By Order )
Order for Second Reading read.
Read a Second time, and committed.
By Order )
Order for Second Reading read.
To be read a Second time on Thursday 21 April.
1. Mrs. Angela Knight : To ask the Chancellor of the Exchequer how much more in income tax and national insurance contributions would be paid by a married man on average earnings with two children under (a) the 1977- 78 tax regime indexed to current prices and (b) the 1978-79 tax regime indexed to current prices, than under the present tax regime.
The Financial Secretary to the Treasury (Mr. Stephen Dorrell) : If a married man with two children and on average earnings paid tax and national insurance contributions in 1994-95 on the basis of the 1977-78 tax regime indexed to current prices he would be £18 a week worse off ; on the same basis, the 1978-79 regime would make him £13 a week worse off.
Mrs. Knight : I thank my hon. Friend for that reply, which shows how much better off families have become under our tax policies. Would not any additional public spending above the Government's plans simply add to taxes ? Will my hon. Friend confirm that nearly two weeks ago he wrote to the hon. Member for Dunfermline, East (Mr. Brown) asking him to confirm or deny the billions of pounds-worth of additional spending pledges that have been made by his Front-Bench colleagues ? Has he received a reply yet ?
Mr. Dorrell : My hon. Friend is quite right to say that I wrote to the hon. Member for Dunfermline, East (Mr. Brown) drawing attention to the fact that many of his Front-Bench colleagues are travelling around the country promising that a Labour Government would spend extra taxpayers' money but that he himself has not made any
Column 402proposal to the House or to the country as regards how he intends to finance their spending plans. His position, and that of his party, is fundamentally dishonest.
Mr. Skinner : The Minister has got a cheek to talk about 1978-79 because since then the Government have had more than £100 billion- worth of tax revenue from North sea oil, about £50 billion of which finished up in the pockets of the richest 10 per cent. of people. Does the hon. Gentleman agree that the answer to the present problems is not to inflict further hardship on ordinary people and pensioners but to take that £50 billion from the richest pockets and build a welfare state with it ?
Mr. Dorrell : The hon. Gentleman neglects to mention the fact that since 1978-79 the man on average earnings has seen his take-home pay rise by £83 a week in real terms. That increase is the result of the Government's policies and has come about because the great majority of the British people, including the hon. Gentleman's constituents, do not take his advice when it comes to critical issues concerning the future of this country.
Mr. Lester : Does my hon. Friend agree that borrowing is in fact deferred taxation and that the previous Labour Government borrowed so much money that we had to use the taxes from 1979 to pay for it ?
Mr. Dorrell : My hon. Friend is absolutely right. The Labour party believes that it can promise to spend extra money without having to finance that spending. That holds out the prospect that a Labour Government would borrow or mortgage future tax revenues in the hope that someone else would pick up the tab.
"Under the Conservatives living standards . . . will go on rising in the years to come" ?
Will the Minister admit that Treasury figures show that, because of the tax increases of £10 a week, living standards will fall ? Why should anyone believe the Chancellor or any of his Treasury Ministers when they are clearly incapable of telling the truth about their own tax increases ?
Mr. Dorrell : The hon. Lady cannot even get through a question without misleading people about the scale of the tax increases. The tax bills of the average household will increase this year, compared with the previous year and as a result of the two Budgets, by £5.75 a week. I shall answer other questions from the hon. Lady when she uses accurate figures in relation to the scale of the tax increases introduced last year.
Mr. Harry Greenway : Will my hon. Friend confirm that the Government will continue to ensure that people keep as much as possible of what they earn and are able to decide their own expenditure, rather than following the principle, "What's yours is mine and what's mine's my own," which has always been the Labour party's policy in local and national government alike ?
Mr. Dorrell : My hon. Friend is absolutely right, and we shall do that for two reasons : first because it is right and, secondly, because it leads to a more successful economy and to the delivery of precisely the improved living standards that my right hon. and learned Friend the Chancellor promised the hon. Member for Peckham (Ms Harman).
Mr. Lewis : Will the Paymaster General assure us that when the Chancellor and his Ministers next have a tax hike, it will not be in relation to VAT, especially on the printed word, children's clothing and food ?
Sir John Cope : The hon. Gentleman misunderstands. The real threat to Britain's zero rates on food and all the other things that he listed comes from the socialist European manifesto, which supports qualified majority voting on tax matters, and would hand the decisions over to Brussels.
Mr. Bill Walker : Does my right hon. Friend agree that in 1979 we stood on an election platform that included transferring taxation from direct to indirect taxes, and that that meant VAT ? Have not we successfully fought the general elections since then on that basis ? Even more important, we have demonstrated clearly that when take-home pay keeps increasing and people have the opportunity to spend, they are happy to pay VAT rather than direct tax.
Mr. Andrew Smith : Will the Paymaster General now answer the question that my hon. Friend the Member for Worsley (Mr. Lewis) asked ? Will the Government give an undertaking not to extend VAT further, in view of the Chancellor's previous stated enthusiasm to do just that ?
Sir John Cope : I have explained exactly what my right hon. and learned Friend the Chancellor said. The hon. Gentleman must answer the question about handing over the decisions to Brussels. That is what the European manifesto would do--and, incidentally, what the Liberal Democrats' manifesto would do, too.
Mr. Waterson : Will my right hon. Friend confirm that those on full retirement pensions and on income support are now receiving generous compensation for VAT on fuel--rather more generous than that demanded by the Opposition spokesman ?
The Chief Secretary to the Treasury (Mr. Michael Portillo) : Focusing incapacity benefit on those genuinely incapable of work and requiring absent parents rather than the taxpayer to take responsibility for maintaining their children will save taxpayers at least £3 billion a year in the long term.
Mr. Flynn : The Chief Secretary has not answered the question. Are not the two measures both Trojan horses, because hidden inside them are two massive tax hikes that will be paid for by the sick and by parents--£2 billion in new taxes every year ? That is not child support or incapacity benefit but two Treasury support measures to pay for the Government's financial incapacity.
Mr. Portillo : I shall answer the question, but the question on the Order Paper asked not about taxation but about the incapacity Bill. If the hon. Gentleman is now talking about the taxation of incapacity benefit, of course that has revenue consequences. It has been the stated Government intention since 1981 to bring invalidity benefit into tax. The benefit is an income replacement benefit, comparable to unemployment benefit and retirement pension ; both of those are taxed, and I do not believe that there is any dispute between the Government and the Opposition spokesmen over the idea that income replacement benefits should be taxed when they are in the hands of those who have the means to pay the tax on them.
Mr. Congdon : In view of the enormous impact of Department of Social Security spending on public expenditure, and the fact that it has grown by 75 per cent. in real terms since 1979, does my right hon. Friend agree that it is right and proper to seek any possible way of reducing that enormous bill ? Do not the measures outlined in the question represent a proper way of trying to ensure that we get better value for money from the enormous amount that we spend on social security benefits ?
Mr. Portillo My hon. Friend is right. The important thing is to ensure that the moneys that we pay in benefits are concentrated on the people who need them. The state will not be able to afford to pay people who do not need benefits. Everybody knows that invalidity benefit has become broadly extended, and has gone much further than was intended when it was first created. The numbers on benefit have trebled over the past 15 years, while the nation has been becoming more healthy. Clearly the time has come to concentrate the benefit on those for whom it was intended--the people who are incapable of going to work.
Mr. Trimble : I thank the Chancellor for his decision to publish the minutes of his meetings with the Governor of the Bank of England. May I refer him to references in the January and February minutes ? In January, he said that the rate of growth had clearly not picked up and in February, he said that the advice that he was receiving from the Bank of England was excessively cautious or at least erred on the side of caution. May I assure him that his instincts on that matter are right, and suggest to him that he should back those instincts and take further measures to increase the
Column 405present inadequate rate of growth, rather than continuing to compromise on the basis of the poor advice that he is receiving ?
Mr. Clarke : I am glad that the hon. Gentleman is studying the minutes that I have published ; he will be greatly enlightened by them, I am sure. I certainly published minutes which show the genuine discussion, at the end of which I reached agreement with the Governor. However, I naturally took my decision on interest rates because that is the responsibility of the Chancellor of the Exchequer.
The hon. Gentleman asks about the discussions in January and February--two months and three months ago. It is right to say that the Governor tends to start the discussions by taking a cautious view of the outlook for the inflation rate. That is what one would expect the Governor of the central bank to do. I was taking a cautious view of the outlook for growth and not relying solely on anecdote, which I think is sensible in the present circumstances. Since that time, an ever-increasing flow of information has shown that we are on course for low inflation and that the recovery is steadily strengthening. It is quite clear that I took the right judgment in the Budget in November and quite clear that I took the right decision on interest rates in February. We are well set to be the fastest growing economy in western Europe this year and the year after.
Mr. Budgen : As the main forum between those who want increased growth and those who want to contain the future rate of inflation is the monthly meeting between the Chancellor and the Governor of the Bank of England, may I warmly congratulate my right hon. and learned Friend on publishing the minutes of the meetings ? May I suggest that the way in which he has achieved that--by slow, steady, incremental change--is probably better than the statute that some of us proposed earlier in the year and certainly better than the move towards an independent central European bank which he has so often advocated ?
Mr. Clarke : I am glad that I am in total agreement with my hon. Friend on the desirability of greater transparency of decisions on monetary policy. I am glad, too, that I am carrying his consent in the cautious, step-by-step approach that we have taken towards that transparency. However, I would take up his suggestion that there is a conflict between those who want low inflation and those who want lasting recovery. What is interesting about the discussions is that they confirm what ought to be reassuring to anybody with any common sense. Both the Governor and I are talking about that essential balance between being safe on inflation and getting the right pace of recovery that will last. I hope that when people study these minutes and future minutes, we shall have a better quality of debate on these issues in the country.
Mr. Beith : Does the Chancellor still believe, as he believed at the time of the February meeting, that there is a significant risk that his fiscal measures will slow the rate of recovery ? What will minutes look like in about a year's time if there are significant inflationary pressures, if growth is not great enough to meet the Government's targets and if the Chancellor is arguing for a greater reduction in interest rates than the Government believe will be safe ?
Column 406consumer expenditure. At that time, there was a lot of debate about whether consumer expenditure was picking up or falling down. Those things move on. I have had a meeting since then and we are all making our judgments now about the outlook for consumer expenditure, given the tax increases coming in. By the end of the year, I shall be making judgments and trying to perform the same balancing acts in the way that I have just described.
I accept that it will be interesting about 12 months ahead to see how often the Governor of the Bank of England got it right and how often he got it wrong, how often the Chancellor got it right and how often he got it wrong and how often, occasionally, absolutely everybody got it wrong. By that time, we shall be moving into the necessary steps to keep us on course for steady recovery and low inflation.
Mr. Bellingham : Does my right hon. and learned Friend agree that the recent output figures were very encouraging indeed ? Does he also agree that various socialist measures such as the social chapter would damage growth ? Will he make that point time and again in the run-up to the Euro- elections ?
Mr. Clarke : I entirely agree with my hon. Friend. In addition to the major economic policy decisions that I have just described, it is essential that we do everything to keep down British industry's costs and help our employers and businesses to make themselves competitive. At present, we have lower costs on top of wage costs than other European countries. By fighting away the social chapter, we ensure that we keep that competitive advantage. That is an absolutely key issue in the European elections.
Mr. Gordon Brown : Given that in January the Chancellor said in public that recovery was becoming robust, whereas we now know that in private he was telling the Governor of the Bank of England that it was feeble ; given that in February the Chancellor was telling us that a 0.25 per cent. interest rate cut was sufficient, whereas we now know that he was telling the Governor that twice as much was necessary ; and given that by March the Chancellor was telling us that tax rises would not have a substantial impact on the recovery, whereas we now know that he expressed the fear in his words with the Governor that it would be substantial, how can the country ever trust the Chancellor, not only on tax but in anything he ever says about management of the economy ?
Mr. Clarke : That bizarre use of the minutes explains why in the past people have been so cautious about openness in these matters. As the hon. Gentleman well knows, that is a total misuse of all the accounts of the discussions that he has read. I have always spoken cautiously about the recovery. I have always stressed the need for it to be sustained. I have also always stressed the need to keep low inflation as a target. All the hon. Gentleman has ever said is, "Cut interest rates", "Cut interest rates" and "Cut interest rates." At times of boom and at times of recession, he would have caused recurrent financial crisis. He says nothing on tax, he says nothing on borrowing and he says nothing on supply-side measures. The possibility of the hon. Gentleman's taking responsibility in these matters would cause a serious crisis of confidence in the country and set back all the hopes of recovery that we are nurturing.
5. Mr. Wells : To ask the Chancellor of the Exchequer what effect the changes in interest rates since 1990 have had on the disposable income, after mortgage payments, of an average family with an average mortgage.
Mr. Wells : Does not that mean that, despite deliberately misleading statements by the Labour party and the whingeing and whining of the media and the Archbishop of Canterbury, the people of this country--poor, middle- income and rich alike--are better off under Conservative economic policies ?
Mr. Nelson : It does, indeed. My hon. Friend is on to a good point because it is not only the reduction in mortgage interest rates that has delivered higher net disposable income. Total disposable income for the average family with an average mortgage has increased by considerably more than the saving on mortgage payments--indeed, it has gone up £270 a month or 33 per cent. in just over three years.
Mr. Sheldon : I welcome the disclosure of the minutes of the meetings between the Chancellor of the Exchequer and the Governor of the Bank of England. Is the Minister aware that those minutes disclose what is always a fact--in general terms, there will always be that difference between a Governor who wants high interest rates and a Chancellor of the Exchequer who we hope wants interest rates at a level that can sustain manufacturing industry ? It is up to the Chancellor to keep pursuing that point.
Mr. Nelson : Decisions on monetary policy lie firmly and safely in the hands of my right hon. and learned Friend the Chancellor. That is and will remain the position. As the Government conducting monetary policy, we have nothing to fear from transparency and clarity. Indeed, it is an act of some courage to be able occasionally to show that there are slight differences of opinion. That is a matter about which the markets will make their own decisions anyway. We have nothing to fear and everything to gain from greater clarity.
6. Mr. Nicholas Winterton : To ask the Chancellor of the Exchequer when he last met representatives of the British film industry to discuss capital allowances and other tax incentives to encourage investment in film production.
Mr. Winterton : Does my hon. Friend accept that the British film industry has a proud record of tremendous achievement and the potential to make a major contribution to the British economy ? Does he further accept that there must be an appropriate fiscal regime to enable not only the film industry but manufacturing industry to make that contribution to the economy ? Does
Column 408he agree that a review and reform of capital allowances would attract investment not only from this country but from overseas ?
My hon. Friend may be aware that changes introduced in 1992 for qualifying EC films provided for the immediate write-off of pre-production expenditure and one third per annum of production costs, and the reforms were welcomed by the industry. We are of course always prepared to look carefully at further proposals. My hon. Friend will be aware that my right hon. Friend the Secretary of State for National Heritage is conducting a wide-ranging review of the British film industry and we look forward to considering his findings.
Mr. Grocott : Does the Minister agree that one helpful thing that he could do for the film industry would be to scrap the ludicrous Broadcasting Act 1990 ? Can he confirm that, since the passing of that Act, half the workers at ITV have lost their jobs while a small number of people have made an absolute fortune ? Is it too much to hope for that the Government will put the interests of the programme makers and viewers first and make sure that the advertisers and money men take a back seat ?
Mr. Nelson : The Government give considerable weight to the issues raised by the hon. Gentleman, and they will be considered by my right hon. Friend the Secretary of State for National Heritage in his review.
The hon. Gentleman will know that there are certain special tax provisions that relate to television companies, as well as reliefs that relate to film companies, in this country. Those provisions were introduced by the Government to attract expertise and stars from abroad to film in this country and to contribute to our economy. There is no reason why that should not be the case in the television industry domestically, as well as in the international film industry. Both will prosper under the Government's measures.
7. Mr. Riddick : To ask the Chancellor of the Exchequer whether he will name the countries which have requested advice on (a) privatisation or (b) nationalisation of key industries ; and if he will make a statement.
Mr. Riddick : Is my right hon. Friend aware that countries around the world are creating free markets, reducing tariffs, abolishing regulations and privatising state-run companies because they know that such policies will lead to increased prosperity and freedom ? Are not those countries following Britain's lead ? Is not that free enterprise approach complete anathema to the socialists on the Opposition Benches ? That is why, despite our current difficulties, the Opposition will stay exactly where they are.
Mr. Portillo : My hon. Friend is right. Countries in every corner of the world are following policies of competition, deregulation, privatisation, lower tariffs, free trade, free markets and political freedom. They believe that the United Kingdom's invented many of those concepts and has exported those concepts to them. There is no question of the United Kingdom being isolated within Europe--the United Kingdom is fighting every day to make sure that Europe, and the Labour party, is not isolated in the world against that trend.
Mrs. Mahon : Is the Chief Secretary seriously telling the House that he is proud that the mines have been privatised ? Does he think that that is a success story ? Is he aware that my hon. Friend the Member for Cynon Valley (Mrs. Clwyd) is currently meeting miners underground at the only remaining pit in Wales ? Is that something of which he is proud ? Will he now--even at this late stage--persuade his right hon. and hon. Friends to tell the Coal Board to stop playing cat and mouse with the decent men and women whose livelihoods depend on that pit and to put that pit into the coal review procedure ?
Mr. Portillo : I am proud of every privatisation that has taken place. All the public services that have been privatised have become no less public--and the services have become a great deal better. In the past few months, the United Kingdom has been asked to give advice to Brazil, Chile, Japan, South Korea, India, Indonesia, Croatia, Gambia, Angola, Australia, Ecuador, Sweden, France, Singapore and New Zealand. I assume that North Korea and Cuba look to the Labour party for their advice.
Sir Peter Tapsell : Yesterday's announcement on interest rates will be widely seen as a possible further step towards the privatisation of the Bank of England. Will my right hon. Friend bear in mind the real danger that, if discussions and disagreements between the Chancellor and the Governor on interest rates are to become publicised within six weeks of the event, it will almost certainly have an unsettling effect on the bond, stock and currency markets ? When such disputes become public, especially when one of the participants is arguing for an increase in interest rates, it could easily lead to an immediate collapse of the gilt market and a large inflow of hot money into sterling. Is my right hon. Friend aware that, to me, that looks to be a speculator's charter like the exchange rate mechanism ?
Mr. Portillo : My hon. Friend's views on the subject are known and I look forward to studying some of his speeches again. It is undoubtedly the case that my right hon. and learned Friend has taken a courageous decision by publishing those minutes. In the past 18 months, we have taken decisive steps forward in increasing transparency and the credibility of our monetary policy. That is necessary to give investors and business men confidence. The fact that such confidence exists is shown by the healthy inflow of funds and by the number of countries and companies willing to invest in Britain because they have confidence that monetary decisions here are taken for economic and not political reasons.
Mr. Nicholas Brown : When the French, Germans and Japanese ring him to ask how they can make their countries more like Conservative Britain, does the Chief Secretary draw to their attention the Public Accounts Committee
Column 410reports that followed each and every privatisation ? Does he draw their attention to the fact that the PAC found that many of the privatisations were pump primed at the taxpayers' expense, that privatisations did not represent true value for money and that, in the case of the public utilities, the prices of electricity, gas, telephones and water have all increased ahead of inflation since 1979 ?
Mr. Portillo : Most of the countries are well able to read the facts for themselves and have seen that prices have been falling in the former nationalised industries and standards of service rising. Quite honestly, if the French Minister who has been presented with a bill for FF 20 billion by Air France rang up, he would think that whatever we had done in this country was good value.
Dr. Spink : Just to get it clear, can my right hon. Friend confirm that since privatisation in 1986, the price of domestic gas has fallen in real terms by 23 per cent. and that the price of electricity has fallen in the past two years by 6 per cent. and is set to fall again this year ? Is not that good news for the economy and for domestic consumers ?
Mr. Portillo : My hon. Friend is right and his figures are extremely close to the ones that I have in front of me. Not only have prices been falling, but standards of service have been rising and the satisfaction of customers is the most decisive factor of all. When hon. Members comment today, as they sometimes do, about infrastructure in Britain they are not saying that the infrastructure of British Telecom and the gas, water and electricity industries is poor. Members of Parliament and my hon. Friends do not receive complaints about those industries because they are making the necessary capital investment and providing a good standard of service to their customers.
8. Mr. David Marshall : To ask the Chancellor of the Exchequer how many representations he has received concerning his plans to impose indirect taxes on air travel and most general insurance premiums.
Mr. Marshall : Why has air travel been singled out for that tax ? How does the Minister justify such discrimination and what does he intend to do about the scandalous double taxation on a return journey involving Glasgow, London and Edinburgh or vice versa--a journey that many people make ? Will he take steps to end that iniquitous and vindictive anomaly ?
Sir John Cope : We introduced the tax because, as my right hon. and learned Friend said in his Budget statement, taxation on air travel is low and it is therefore a suitable source from which to raise revenue. On the second half of the hon. Gentleman's question, that is a matter which we shall have the opportunity to return to when we debate the Finance Bill on Report in the next few days. We also discussed it in some detail in the Standing Committee considering that Bill.
9. Mr. Luff : To ask the Chancellor of the Exchequer by how much real take-home pay has risen for a married man on average earnings with two children since 1979 ; by how much the same measure rose between 1974 and 1979 ; and if he will make a statement.
Mr. Kenneth Clarke : Real take-home pay for a married man on average earnings with two children has risen by around £83 since 1978-79 ; it rose by only £1.50 between 1973-74 and 1978-79. The policies that we have in place create the conditions for sustained recovery which means more jobs and higher living standards.
Mr. Luff : Will my right hon. and learned Friend confirm that it means, if my mental arithmetic is right, that real take-home pay has increased each year on average something like 20 times faster under the present Government than under the last Labour Government ? Does not that mean that the increase would have been absolutely impossible if we had to meet the bill for the extra £38 billion of public expenditure that was promised by the Opposition at the last election ?
Mr. Clarke : My hon. Friend is right but, with his typical fairness, he asked a question that was rather generous to the Labour party when he referred to its period of office. If one uses the examples of single people and married couples without children, their real take-home pay fell while Labour was in office, so even the generous comparison that my hon. Friend makes cannot be made at all for a large section of the population.
Mr. Stevenson : Will the Chancellor accept that the real take-home pay to which he refers has been affected by the amount of money that is required for the common agricultural policy--for example, £28 per week is taken out of the take-home pay of the average family ? It is estimated that an increase of some £6 billion will be required between 1992 and 1995 because of the agricultural policy. Will the Chancellor now give a commitment that that very effective indirect taxation on take-home pay will be resisted by the Government ?
Mr. Clarke : The hon. Gentleman knows that he and I agree to a large extent on the common agricultural policy and that we have committed ourselves to reforming it. We shall continue to do so and I very much trust that, as the tight constraints that now exist on the European budget begin to take effect, we will achieve more progress. While we seek to achieve that improvement in European conditions, however, we also seek to ensure that the costly and unhelpful provisions of the social chapter do not apply to this country, that we deregulate the circumstances in which business operates and that we make the single market work properly by giving it state aids. Unfortunately, no member of the Labour party gives us any support on those issues, which have a big effect on increasing jobs and prosperity.
Mr. Duncan : Has my right hon. and learned Friend had the opportunity to study the impact on average earnings that would follow the imposition of a minimum wage as proposed by the Labour party ? Does he agree with me that, ironically, if there were such a minimum wage one might see the statistics for average earnings going up simply because hundreds of thousands of low-paid workers would be thrown straight on to the dole ?
Mr. Clarke : I entirely agree with my hon. Friend, whose analysis is totally correct. Although members of the Labour Front-Bench team continue to say that they are in favour of a minimum wage, the more candid continue to concede that it would cost jobs. Unfortunately, as with everything else, the Labour party will not say what the minimum wage would be, so we can only guess at the scale of the damage that it would do to employment in the United Kingdom.