House of Commons Hansard Debates for 25 Jan 1994

Mr. Faulds : On a point of order, Mr. Deputy Speaker. Is there, in "Erskine May", any restraint of solo recitation? Mr. Deputy Speaker (Mr. Geoffrey Lofthouse) : I am sure that the hon. Gentleman realises that that is not a point of order. I have no doubt that if there is such a restraint, he will go and find it.

Mr. Portillo : The Labour party has raised the stakes on taxation. It has convinced the people of the country that high taxation is something that it does not want. Labour Members think that they are sitting pretty today. I predict that they will rue the day. Come the next general election, no one will believe that the Labour party will reduce taxes. People will vote for the party that stands for the reduction of taxation, and the Conservative party believes in that. The Budget and the Finance Bill provide the means of controlling public spending and setting our public finances on a sound footing. The Bill gives effect to the measures in the Budget, and I commend it to the House.

4.36 pm

Ms Harriet Harman (Peckham) : I welcome the Chief Secretary to the debate about taxes, because, while the whole country has been talking about taxes over the weekend and since then, the Chief--

Mr. Deputy Speaker : Order. May I draw it to the attention of the hon. Lady that she should move the amendment?

Ms Harman : I beg to move,

That this House believes that the Finance Bill is not an acceptable and effective measure because it fails to make any proposal to repeal section 42 of the Finance Act 1993, which imposed value added tax on domestic fuel.

[Interruption.]

Mr. Deputy Speaker : Order. There is not much point in asking the hon. Lady to move the amendment if I cannot hear her.

Ms Harman : I welcome the Chief Secretary to the debate about taxes, because, while the whole country has been talking about taxes over the weekend and since then, the right hon. Gentleman has been noticeably absent. While the Chancellor and the Financial Secretary to the Treasury have been running around television studios trying, unsuccessfully, to rescue the tattered reputation of the Government, the Chief Secretary, uncharacteristically,

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has been nowhere to be seen. It seems that he is ever available to make speeches to right-wing groups of Conservatives.

Sir Peter Hordern (Horsham) : On a point of order, Mr. Deputy Speaker. I understood that the hon. Lady was going to move the amendment.

Mr. Deputy Speaker : I have already pointed out to the hon. Lady that she should move the amendment and I would be obliged if she would.

Ms Harman : May I point out to the right hon. Member for Horsham that the amendment-- [Interruption.]

Mr. Deputy Speaker : Order. We shall have order, whether I take points of order or not. The Chair will decide whether or not the hon. Lady is in order or out of order. That decision can safely be left to the Chair.

Mr. Robert Sheldon (Ashton-under-Lyne) : On a point of order, Mr. Deputy Speaker. You will know that, of course, it is perfectly in order to move the amendment at any time during the speech.

Mr. Deputy Speaker : The right hon. Gentleman is quite right.

Mr. Ian Taylor (Esher) : On a point of order, Mr. Deputy Speaker. Is it not in order that you remind the hon. Member for Peckham (Ms Harman) to move the amendment, because she forgot to table it last time? [Interruption.]

Mr. Deputy Speaker : We will have less frivolity, and get down to serious business.

Ms Harman : People outside the House of Commons are not interested in procedural points to disrupt debate ; they are interested in the increases in taxes that they will face from this lying, hypocritical Government, and they are interested in the VAT which the Government have insisted on. The hon. Member for Esher (Mr. Taylor) will have an opportunity to vote with his constituents against VAT on gas and electricity.

Although the Chief Secretary to the Treasury is ever available to make speeches to right-wing groups, he has been available nowhere, it seems, to talk about the Finance Bill. He could hardly bring himself to discuss the contents of the Bill today. While his colleagues prepare for the next day's battering from a now furious Tory press, he has been watching his back in preparation for the next leadership election. That is why he has been so silent. It is no wonder he has not wanted to be seen talking about the Finance Bill : the Bill destroys once and for all the Conservatives' central claim that theirs is the party of low tax.

That is the claim that was presented to the British people as the principal reason for voting Tory at the previous election. That claim is now dead, for now the very same party has imposed 12 major tax increases in just one Bill, 20 tax rises in 20 months, and the largest tax demand in peacetime history. It is no wonder Tory Back-Bench Members are worried--taxes to the left of them, taxes to the right of them, into the valley of taxes Ministers are leading them.

Within two hours of the supposedly tax-cutting Chancellor making his Budget speech on 30 November,

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taxes began to rise--this year, next year, the year after, the year after that and the year after that as well. The Tories' five-year plan is tax upon tax, year after year.

As the claim to be the party of low tax is destroyed, so too is any claim to the trust of the British people. The Conservative manifesto invited the electorate to trust the Tories as

"the only party that understands the need for low taxation". But now the Government have been forced to admit that, whether it is tax on what one earns or tax on what one spends, one will pay more.

The Prime Minister promised the British people that he could be trusted not to increase VAT, but the Government have been forced to admit that people are already paying twice as much VAT as they paid in 1979. He promised not to put VAT on gas and electricity, and now he intends to do just that. The Prime Minister promised that he could be trusted to make reductions in the rate of tax, year on year. But, in a parliamentary answer that the Financial Secretary gave me, the Government have been forced to admit that taxes on income have not only been raised but are now higher than they were in 1979.

Mr. Simon Burns (Chelmsford) : Does the hon. Lady accept that it is quite extraordinary to many people both in the House and outside that she should be lecturing on credibility and trust, given the economies with the truth and the innuendos and smears that she practised as shadow health spokesperson in the previous Parliament?

Ms Harman : That is a disgraceful diversion, and an attempt to distract attention from what the Government are doing to the hon. Gentleman's constituents on taxation. The hon. Gentleman is too cowardly to stand up and protect them against what the Government are doing.

Mr. Nigel Forman (Carshalton and Wallington) : I am trying to follow the hon. Lady's argument on tax matters, which is central to her speech. If she really is sincerely complaining about rates of tax under the Government, which rates of tax would her party cut if it were in office ?

Ms Harman : I am complaining about tax increases from a Government who promised to cut tax, tax increases to pay for high unemployment, and tax which hits hardest those who can least afford it. Perhaps the hon. Member for Carshalton and Wallington (Mr. Forman) should be reminded of what he said in his election address to his constituents, and perhaps he will vote with us against the Finance Bill. He said :

"The burden of income tax has been reduced and only the Conservatives promise further reductions"--

[ Hon. Members :-- "Which taxes would you cut ?"] We would stop VAT on gas and electricity.

Several hon. Members rose --

Ms Harman : I shall not give way for a while.

Several hon. Members rose --

Mr. Deputy Speaker : Order. The hon. Lady has made it quite clear that she is not giving way. These are not the football terraces.

Ms Harman : The Chief Secretary claimed last year--the right hon. Gentleman could confirm the point :

"Over time, we have shifted the tax burden away from direct taxes".--[ Official Report , 26 April 1993 ; Vol. 223, c. 734.] But that is not what they have done. They have put up direct as well as indirect tax. The tax bill on the earnings

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of a typical family will be higher from April than it was in 1979. The Chief Secretary still refuses to own up to that deceit. Instead, he lectures us about morality and ethics. Perhaps we should not be surprised.

Mr. Rod Richards (Clwyd, North-West) : Will the hon. Lady give way ?

Ms Harman : I will not give way.

The Chief Secretary has a history of brazening out extravagant claims, for it is he who promised the British people that he was committed not just to a low-tax economy--that was not good enough--not even to a very low-tax economy, but to an ultra-low-tax economy. With an unbridgeable gap between what he says and what he is doing--that is the real gap at issue--perhaps you should turn off the television cameras, Mr. Deputy Speaker, so that the country cannot see what is going on.

Mr. Quentin Davies (Stamford and Spalding) : As the hon. Lady now wishes to present herself as a champion of low taxes, does she regret that the Labour party opposed all the reductions in direct tax rates, income tax and corporation tax which we have brought about over the past 15 years? Will she apologise for the Labour party opposing those reductions?

Ms Harman : The hon. Gentleman should remember that we did not vote against widening the 20 per cent. ban when we considered the previous Finance Bill, but I am grateful for his intervention, because it allows me the opportunity to remind his constituents and his colleagues of what he said in his own election address. It was a good one. He said :

"We are absolutely committed to continuing to bring down taxes." What garbage. It is no wonder Conservative Members want to end the televising of Parliament. Having been exposed for putting up VAT and putting up national insurance, the Government continue to claim--one last claim--that theirs is the party of low income tax.

Mr. Graham Riddick (Colne Valley) : Will the hon. Lady give way?

Ms Harman : I am going to press on. [Hon. Members :-- "He is on the list".] As my hon. Friends say, the hon. Gentleman is on the list. In his new year message, after the Budget, the Prime Minister said :

"The Conservative party remains the party of low income tax." Last Tuesday, in the House of Commons, he contradicted my right hon. and learned Friend the Leader of the Opposition and said : "standard rates of tax under the Conservative party have dropped dramatically since the Opposition were in government".--[ Official Report, 18 January, 1994 ; Vol. 235, c. 703.]

But the Treasury's own figures, which were given to me in a parliamentary answer from the Financial Secretary--the hon. Gentleman will agree with me- -show that the income tax bill for a family with a mortgage will be higher from April than it was in 1979. We know what the Government have done. They have reduced headline income tax rates, but they have cut tax allowances, and that is how they have put up tax bills. So their claim to be the party of low income tax is now exposed as being as fraudulent as all the other claims.

After all the broken promises and the betrayal of trust, the Prime Minister, the Chancellor and the Chief Secretary

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offer not a word of apology to the people of this country. What they offer is only evasion and excuses--the same kind of evasion and excuses which they have been dishing out since the election : "The recession went on longer than we expected," or, "Well, it depends what you call a political promise," or, "It is all outside our control." When confronted with the Treasury's own figures on tax increases, the Chancellor brazens it out and calls it "piffle". With that record, the Chief Secretary's speech 10 days ago when he was whingeing about cynicism was a disgrace. Despite that record of betrayal, he demands respect from the British people. He believes that he and his colleagues are blameless victims of that terrible cynicism. The Chief Secretary tells us that it is all the fault of the British people--the new enemy within. It is all of them--all the British people. The public, he says, lack moral fibre. The Government do not lack moral fibre--not this honourable Government!

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

Ms Harman : I will not give way to the hon. Gentleman on moral fibre. I do not think that he has anything to tell the House about that.

The Chief Secretary says that leaders should be afforded respect whatever they do. Otherwise, he tells us, the country will not work so well. He wants us to turn off the television cameras so that the ignorant electorate cannot jump to so many wrong conclusions. The discredited and dishonest electorate have betrayed a decent and upstanding Government. The Tory party is not the party of low tax--it is the party of low excuses.

Mr. Portillo rose--

Ms Harman : Here comes another excuse.

Mr. Portillo : No, not at all. I have listened to what the hon. Lady has said about my speech. Not a single comment that she made was accurate, and every one was a distortion. I do not want to get into a great discussion with her now, but the hon. Lady would be on stronger ground if she quoted what I said and argued against that, rather than parodying what I said. It shows her to be on weak ground, not strong ground.

Ms Harman : I must apoligise, as clearly I have been very hurtful to the Chief Secretary.

The Tory party is not the party of low tax--it is just the party of low excuses. In the case of the Chief Secretary, the excuses are not just low, but ultra-low. As the Government run out of excuses, all they can say--the Chief Secretary said it again this afternoon--is that they did not intend to put up taxes.

The Prime Minister says, "I very much regret that we had to put up taxes," and, "It was not our intention," and, "I did not wish to do it." The Chancelloor tells us about his instincts, but I am not sure that I want to know about them. He tells us that his instincts are for low taxes. The Chief Secretary tells us that the Conservative party believes in low taxes.

Those people who hold the great offices of state can offer nothing but their instincts and their aspirations. Ministers of the Crown have opened their hearts and told us of their hopes. This is truly, as the former Chancellor of the Exchequer, the right hon. Member for Kingston upon Thames (Mr. Lamont) said, a Government in office but not in power. A party which has been in government for 14

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years begs to be judged not on its record but on its instincts. However, no one will take those instincts seriously and they count for nothing, because the Tories cannot deliver on their promises. They cannot deliver on their pledge of low tax, because they have failed on the economy.

After 14 years, the Tory economics of leaving everything to the markets have failed. Their economic failure has torpedoed their tax plans. They have presided over 14 years of our economy falling behind and of low growth. They have allowed our economy to sink into the deepest and longest recession since the war. They have presided over the destruction of one third of this country's manufacturing employment. They have landed Britain with a deficit in manufacturing trade for the first time in history. The party which says it stands for sound finance--whatever that means from this Government ; the Chief Secretary has said it again today--is borrowing more than any other Government since the war.

It is in the face of that failure that the Government are putting up taxes in the Finance Bill. The higher taxes are not for better hospitals--they are cutting capital investment in the health service. The higher taxes are not for better railways--they are cutting investment in British Rail. The higher taxes are not for better training--they are cutting employment programmes.

The higher taxes are to pay the price of economic failure, and they are to deal with the cost of nearly 3 million unemployed people. With £9,000 being spent for every one person who is unemployed, that means that this country is spending £25 billion of public money a year on unemployment --two and a half times more than it was under Labour in 1979. That is where the money goes.

Mr. Portillo : What would the Opposition cut?

Ms Harman : The Chief Secretary asks what we would cut. We would cut unemployment. We want a nation at work, not a nation on benefits.

The higher taxes are to deal with the problems of high unemployment and low growth that the Government have created. The taxes are the price that the country is paying for a Government who believe that unemployment is a "price worth paying". The tax rises will not solve Britain's economic problems--they will just take the Government's economic failure one step further. The Government have raised taxes because of their economic failure, but the tax rises threaten to make the problem worse.

Even Ministers are admitting that the tax rises will slow the recovery, and that the recovery will be checked. Instead of a panic Budget which put up taxes, there should have been a Budget which took immediate action to address the real causes of the deficit that the Government have created. The Budget should have taken action to promote growth and cut unemployment, and to encourage investment in our industry, our infrastructure and our people.

The Chief Secretary thinks that cutting unemployment would be "fatuous". We wanted a Budget which would have released the £4 billion of capital receipts from council house sales. It is not fatuous to put building workers back to work and to take them off the dole. We wanted a Budget which gave an incentive to firms to hire the long-term unemployed. It is not fatuous to put the long-term unemployed back to work. We wanted an extended capital allowance to help industry with investment, and we wanted

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genuine action to modernise our infrastructure. We did not get that, and in consequence we will continue to have a weak economy. Having been driven off its claim to be the party of low tax, the Conservative party cannot resist one further fundamental Tory instinct. Government Members have not been talking about that instinct tonight, but it is the real Tory instinct--the instinct for unfairness. Tonight, we ask the House to vote against VAT on gas and electricity because it breaks a clear election promise and because it hits hardest those who can least afford it.

The compensation scheme is wholly inadequate. All Government Members will find that even their poorest pensioners will have to pay some of this new tax. Is that what they want? Is that what they promised their constituents? Is that fair?

The hon. Member for Gloucestershire, West (Mr. Marland) wrote in a letter to one of his constituents that he would vote against VAT on gas and electricity if only he had the chance. Tonight he has that chance. His constituents will notice that he is not in the Chamber. But he has the chance to vote tonight.

The choice for Conservative Members is this : they can vote with these discredited Ministers or they can vote to honour the promises that they made to their constituents and the pledges that their Prime Minister made to the country. If they do not take the chance tonight to get rid of VAT on gas and electricity, their constituents will never forgive them.

To add to the unfairness of VAT on gas and electricity, the new taxes on spending are grossly unfair. The tax on insurance hits hardest people who live in poor, high-crime areas. They will have to pay up to seven times more of this tax than people in affluent areas.

Let us take the airport tax--the tax on holidays. It is neat, is it not, that the Conservatives have made an exemption for small aircraft? The Chancellor presented it as an exemption for the Scottish islands, yet 90 per cent. of those who go to, from and between the Scottish islands do not travel on planes which qualify for the exemption. Only 10 per cent. of them will escape the tax. It is a badly targeted exemption if it fails to help 90 per cent. of those who travel to the Scottish islands.

My hon. Friends suspect that there is another group who can expect not to pay the airport tax. It is not Scottish farmers or crofters, but millionaires with private jets. Who are the people who will be exempted? They are people such as John Latsis, Li Ka Shing and Asil Nadir--if he ever flew back to this country : all Tory donors, all private jet owners, all exempt from the tax.

The truth is that the Chancellor's exemption is not protection for crofters but protection for Tory donors. There is one thing that demoralised Conservative Members of Parliament can still hold to. There is one thing that we can rely on Tory Chancellors for. We can rely on them, when they put up taxes, always to ensure that there are loopholes for their friends.

The Tories have also increased direct taxes in the most unfair way possible. A family on half average earnings will pay more tax after April. They will spend more than they would have done in 1979. A family on average earnings will pay more tax after April than now and more than they paid in 1979, but a family on £100,000 will pay £1,000 a week less tax than in 1979.

Even as the Finance Bill imposes new unfair tax increases, it fails to end tax abuses by the wealthiest. The

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truth is that this is a Government who look to the most wealthy when they want to give away tax cuts but turn to ordinary people and their families when they put taxes up.

We shall oppose the Finance Bill, not only because it breaks election promises but because it is deeply unfair. The Chief Secretary complains about the cynicism that he says bedevils Britain. That cynicism has not arrived from nowhere. It has not arrived from outer space. It is not some virus or some new British disease, as the Chief Secretary calls it. It is the Tory Government who have made people cynical about politics. It is the Prime Minister who has brought shame on No. 10 Downing street. It is Tory Chancellors who have brought contempt on No. 11 Downing street.

No wonder that a Tory activist confided to The Daily Telegraph : "When you go out and canvass you are hampered by the fact that everyone thinks the Prime Minister is slippery".

The Sun described the Prime Minister as

"weak and mediocre, surrounded by unprincipled spivs and chancers."

I agree with the Chief Secretary on one thing. The deceit and duplicity of the Tories have taken their toll. People are demoralised. They have lost confidence. It is not that the Chief Secretary has discovered it : his Government have created it. As the events of the past few days have shown, the Finance Bill marks an historic moment in British politics. Let us make no mistake about it : it is a decisive turning point against the Conservative party. The pledge of tax cuts has been betrayed. The promises of low taxes have been broken. The integrity of the Conservative party lies in tatters. It has nothing left. No one will believe it if it ever says again that it is a party of low tax. No one will ever trust the Tories on tax again.

Mr. Michael Stern (Bristol, North-West) : On a point of order, Mr. Deputy Speaker. I listened carefully to the speech of the hon. Member for Peckham (Ms Harman). [ Hon. Members :-- "He was not here."] I have been here throughout. [Interruption.]

Mr. Deputy Speaker : Order. How can I be expected to deal with a point of order if I cannot hear it?

Mr. Stern : I deliberately refrained from intervening in the speech of the hon. Member for Peckham so that I could hear her speech more clearly. Despite your invitation at the beginning of her speech, and despite Madam Speaker's selection of the Opposition amendment, I genuinely believe that at no point was that amendment moved.

Mr. Deputy Speaker : That is a matter for the Chair. The Chair was satisfied.

5.6 pm

Mr. John Biffen (Shropshire, North) : The hon. Member for Peckham (Ms Harman) formidably indicted practically every clause in the Finance Bill. She made it clear that in her experience it was one of the most unacceptable pieces of legislation that she had ever encountered. If that it true--I take her words--the prospect of the Bill being fiercely debated in Committee is assured. It is a Bill of massive proportions. My right hon. and hon. Friends in the Government owe it to the public outside and to the parliamentary process, if it seems that the Bill will be filibustered or impeded so that it will not receive proper consideration from beginning to end, to table an early

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timetable motion. That is the only way in which there can be proper consideration of the Bill in circumstances which are not of the making of my right hon. Friends, but which are certainly detrimental to the public interest in our affairs.

Finance Bill debates are always occasions for going down memory lane. Today has been no exception. Practically all the debate has concentrated on what has happened in the past. Not much has been said about what will happen in the period between now and the next election. The Bill marks the beginning of a phase of consideration of the economy that will dominate the next two or three years and will be central to what will be debated and resolved at the next general election.

I should like to share with the House a passing thought inspired by the speech of my right hon. Friend the Chief Secretary. He talked about the Denis Healey Budget of 1974, which cut taxes in a situation in which that was clearly damaging-- [Hon. Members :-- "1978."] I am sorry, 1978.

Dame Elaine Kellett-Bowman (Lancaster) : It was just before the election.

Mr. Biffen : That is right. I remember it well. Whatever the year, it was before an election.

The events are clearer in my imagination than the pedantry of dates. The Budget came after a narrow Labour victory and portended a somewhat enhanced Labour victory. I remember it well because it bore all the hallmarks of the measures against which my right hon. Friend has reacted. But the Opposition of the time did not oppose it ; they thought that it was not the time to be seen to oppose tax cuts. It was left to my hon. Friend the Member for East Lindsey (Sir P. Tapsell) and to me--like two rednecks below the Gangway--to divide the House, earning ourselves the irritation of the Whips and an approving editorial in The Times. It was a sort of morning star of Maastricht to come. I say that to emphasise that we would be unwise to assume that there is a puritanical attachment to truth and analysis in connection with Budgets during the heady days leading up to elections.

Having said that, I hope that we have learnt something from the events of the past two or three years. It is now clear that my right hon. and learned Friend the Chancellor of the Exchequer has presented a Budget that includes massive increases in taxation. Nobody disputes that. Those increases are wholly merited, and I would have gone even further. The increases are wholly merited because they mark a very substantial reduction in the borrowing requirement, which I believe is my right hon. and learned Friend's utmost priority. From now on, as we begin to take advantage of the recovery--which of course will be affected by the tax increases, but which is reasonably well established and which my instinct tells me will continue --one question will increasingly characterise the political situation : how should the political world use the resources that are created by the recovery? Without doubt, our first priority should be to continue to reduce borrowing. Thereafter, we shall have to make the tantalising choice between reducing taxation and accommodating further public expenditure increases.

I hope that my right hon. and learned Friend will not become too enthusiastic about any one of the courses that are available to him. Although we are discussing a combined spending and revenue-raising arrangement in a new form of debate, it is spending that determines taxation

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