the welfare state.

The Chief Secretary said that there was good news on the economy, but the Finance Bill is dealing with the consequences of economic failure. If one looks at the measurements that matter--the growth of manufacturing output, gross domestic product and the change in manufacturing employment--the story is the same all round. We are way behind Japan. We are behind the USA. We are also behind Germany, Italy and France.

The Finance Bill does not contain any measures to help industry, but the Government have insisted on measures that threaten the North sea oil industry. Already today Shell has slashed exploration, which affects jobs.

Mr. Portillo : I am intrigued by the hon. Lady's comparison with Germany. I told her a moment ago that manufacturing output in this country had risen by 5 per cent. over the first five months of this year, while industrial production has fallen by 7 per cent. in Germany. How does she equate that with Germany being way ahead of us? Is she using a negative scale?

Ms Harman : I am not. The problem with Ministers is that they twist the baseline in order to present something that people know is completely at variance with reality. If we hear about the pound replacing the deutschmark, or of an economic miracle in this country, people will know that the Government are refusing to faent that the right hon. Gentleman has just made shows that he is more interested in presentation and trying to cover over the cracks of the Government's division than he is in having a serious economic policy to put right the deep problems in this country. He is not prepared to recognise the situation, so it is welcome that the hon. Member for Wolverhampton, South-West (Mr. Budgen) described the reality. Last night, the hon. Member for Wolverhampton, South-West said that the Government were "near

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bankrupt". The hon. Member for Southend, East (Sir T. Taylor) described the country as "bust". However, it is not only the Tory Back Benchers who have been describing the Government's economic failure. We have had a Conservative analysis of the economic failure of the past few years which I would like to quote to the House.

Mr. Stephen Milligan (Eastleigh) : As the hon. Lady will not pursue the point made by my right hon. Friend the Chief Secretary to the Treasury, can she explain how, when she makes an incorrect statement about German and British industrial production, that is perfectly fair, but when my right hon. Friend produces the correct figures, that is just a matter of presentation?

Ms Harman : The Chief Secretary to the Treasury did not produce the correct figures. If we consider the growth of manufacturing output in the G7 countries between 1979 and 1992, Japan had 50 per cent. growth ; the United States had 32 per cent. growth ; Germany had 23 per cent. growth ; Italy had growth of 16 per cent. ; France had growth of 7 per cent ; and Canada had growth of 8 per cent. Would the hon. Member for Eastleigh (Mr. Milligan) care to volunteer the growth figure for the United Kingdom? I will give way to the Chief Secretary if he can tell us how we compare.

Mr. Dorrell : Perhaps the hon. Lady would like to tell the House what happened to manufacturing output under the last Labour Government.

Ms Harman : Against a figure of 50 per cent. growth in manufacturing output in Japan between 1979 and 1992, the United Kingdom had growth of barely 5 per cent. I am glad that the Financial Secretary to the Treasury has intervened because I was about to quote from his analysis of the Government's economic failures. The Financial Secretary said :

"Think back six years. The yuppie revolution was in full swing. It had a lot going for it. It encouraged young people to regard wealth creation as a benign activity. It broke class barriers. It embraced change. It exuded confidence. All of that was positive. But it was built on sand."

How right he was. In this Finance Bill, the country is paying the price of those years of economic failure.

The Financial Secretary went on to say that

"the resources that were attracted, like moths to a lamp-bulb"-- and to property development and to what the hon. Gentleman described as

"the lure of easy money"--

were wasted resources. He said :

"Resources are scarce, and we cannot afford the luxury of" and he then described his own Government's economic policy as "waste and distortion." I have to agree with the hon. Gentleman about that.

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

Ms Harman : No, I will not let the hon. Gentleman intervene.

Mr. Dorrell : Would the hon. Lady like to change her mind?

Ms Harman : No, I would not. I am afraid that I am going to be flinty-faced on this occasion.

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This Finance Bill pays the price of economic failure, unemployment and the soaring cost of unemployment. When we consider the public sector borrowing requirement and the cost of unemployment, it is clear that the figures are enormous. The cost of unemployment in London and the south-east for one year is £8 billion. That is £8 billion just for one year to finance idleness, waste and forcing people to be on the dole.

That is why we have said all along that the reduction of unemployment should be at the heart of the Government's economic policy so that we can end the high dole bills and lift the fear of unemployment which, to this day, still hold the economy back. However, still lurking in the Government's view is the idea that the first objective is sound public finances, although the Government have failed to achieve that, and that somehow high unemployment is "a price worth paying".

Having failed to tackle unemployment, the Government are now turning on the welfare state.

Mr. James Paice (Cambridgeshire, South-East) : By how much does the hon. Lady believe that the public sector borrowing requirement could be lowered by reducing unemployment?

Ms Harman : It is clear that the PSBR is too high. That is the price that has been paid for economic failure and for high levels of unemployment. Economic failure has been the result of failure to invest in training, skills and our infrastructure. We need to invest in those areas to set the economy to rights.

It is no longer any good for the Conservative party to posture as the party of sound finances. The Conservatives have ripped the finances of this country to pieces through the failure of their economic policy. Having failed to tackle unemployment, the Government are now turning on the welfare state.

Mr. Quentin Davies : Will the hon. Lady give way?

Ms Harman : I am sure that the hon. Gentleman cannot be trying to intervene on my point about the welfare state because clearly he has no connection with it. However, many people have.

The Chief Secretary to the Treasury has said that the growth of the social security budget is

"a sort of cuckoo in the nest."

He also said that

"Prescription charges is only one of 100 different things to look at."

We have heard of a secret letter from the Secretary of State for Social Security referring to cutting and taxing invalidity benefit. He recognised in that letter that that would cause an outrage. The Government are turning on single mothers, complaining that they are on benefits and a drain on public finances. However, the Government deny them the child care and job opportunities that would enable them to work and be independent and able to support themselves and their children. That is what they want to do.

The Government have broken their promises. The Prime Minister said :

"We have no plans and no need to extend the scope of VAT." But that is exactly what the Government have done. The Government have said :

"We are the only party that understands the need for lower taxation",

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but in this Finance Bill they have raised taxation. The Prime Minister has also said :

"I have no plans to raise the level of national insurance contributions."-- [ Official Report, 28 January 1992 ; Vol. 202, c. 808.]

But that is exactly what he has done.

The Finance Bill raises taxes £17.5 billion over the next two years. It freezes personal allowances and puts 1p on national insurance contributions and it affects VAT. Even now, the Chancellor of the Exchequer is warning that further tax increases are in the offing.

Tory Members cannot justify those tax increases on the grounds that they are the only way to raise public money. During this Finance Bill, we proposed 14 separate measures that would raise money, deal with tax abuses and plug tax loopholes. Not only did the Government reject them all--they would not even allow them to be debated.

The Tories would rather freeze personal allowances than abolish tax relief for private medical insurance. They want to subsidise people using private medical insurance and give them tax relief while freezing everyone else's personal allowances. The Government would rather put 1p on national insurance than tax the share options given to top executives. That is the Government's sense of priorities. In addition, of course, the Government would rather put VAT on gas and electricity than make the gas and electricity companies pay their fair share of corporation tax.

Treasury Ministers will no doubt claim that this Budget--this Finance Bill- -has been a success. But it has cost the Government a Chancellor. It has cost the Government 400 Tory county councillors. It cost them the Newbury by-election and it will cost them the by-election in Christchurch.

How can the Government call it a success to increase taxes for the low paid and cause dismay among the elderly? The Chancellor is setting the scene for cuts in the welfare state and tax increases in the autumn Budget. But the country wants to see an economic policy that begins the task of putting our industry and economy back on their feet.

The Chancellor and the Chief Secretary, possibly over a bottle of champagne, might congratulate themselves on getting the Finance Bill through Parliament, but for the people of this country fear of this Bill will be followed by dread of the bills that they cannot pay. Parliamentary proceedings on the Bill may be drawing to a close, but the political fallout has only just begun.

7.18 pm

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