House of Commons Hansard Debates for 13 Jul 1993

Mr. John Watts (Slough) : We have just heard the hon. Member for Peckham (Ms Harman) make some wild assertions. In particular, she mentioned the subject of tax relief for private medical insurance. She will remember that such tax relief is available only to those over the age of 60. When the proposal came before the House in an earlier Finance Bill, I did not vote in favour of it because I prefer not to increase the tax breaks that are available as a reduction of income tax. It will not be lost on the voters of Christchurch, 30 per cent. of whom are over the age of 60, that the hon. Lady is advocating, on behalf of the Labour party, that that tax concesson should be withdrawn.

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I should like to consider three matters contained in the Bill which, as you reminded my right hon. Friend the Chief Secretary, Madam Deputy Speaker, is the subject of the debate.

I always look back on Finance Bills with a mixture of pleasure and disappointment. On Second Reading, I referred to the changes in the regime for petroleum revenue tax, and urged my right hon. and hon. Friends to improve the transitional relief offered. In Committee, my hon. Friend the Financial Secretary brought forward some further limited measures of transitional relief which the industry welcome, particularly the smaller companies towards which they are targeted. My hon. Friend knows, however, that I believe that those transitional measures do not go far enough.

The amendments which I tabled in Committee and which, with my right hon. Friend the Member for Woking (Sir C. Onslow) and others, I sought to table on Report, could not be debated on either occasion for technical reasons.

Mr. Robert Hughes (Aberdeen, North) : Will the hon. Gentleman confirm that he had a meeting last Thursday with the Financial Secretary? Will he further confirm that he told the oil companies' representatives that same evening that a deal had been stitched up and that the Government were going to accept his amendments Nos. 40 and 41?

Mr. Watts : No, I cannot confirm that. I can confirm that there was a meeting between my hon. Friend the Financial Secretary, representatives from a number of oil companies, myself, my hon. Friend the Member for Bournemouth, West (Mr. Butterfill), my right hon. Friend the Member for Woking and myself. At the conclusion of that meeting I certainly did not suggest to any representatives of the oil industry that any deal had been stitched up.

Mr. Hughes : Can the hon. Gentleman explain why I was telephoned on Friday morning, by a representative of an oil company who attended that meeting, and was asked, "Please will you make sure that no Labour Back Benchers sign the motion because, if they do, it will screw up the deal"?

Mr. Watts : I would have been very happy if I had been able to conclude a deal with my hon. Friend the Financial Secretary, but that is not what happened. There may be some confusion in the mind of the person who spoke to the hon. Gentleman. At the conclusion of our meeting, we explained the way in which the amendments had been framed and why there were two separate sets of amendments.

We considered that one set of amendments would be technically in order for selection but would not produce the desired solution. The other set of amendments would have achieved our objective of a three-year relief period, but we understood that if the amendments were tabled by Back Benchers they could not be selected for technical reasons. They would be in order only if they were tabled by the Government.

Our amendments were tabled on Thursday, which is normally the last day for tabling amendments to be considered on Report. It was our outside hope that, if my right hon. and hon. Friends in the Treasury were convinced of the force of our argument, they could be

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persuaded to adopt our second set of amendments as Government amendments and provide a vehicle for them. It was not my intention, or that of any of my right hon. and hon. Friends, to convey to the representatives of the oil industry that any such deal had been struck. Indeed, as late as last evening, we discussed the matter further with my right hon. and learned Friend the Chancellor of the Exchequer. He had just returned from Brussels and we were grateful to him for making time to discuss the matter with us at such short notice. Sadly, the vehicle that we hoped to provide was not one that my right hon. and hon. Friends chose to ride in.

Mr. Darling : The hon. Gentleman will appreciate that this is a very important point, especially as Shell has announced that it is going to cut back on its drilling because of the changes that the Government intend to introduce.

Mr. Duncan : That is not what it said.

Mr. Darling : It is what it said.

The hon. Member for Slough (Mr. Watts) has mentioned that he had a private conversation with the Chancellor. Will he tell us whether the Government now accept that far more generous transitional relief must be offered to stop an even greater decline in exploration than that anticipated? That will have disastrous long-term consequences for the country's balance of payments.

Mr. Watts : I am sure that my hon. Friend the Financial Secretary will answer for himself. It is not my understanding that my right hon. and hon. Friends are yet persuaded that there is a need to go further than the measures introduced in Committee.

The purpose of the amendments that I tabled, in Committee and on Report, was to obtain relief, in a tax neutral way, over a three-year transitional period. That would have been financed by restricting the reduction of PRT to 55 per cent. for that period rather than going immediately to the 50 per cent. rate mentioned in the Bill. I am persuaded by my hon. Friend the Financial Secretary's argument that the 50 per cent. rate of PRT will have the effect of stimulating further investment in existing mature fields, and that that will be beneficial to the future development of the North sea. I am not persuaded, however, that we will see such new investment in the near future. Any substantial investment will take two or three years to be productive. I believe that in that intervening period, exploration and appraisal activity will be subject to a marked decline before any major new investments come on stream.

Our proposals have been put in a number of different guises, but our intention has always been to smooth that transition. We want to give those parts of the industry that have been hardest hit by the tax changes more time to adapt. That would enable a high level of activity in the North sea to be maintained in the intervening period, and ensure smoother progress for our North sea oil industry.

Mr. Salmond : Will the hon. Gentleman clarify what happened at last week's meeting because I was given the same information as the hon. Member for Aberdeen, North (Mr. Hughes)? It may be a question of who is misleading whom. Were the hon. Gentleman and his hon. Friends misleading the representatives of the oil

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companies with unwarranted expectations of success, or were he and his hon. Friends being misled by Ministers promising concessions that did not materialise?

It is to be regretted that the hon. Gentleman's amendments were not tabled on an all-party basis. If they had been, the issue could have been put to the test yesterday. Presumably, all-party amendments stand a better chance of selection than those tabled by Conservative Back Benchers.

Mr. Watts : I am clear in my own mind that neither I nor any of my right hon. or hon. Friends was misled by Ministers. It was not our intention to mislead any representative of the oil industry. I have tried to explain how I think some confusion may have arisen. I certainly did not give any indication to anyone in the industry with whom I was in contact that I believed that a deal had been done. I was certainly trying my hardest to bring about a solution, but we have failed. That is why I referred in my opening remarks to looking back on the Bill with a mixture of pleasure and disappointment. That failure is one of the disappointments.

Even at this late stage, I urge my right hon. and hon. Friends in the Treasury to look again at what has happened in the North sea. Perhaps they will be proved to be right and that the anticipated dramatic reduction in activity will not occur or, at least, will not be sustained activity in the North sea has already markedly declined.

The hon. Member for Edinburgh, Central (Mr. Darling) referred to the announcement by Shell UK Exploration and Production yesterday that it was reducing its manning levels by 30 per cent. I understand that there have been some denials about whether that was directly related to the change in the tax regime, but there is no doubt that it intends to reduce its exploration activity.

Mr. Duncan : Do not the statements that Shell UK Exploration and Production has made to the press make it explicit that its decisions were made a long time ago and that its decision to reduce its activity has nothing whatever to do with the change in the PRT regime announced in the Budget ?

Mr. Watts : That may be what the company maintains, but it is reducing its activity and, not surprisingly, some people will link the changes in the tax regime with that fact.

Mr. Dorrell : This is an important point. Opposition Members were shouting "No" when my hon. Friend the Member for Rutland and Melton (Mr. Duncan) intervened. My hon. Friend is right. The statement issued by Shell UK Exploration and Production on 12 July says : "The cost cuts in the exploration division of Shell ExPro are not due to the proposed budget changes in PRT."

Nothing can be more explicit than that.

Mr. Peter Mandelson (Hartlepool) : On a point of order, Madam Deputy Speaker. The Financial Secretary has unwittingly--no doubt not intentionally--misled the House by his intervention. The memorandum written by a responsible person at Shell says clearly :

"Doubtless you are aware some very significant changes in petroleum revenue tax regulations will be implemented this year by the Government. The main effect that this will have on exploration is that our net costs will go up by a factor of four. In these circumstances, our exploration programme will have to be reassessed carefully."

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That is at variance with what the Financial Secretary said.

Madam Deputy Speaker : Order. That may be an important point, but it is certainly not a point of order for the Chair. It should be raised by means of an intervention if the hon. Gentleman is able to have the Floor.

Mr. Watts : The hon. Member for Banff and Buchan (Mr. Salmond) asked whether orderly amendments could have been tabled on an all-party basis. To achieve a tax-neutral package of transitions, we would have needed to propose that the rate of PRT be maintained at more than 50 per cent. We wanted the transition to be a three-year period, which is longer than that provided for in the Bill. However, any such amendments tabled by mere Back Benchers would have been ruled out of order. I understand that the orderly amendment that we tabled was not selected because it was considered that the matter had been adequately debated both in Committee of the whole House and in Committee upstairs.

Mr. Robert Hughes : In attempting to explain the position, the hon. Gentleman is simply causing further confusion. Why did he and his right hon. Friends table an amendment which they knew in advance was out of order, and tell the oil companies that they knew it was out of order, if they had not believed that something would happen to it? Surely that was the worst thing to do because it was kidding the industry along.

Mr. Watts : The hon. Gentleman clearly did not hear my explanation. Two sets of amendments appear on the amendment paper today. The first deals with an enhancement of the 18-month transition period and could have been selected had it not been deemed that the matter had been adequately debated. We knew that the second set of amendments was not in order. It was tabled by Back Benchers and set out what we considered to be the proper solution to the problem. The Government could have adopted it as a suitable vehicle had they been persuaded of our argument but, sadly, that was not the case.

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

Mr. Watts : I shall give way to the hon. Gentleman for the last time because I said that I would refer to three matters.

Mr. Darling : I am grateful to the hon. Gentleman for giving way because I was the first hon. Member to raise the question of Shell. I have seen the text of the memorandum to which my hon. Friend the Member for Hartlepool (Mr. Mandelson) referred. It says that the changed tax regime had made exploration four times more expensive. Shell has subsequently denied it, but companies do that sort of thing.

Our difficulty is that many Tory Back Benchers, including the hon. Gentleman, have unwittingly been sold a pup by the Government. Exploration and appraisal will suffer, and the oil companies may do better next time if they remember not to bother dealing with Tory Back-Bench Members or consultants, because that is throwing good money after bad.

Mr. Watts : Nobody has thrown money at me. I am not a consultant but I took an interest in the issue because it seemed to be a valid argument to pursue. I have financial interest neither in an oil company nor in a business representing an oil company. If I had such an interest, I

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would have declared it at the beginning of my speech. My understanding of the Shell memorandum is exactly as the hon. Member for Edinburgh, Central (Mr. Darling) just stated. As he said, the company has now put a different gloss on the matter.

I was about to conclude my remarks on PRT by saying that I am still convinced that a substantial and damaging reduction in activity in the North sea could have been prevented had a three-year transition been provided. I hope that, if those of us who take that view are proved right and the Financial Secretary's more optimistic assumptions of what will happen in the next few months are proved wrong, even though it is too late Ministers will be prepared to reconsider the matter when preparing the November Budget and the next Finance Bill.

Lest it should be thought that I speak merely to pour condemnation on my hon. Friend the Financial Secretary, let me say that he also gave me pleasure in Committee because, for five or six years, I have been arguing for a more favourable tax treatment of unit trusts selling into other European countries. The gist of the argument is that if unit trust companies could pay dividends gross to residents of other European countries, their export performance would be much better. Evidence suggests that that is so. Ten years ago, Luxembourg had virtually no such funds under management. It now manages £86 billion worth of funds and has outstripped the funds under British management.

I was therefore pleased when, in responding to the debate in Committee, my hon. Friend the Financial Secretary said that suitable measures would be proposed in the November Budget and incorporated in the next Finance Bill following consultation with the industry in the intervening period. That was welcome news, not just for the industry but for the financial services industry in this country. To avoid doubt, may I confirm that I am not a consultant for the unit trust industry, although it kindly sent me a crate- -12 bottles--of wine earlier this year. We excel in the financial services industry and could increase our earnings on exports to the European Community. The Bill's measures will be greatly welcomed.

The third and final measure to which I wish to refer is the abolition of the business expansion scheme. It was probably right for the Government to propose that the existing scheme should be brought to an end. However, faced with the loss of my legislative programme for the Finance Bill now that my proposals on unit trusts have been taken up, and needing to look for another cause, that new cause may be "Son of BES".

I am convinced that we need to provide a means of encouraging equity investment, particularly in small manufacturing companies and other small companies. I hope that my right hon. and hon. Friends in the Treasury will consider how that might be done. If they do not make their own proposals, I may argue the case for the next five or six years until, in the fullness of time, my hon. Friend the Financial Secretary or his successor--I expect that my hon. Friend will be in a more exulted position by that time-- concedes that it is a good argument and introduces his own measures.

Overall, this is a good Bill, although the measures relating to PRT are unattractive. It presents a balanced approach to improving the state of the national finances, and it is a good foundation on which my right hon. and learned Friend the Chancellor can build as he prepares his Budget for presentation in November.

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7.39 pm

Mr. Robert Ainsworth (Coventry, North-East) The Chief Secretary said at least one thing with which I agree : that on Second Reading,in Committee and on Third Reading, the main issues have remained the same. Those issues are the reneging on election promises, the failure to address the underlying problems in our economy, and the nature and effect of the huge tax increases that have been proposed and are to be introduced in the measure.

I think that all hon. Members will recall the clear commitments that were given before the general election. They were that there would be no extension of VAT, no increase in national insurance contributions and--a commitment given in the clearest of terms--tax decreases year on year. The excuse with which we have been repeatedly presented is that the circumstances that we now face have changed and were totally unforeseen when those honest commitments were given to the electorate before the general election.

However, the Chief Secretary said tonight that there was a lot of good news in the economy. He talked about the success in the last three quarters, the fact that unemployment was down, and forecasts that showed that we would have the highest growth of the nations of the Organisation for Economic Co- operation and Development. What on earth should we believe? If those success stories are correct, what are the unforeseen events that have happened since the Government gave those clear pre-general election commitments that there would be no tax increases?

Last night, I heard Conservative Members say that one can, in certain circumstances, renege on election pledges, but there has to be some honesty of intent. If the Government have honesty of intent, why are they boasting about the wonderful news in the economy? If there is wonderful news in the economy, where was the honesty of intent in those pre-general election promises? The Government cannot square the circle. One or the other of their claims is not true. The nation is getting sick of the Government's slick presentation and wants them to give the facts about the problems that face the country.

A couple of years ago, when we were enjoying a huge budget surplus, the Government took the opportunity to decrease taxes, and they gave those decreases to the better-off in society. The biggest single adjustment they made was the abolition of all tax grades above 40 per cent. That act alone gave more than £2 billion to those who are better off.

Now that we are picking up the cost of those foolish measures and the inability to sort out the long-term problems in our economy, we have a huge £50 billion deficit in public finances. There are two major proposals designed to deal with that deficit. The first is to increase national insurance contributions. That policy was deliberately chosen rather than an increase in income tax, because it hits those on average and below-average earnings, while protecting those in the highest income tax bracket. The second and far and away the worst proposal in the Budget is the appalling p of VAT increases. Almost all the representations which I and, I think, others have

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received have been on the VAT issue. Almost all the representations that I have received have been from pensioners.

I do not believe that pensioners are the only people to have realised that they will be affected by the VAT proposals in the Budget ; I do not believe that they are better informed than the rest of the population. The pensioners' representations have been made for one simple reason : fear. There is fear among ordinary pensioners living on, and just above, income support levels about how they will pay the increased fuel bills and survive.

We are told that the policy is not designed merely to raise revenue, but involves the environment. Does not the environment of those pensioners count? Is it not their world? Is their environment of no concern to those people who say that the measure is an environmental policy?

A recent survey conducted by Age Concern showed that

already--without the implementation of the Budget proposals--30,000 to 40,000 more people die in this country in winter than in summer. It also discovered that 18 per cent. of pensioners had no insulation on their hot water tanks, 26 per cent. had no loft insulation, and 64 per cent. had no double-glazing on their windows.

If anyone--whether members of the Conservative party or supporters of Friends of the Earth--wants to support the measure on the grounds that it is a green policy, they should address the problems relating to pensioners. We are talking not about a green measure, but about a hypothermia enhancement measure--that is the effect that it will have on pensioners. That is the reason the pensioners have made representations, and the reason for their fear.

The people who have made representations to me fall into two categories. First, there are those who are already on income support, who are dependent on means-tested benefits and who do not believe that they will receive full compensation from the Government for the costs imposed on them by the proposals. They have no reason to believe that they will receive adequate compensation when they look at the Government's track record of deliberately and repeatedly reneging on their commitments.

The second category of people are those living just above income support levels, who receive no state benefits because they have struggled all their lives to make some small extra provision by paying into an occupational pension scheme or something similar. They now find that their prudence and the struggle that they have maintained throughout their lives by paying taxes and national insurance contributions has resulted in their being pushed into the poverty trap. The proposals will bring them no benefits.

The Chief Secretary said that he hoped that he had established a rhythm of good decision making. What sort of rhythm of decision making will the pensioners have to take up when they try to balance their water bills, council tax bills, rent bills and fuel bills? What sort of rhythm of good decision making does the Cheif Secretary suggest that the pensioners should adopt?

Undoubtedly, the Government are proposing deliberately and cynically to make the poorest people--the most vulnerable in the country--pay for their own mishandling of the economy over not only the past three or four years but the past 14 years.

The Conservative Government told the nation that they were the Government of prudent economic management. However, they have got themselves into such a mess that

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we are now imposing these appalling measures on pensioners. It is disgraceful. I hope that the Government are never forgiven for deliberately reneging on their election pledges. I shall do everything in my power to ensure that they are not forgiven. 7.50 pm

Mr. Alan Duncan (Rutland and Melton) : It is almost four months since the Budget statement was read to the House. Since then, we have studied it in great detail, on the Floor of the House and in Committee.

As we reflect on our deliberations, it is important to recall the mood that prevailed when the Budget was read. Spending was admittedly high, and we knew that that matter had to be addressed. There was a strong feeling that any severe attack on public spending could jeopardise what was seen to be a fragile recovery. My hon. Friends were wary of doing anything too severe so as not to put into reverse the small signs of progress that could already be observed as the economy crept out of recession.

On Budget day, I said that the Budget could have been tougher on the public sector borrowing requirement--I still hold that view--because I felt that the most attested economic phenomenon is probably the business cycle. However fragile we might think the recovery is, the business cycle has a momentum of its own which we expect to perform.

When I study research papers on economic indicators in the Library, I am always struck by how steeply the graph is pointing upwards to reflect the increasing size of the public sector borrowing requirement. That must determine our decision on whether the Finance Bill tackles what needs to be tackled.

A lot has happened since Budget day. Of course, we now have a new Chancellor. I pay tribute to my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), who drafted the Budget. He is an economic radical. The Budget definitely had his personal stamp on it. Setting aside all the political problems that have beset him since he spoke in the House on 16 March, he can feel justly proud of the way in which the Budget is shaped, and the economic prosperity that it will deliver in due course.

We must put the Budget in the context that, because the United Kingdom was the first country to go into recession we are showing that we are the first to come out of it. That puts us in a unique position to take advantage of the improved competitiveness in the British economy as we emerge from recession while our partners are still suffering.

Only a cursory look at Germany and France shows that, in contrast to our economic fortunes, they are facing severe difficulties. A visit to Germany shows that, in Stuttgart, 25,000 people have been laid off at the Mercedes- Benz factory, the production of Porsche cars has gone down by about 80 per cent., and the machine tool industry is all but in a state of collapse.

The German economy, which depends heavily on the motor industry, is facing severe difficulties. Effectively, having bought a bankrupt country, the Germans must now support the debt that they took on to do so. Having invested so much pride--and rightly so--in sustaining the value of their currency, they face a severe conflict between deciding how to protect the parity of the deutschmark and reducing interest rates to stimulate economic activity. I do not envy them that problem. Indeed, we had the same

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problem. None the less, it will shape the economic behaviour of our European partners over the next few years.

The problem in France is not quite so severe--

Madam Deputy Speaker (Dame Janet Fookes) : Order. Before the hon. Gentleman continues his tour of Europe, I must remind him that we are debating the Third Reading of the Bill. Although it is in order to take some general economic policy as background, it must not turn into a debate on policy that is unrelated to the Third Reading of the Bill.

Mr. Duncan : I am grateful for your guidance, Madam Deputy Speaker, and I will abide by it. I was merely setting the Budget in context. The judgments contained in the Bill can be justified. In making such judgments, we must increasingly examine our European competitors to assess whether the judgments made in the House can be supported. In reverting to the details of the Bill, my right hon. Friend the Member for Kingston upon Thames will be vindicated in the details that he injected in the measures by having a delayed clawback in the structure of the public sector borrowing requirement for the future. To retrieve £6.5 billion in 1994-95 and £10.5 billion in 1995-96, it is necessary to build economic confidence, but at the same time not severely to attack a fragile recovery.

We are in a good position as a result of the Bill. Inflation is now below the EC average, and our interest rate is the lowest in the EC. At 6 per cent., it is the lowest rate since December 1977, and the fifth reduction since we left the exchange rate mechanism. As a result of the Bill, unemployment has shown an unexpected improvement, costs and earnings are increasingly contained, car registrations are up, and industrial production and exports are up.

Dr. John Reid (Motherwell, North) : Can the hon. Gentleman explain how unemployment has fallen as a result of the Bill when it has not yet been enacted?

Mr. Duncan : People are well aware of what the Budget contains, because the Bill has been discussed in detail in the House and in Committee. Indeed, giving the Bill Royal Assent merely confirms that the House wishes to see it enacted.

The Finance Bill sets the foundation for sustainable growth. We still have certain structural problems and a certain bias to housing, which has been addressed by ensuring that mortgage interest relief at source is at the lowest rate. There are many things that we will have to discuss in the November Budget.

The Finance Bill has brought us back to reality. It will ensure that we entertain realistic expectations of what the economy can deliver. It does not suggest that there is any good sense in making a dash for growth. Rather, we will see growth of 1 or perhaps 2 per cent., plus 1 per cent. and then another 1 per cent. The Bill will ensure that we have the sustainable prosperity for which we must aim.

During the passage of the Bill, we have listened in vain for any constructive alternative from Labour Members. The speech of the hon. Member for Peckham (Ms Harman) was completely bereft of any alternative proposal for or commitment to what she thinks the upper

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rate of tax should be. She did not say why the Labour party dropped its election policy of imposing an investment income surcharge on savers.

If she was still here, I would ask the hon. Lady whether she agrees with the shadow Chancellor that to raise income tax would be a mistake, and would probably take demand out of the economy. How would she fulfil her party's pledge to increase Government spending without raising taxes? What does she think is the correct level for the public sector borrowing requirement? We missed all that from Labour Members.

I commend the Bill to the House for the Third Reading that it so properly deserves.

8 pm

Mr. Beith : I will not attempt to answer many of the questions that the hon. Member for Rutland and Melton (Mr. Duncan) put to the hon. Member for Peckham (Ms Harman), because I would be ruled out of order. We are supposed to be discussing what is in the Finance Bill. The Chief Secretary sketched in the economic background, which it was reasonable for him to do, and I do not quarrel with the main elements he quoted as favourable and positive in the current economic climate, although he was inclined to leave out some unfavourable elements.

For example, the construction industry is still not showing the signs of recovery that are vital in that crucial sector of the economy. The unemployment news cannot give the Government ease and comfort. We have very high levels of unemployment, and most commentators expect them to persist, even if there are some offsetting job improvements through gains achieved by British exporters in world markets.

Hon. Members point out that many countries are going deeper into recession as we are coming out of it. They talk about that as good news, whereas it is really bad news for exporters, who must sell into markets which are in recession. Other countries being in recession acts as an inhibition on our recovery. We should not be pleased about their plight. No more should we be pleased about the continued high import penetration of our domestic economy, which remains a worry for industry.

I was tempted to intervene in the speech of the hon. Member for Slough (Mr. Watts) to say that he was pouring petrol over the Government but not putting a match to it. On the other hand, the hon. Member for Corby (Mr. Powell) last night poured domestic fuel over the Government and put a match to it by pointing out-- [Interruption.] I am not sure whether political self-immolation was a necessary part of that--that the Christchurch by-election, and, by implication, any other by-elections that may occur in the near future, is likely to go against the Conservatives because of the provisions in this measure. The Bill includes the hated and feared VAT on domestic fuel, imposed without adequate compensation or channelling of revenues into measures that will help people to pay for it by making their homes more energy-efficient. That alone is sufficient reason to oppose the Bill.

The Budget, of which the Bill is a part, contains in effect an income tax increase, even though it is not to be found in the Bill in that form. The 1p increase in national

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insurance contributions represents an income tax increase for the low-paid, because all higher levels of income are not subject to the 1p charge. Perks, which are subject to income tax but not to national insurance contributions, escape. In other words, it is a back-door income tax increase, and we were not able to discuss it at earlier stages of the Bill because it is being done through the national insurance system.

The Bill imposes substantial additional burdens on charities, through VAT and changes in advance corporation tax, both of which will hit them hard. Hon. Members are still receiving extensive representations on the issue from charities.

The Bill's petroleum revenue tax regime is costing thousands of jobs. That cannot be denied, because, whatever is happening at Shell, thousands of jobs will be lost in the oil industry and in many others which that industry supports and from which it buys. I was struck by a revised Shell statement, quoted in the Financial Times today, which bears the hallmark of some careful drafting. A company spokesman is reported as having said :

"The PRT changes have underlined, and given focus to, what we were already looking at in the North Sea".

Those were carefully crafted words. They put into sharp relief the fact that one of the only two companies which welcomed the new PRT regime is shedding a vast number of jobs. The other company is also shedding many jobs.

Mr. Dorrell : For the sake of completeness, the right hon. Gentleman will want the House to know that the sentence which he quoted finishes with the words :

"without further affecting the drilling programme."

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