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Schedule 18 --
Management : other amendments
Mr. Dorrell : I beg to move amendment No. 25, in page 385, line 30, at end insert
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Class 4 contributions
44A. In subsection (1) of section 16 of the Social Security Contributions and Benefits Act 1992 (application of Income Tax Acts to class 4 contributions), for paragraph (b) there shall be substituted the following paragraph
"(b) the provisions of Part VA (payment of tax) and Part X (penalties) of the Taxes Management Act 1970,".'.
The provision concerns the extension to class 4 national insurance contributions of the administrative machinery rules that apply to income tax. In general, those rules are automatically applied through the operation of section 16 of the Social Security Contributions and Benefits Act 1992 and no specific provision is needed for class 4 national insurance contributions to take account of the introduction of self-assessment.
However, self-assessment contains one new element : a surcharge for the late payment of tax introduced by clause 192. I am advised that it is not entirely free from doubt that surcharge could be imposed on unpaid class 4 contributions. The amendment makes it clear that the rules for surcharge in relation to income tax, contained in the Taxes Management Act 1970, are equally applied to unpaid class 4 national insurance contributions.
Mr. Nicholas Brown : I am afraid that we cannot take responsibility for this amendment. It deals with an oversight in the Government's drafting of the regulations for their surcharge regime. Nevertheless, I am sure that it is reasonable.
Amendment agreed to.
Clause 253 --
Calling for documents of taxpayers and others
Mr. Dorrell : I beg to move amendment No. 13, in page 222, line 39, leave out
or assist in the evasion or avoidance of tax'.
Clause 253 requires a tax inspector to give the taxpayer his reasons for applying for consent to issue an information notice in respect of that person's tax liability. One of the exceptions to that requirement in the clause as currently drafted is where a general or special Commissioner is satisfied that there are grounds for believing that the disclosure of the reasons would prejudice the assessment or the collection of tax or assist in the evasion or avoidance of tax.
In Committee, concerns were expressed that the use of the term "avoidance" could lead to an inspector's reasons being withheld in cases of straightforward tax planning. That was never intended. In view of those concerns, we have decided to remove the reference to evasion and avoidance of tax from the clause. That should allay the fears of hon. Members and also bring the new provision into line with similar references elsewhere in the statute book.
Mr. Nicholas Brown : I welcome what the Government are doing, for which I think that the Opposition may claim some credit. It is quite an important matter. Clause 253, as it is harmlessly described now, was the much more controversial clause 240 in Committee, and was followed by the even more controversial clause 241, which the Financial Secretary withdrew, to approval from hon. Members from all parties.
The debate in Committee was heated. Points made by Labour and Conservative Members were critical of the Government's wording of their legislation. Although, I
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accept, as the Financial Secretary told us at the time, that the purpose of clause 253 was to grant a concession rather than to place a burden on the taxpayer, exception was rightly taken to the choice of "avoidance and evasion" as a phrase.It was not only the phrase that the Financial Secretary used in the debate, but the wording in the Bill, and it was clear to Opposition Members and, indeed, to the Financial Secretary's hon. Friends that "avoidance" in some circumstances is open to a wide interpretation and could be construed to refer to the perfectly lawful arrangements that a taxpayer makes. I am glad that the Financial Secretary has decided to think again, and the proposed outcome is for the best. 5.30 pm
It is right to put on record the considerable disquiet that was felt on the Opposition Benches at the way in which the debate was handled in Committee. The timetable motion was set out in such a way that the debate--an important one--was the final debate on a Thursday. The Committee's sitting hours on a Thursday were shorter than those on a Tuesday under the guillotine. It was unfortunate that such an important debate was the final debate on the Thursday when it took place, a day on which other controversial matters were discussed. I felt at the time that it might not be possible to discuss the issue in Committee because of the terms of the guillotine motion. Indeed, we almost lost the opportunity to debate it. It would have been extremely serious if there had been a straight vote for or against the clause and the following clause, without pertinent matters having been explained and explored and without the Government having the chance to change their mind.
There are two lessons for us. First, debate in Committee can be of some importance. Secondly, guillotine motions or timetable agreements, which I hope we shall have in future, should be drawn with much more care and, dare I say it, with much more consultation.
Mr. A. J. Beith (Berwick-upon-Tweed) : I welcome the change that is set out in the Government's amendment. The change, together with the abandonment of former clause 241, reflects the strong feelings that were expressed in Committee. The Minister and the Revenue should recognise that it was felt in Committee that, in a combination of clauses, the Revenue were trying it on a bit. When it reached the point at which the Revenue sought to have power over the papers of taxpayers who were guilty of no misdemeanour, merely because there was a suspicion that their accountant in his dealing with another taxpayer may have assisted improperly in withholding information from the Revenue, the Committee felt that it was too much of a try-on. The Revenue is expected seriously to chase tax evasion and to do so thoroughly. There is a difficult line to be drawn. The Minister may take some lesson from the general feeling of the members of the Committee that the two clauses taken together seemed to go too far. The Minister has obviously recognised that.
Mr. Dorrell : I intervene briefly, but not to have a re-run of the debate that took place in Committee. I shall content myself by thanking the House for its welcome for the outturn of our debates. I shall take up the closing comments of the hon. Member for Newcastle upon Tyne, East (Mr. Brown). I
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shall not repeat old arguments about the degree of consultation on the operation of the guillotine. I wish only to observe that the hon. Gentleman did not say that we should never have a timetable motion again. Instead, he recommended the way in which a timetable motion might be better administered. I assure him that my right hon. Friend the Chief Secretary and I, and perhaps more importantly for this purpose my right hon. Friend the Leader of the House, heard and noted his remarks.Mr. Nicholas Brown : For the avoidance of any doubt, it has always been my view that the sensible timetabling of the taxes management part of the Finance Bill should be encouraged and welcomed. In the past, we entered into arrangements with the Government which effectively did exactly that.
Amendment agreed to.
Schedule 25 --
Repeals
Amendment made : No. 35, in page 452, line 46, at end insert--
Chapter |Short title |Extent of repeal ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ 1979 c. 2. |The Customs and Excise Management Act 1979. |In section 118A, subsection (7). 1983 c. 55. |The Value Added Tax Act 1983. |In Schedule 7, in paragraph 7, sub-paragraph (6).'
(3) Assigned matters: minor corrections!Chapter!Short title!Extent of repeal!
!1979 c. 2.!The Customs and Excise Management Act 1979.!In section 118A, subsection (7).!
!1983 c. 55.!The Value Added Tax Act 1983.!In Schedule 7, in paragraph 7, sub-paragraph (6).'!
-- [Mr. Portillo.]
Order for Third Reading read.
5.33 pm
The Chief Secretary to the Treasury (Mr. Michael Portillo) : I beg to move, That the Bill be now read the Third time.
Life is full of surprises. Here we are, shortly after 5.30 in the afternoon, turning to the Third Reading of a Bill which has proceeded under a guillotine. I make the point not to create any tension or upset between the occupants of the Front Benches but merely to remark that a Bill which has proceeded under a timetable motion has been given sufficient time for hon. Members to consider the important matters that have been placed before them.
I think that many hon. Members on both sides of the House have found the timetabling of the Bill to their convenience. I think also that that goes for many people outside the House. It has been a matter of convenience for them. It has been much clearer to outside interests that have a legitimate point of view to put to the House when the matters in which they were interested would come before the Standing Committee for consideration. As a consequence, they have been able to make their recommendations in a timely way.
I say nothing about what future proposals might be for the handling of these matters. It is worth putting on record, however, that the timetabling of the Bill has not led to any shortage of debate or shortage of opportunity to make representations. I think that in general the process has proceeded smoothly.
Ms Angela Eagle (Wallasey) : As this was my first Finance Bill, I am in a slightly odd position because I do not know what a Finance Bill without a guillotine is like.
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Is the Chief Secretary saying that the Conservative party will be happy to have future Labour Governments' Finance Bills guillotined at the beginning of the parliamentary process so that they, too, can be speedily dispatched ?Mr. Portillo : No. I have restricted myself to making comments about the past and not about the future. It is important to get the past straight. I wanted to do that. I think that the only way that things might be done differently, were this process ever to take place again, would be that the Opposition would want to attend the Business Committee, at which the phasing of this Bill was first discussed.
The guillotining of the Bill was only one of several novelties this year. We found ourselves debating a Finance Bill at a time of year to which we were not accustomed. We debated the Bill at the beginning of the year. We found ourselves also taking time out of the Committee to run to various television and radio studios to debate some of the tax measures that were to come into force at the beginning of April. The paradox was that most of the tax measures that we found ourselves debating in various studios were not measures contained in the Bill. Instead, they were measures that were introduced by the previous Budget of my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont).
Mr. Beith : Before the Chief Secretary gets fully into this especially interesting part of the past, I hope that he will not fail to notice that among the novelties of the Bill were two new taxes, neither of which had been the subject of any prior consultation--one on airports and one on insurance. Another novelty was that the Bill was printed in two volumes, being of greater length than any previous Finance Bill.
Mr. Portillo : Yes, the Bill was of greater length than its predecessors. As the right hon. Gentleman says, it was the first time that the Bill was printed in two volumes. For that reason, I thank all members of the Standing Committee for their diligence in paying attention to the Bill. It was for the reason of length that the guillotine motion provided for rather more hours of debate than those which were expended on the previous Finance Bill, which was not subject to a timetable motion.
Mr. John Townend (Bridlington) : Does my right hon. Friend agree that having Finance Bills as large as the one that is before us is not satisfactory ? Will the Government consider in future separating the main Budget proposals and having a relatively shorter Bill, and having a technical Bill dealing with anti-avoidance measures, which the Inland Revenue introduces every year ? Would not that be a much more satisfactory approach ?
Mr. Portillo : That very question had been raised only shortly before my hon. Friend entered the Chamber, during consideration of one of the amendments. My hon. Friend the Financial Secretary explained that it was not the Government's wish to operate in that way.
Bearing in mind what has happened during consideration of the Bill, I think that my hon. Friend the Member for Bridlington (Mr. Townend) will find that the matters considered technical were not matters on which the Committee found itself wishing to spend a long time. Taking all matters together--the technical and the more political--did not inhibit the smooth discussion of the Bill. I would be in some difficulty to find instances in which not
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separating out technical and political matters caused difficulties for the Committee. In practice, I do not think that the Committee found itself in those difficulties.My right hon. Friend the Member for Kingston upon Thames brought in an extremely brave Budget at the beginning of 1993. It was one which took seriously the problem of the public sector borrowing requirement and demonstrated beyond doubt that the Government would ensure that that borrowing requirement was tackled. My right hon. Friend was proceeding at a time when it was not at all evident that the recovery was under way. He therefore had to be cautious about introducing taxes in the early part of 1993. What he established was a wedge of increasing revenue for the years ahead, and it is some of that wedge that came into play in April 1994.
The effect of my right hon. Friend's Budget in March 1993 was to convince the markets that the Government were entirely in earnest about tackling the public sector borrowing requirement. As a consequence, through 1993, even though we were borrowing at a rate of about £1,000 million a week, we saw short-term interest rates fall, and we saw long-term interest rates also fall. The impact of that on the recovery is important. If the opposite had happened--if interest rates had been rising--the recovery would have been put in jeopardy. What the Government did was to ensure, even at a time when it was unwise to introduce the tax increases, that the markets were reassured that we would take action. They set out the precise course and the exact taxes that would be increased. In the process, they took a number of political risks. But taking those political risks was worth while, because it showed the markets that we meant business.
In the March 1993 Budget, my right hon. Friend also had to take some decisions on indirect taxes which would have an impact on the retail prices index. That required considerable courage at that time. It is interesting to reflect now on how much lower inflation is today than we were predicting one year ago. Inflation has stayed very low. The retail prices index, excluding mortgage interest payments, is at the lowest level since 1967, and the headline rate has been below the European Community average since August 1991.
Today, we see that the underlying inflationary pressures are very weak : factory gate inflation is at the lowest level since 1973 and businesses are keeping their costs under control. The recent underlying earnings growth is the lowest that it has been in 25 years.
Mr. Ian Taylor (Esher) : Is not the point about taxation that, if the two Chancellors of the Exchequer had not wisely raised taxation in 1993, the debate now would be about how much taxation we would be forced to raise this year ? In other words, we cannot avoid the problem. Indeed, if the taxation rates had not been increased in 1993, we would not have had interest rates down to the present level, because the markets simply would not have accepted that the Government were serious about borrowing, and there would therefore be other pressures in the interest rate market.
Mr. Portillo : My hon. Friend is absolutely right. When the Government make wise decisions, the difficulty is to prove the existence of the dog that did not bark. There was no funding crisis in 1993. Interest rates were not rising ; they were falling, despite the pressures that the Government were imposing on the market through their
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level of borrowing. I simply remind my hon. Friend that the Government have taken action to solve the public sector borrowing requirement problem not only by increasing taxes but, more importantly, by decreasing public spending.Ms Eagle : I thank the Chief Secretary for giving way again ; he is very courteous. I listened to what he said about the political courage demonstrated by his Government in raising the massive tax revenues in 1993. Surely the economic situation that the Government would face was obvious before the 1992 election. Would it not have been much more courageous therefore for the Government to take these difficult decisions before the general election rather than after it ?
Mr. Portillo : What was evident in the early part of 1992 was that there was a substantial public sector borrowing requirement, but it was not evident that it would be anything like the £50 billion which was subsequently predicted. In the early part of 1992, we believed that the recovery would begin strongly and proceed apace. It was not only the Government who had those views ; they were shared by independent forecasters and by the Labour party. If they were not shared by the Labour party, it is inexplicable that the Labour party was planning massive increases in public spending. If it knew all the time what no one else knew --that the public sector borrowing requirement would be larger--how on earth could it have been responsibly proposing that public spending should be massively increased ?
I should like to know from the hon. Member for Wallasey (Ms Eagle) or the Opposition spokesman whether the reason was that the Labour party was all- knowing. Was it that it had knowledge that no one else had, and yet it persisted with its irresponsible plans to raise public spending, or was it that it shared the views of all the experts and the Government, which was that the recovery would shortly begin and that it would be strong, and that the public sector borrowing requirement would not reach anything like the heights that it has subsequently reached ?
Dame Elaine Kellett-Bowman (Lancaster) : Is not my right hon. Friend being unduly modest in his sunshine list, because he did not add the excellent unemployment figures which were released today ? Those figures show that unemployment is down 0.2 per cent. nationally and--we usually lead the way--down 0.3 per cent. in Lancaster. My right hon. Friend also did not give the superb figures, to which he referred obliquely, for the public sector borrowing requirement. Such figures were unheard of one year ago ; he could not possibly have forecast them.
Mr. Portillo : My hon. Friend is absolutely right. It may not seem like it, but I am still on paragraph one, and I intend to reach some of those points in a moment.
It is worth dwelling on the importance of our success with inflation. It is worth reminding people that keeping inflation down is a vital objective for the Government. We are firmly committed to a monetary policy that will maintain downward pressure on inflation. We will not let up on our achievements so far, and we will ensure that we meet our targets in the future.
Mr. Thomas Graham (Renfrew, West and Inverclyde) : Is the Minister telling the House that the massive increase in domestic fuel bills will keep inflation down ? Is he aware that low-paid workers and the
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unemployed are suffering dramatically because of the huge indirect taxes that the Government have imposed ? How in God's name can he hold his head up and say that the Government are helping ordinary men and women ?Mr. Portillo : Since privatisation of the electricity and gas industries, prices have fallen either in real terms or, in some instances, in cash terms. The hon. Gentleman will remember that, in the Budget, my right hon. and learned Friend the Chancellor announced a package of assistance not only for those on low incomes but for all pensioners, whatever their incomes might be. What has made old people suffer is not the fact that taxes have been increased but the fact that Labour sought to scare them about the scale of the increases. We are talking about increases of about £1 a week. The Government have provided compensation which, in large measure, pays for those extra increases. What Labour have done is to spread an idea that the increases will be vastly greater than they are.
I warn the hon. Member for Renfrew, West and Inverclyde (Mr. Graham) that that will rebound on the Labour party, because, when people discover that they have been misled by the Labour party's black propaganda, they will be angry. To scare old people in the way that the Labour party has done is unforgivable, and they will turn on the party that has perpetrated it.
Mr. Clive Betts (Sheffield, Attercliffe) : Can the Chief Secretary respond to a constituent of mine who wrote to me the other day saying that, first, the 70p that he would receive in additional pension would not compensate him for his increased fuel bills and, secondly, because he had a small occupational pension and therefore paid income tax, he would be taxed on that 70p as well ? Have the Government taken into account the increase in income tax that they will receive from this process when calculating the compensation that will be paid to people in that situation ?
Mr. Portillo : I presume that the hon. Gentleman realises that, if the public sector borrowing requirement is reduced and more revenue is raised, someone must pay for that. The Government have never shied away from saying that taxpayers will have to pay. However, they have ensured that people on low incomes are compensated to help them to meet their extra fuel bills. We have gone much further than that by compensating all pensioners, whatever their incomes may be, to help them with their extra fuel bills.
The hon. Member for Sheffield, Attercliffe (Mr. Betts) is saying that pensioners who are not only not living on income support but who also have an extra income on which they pay tax should also be compensated for the tax that they must pay on the increase. That is not reasonable from the hon. Gentleman's point of view. If he reflects on it, he will see that it is not a sensible proposition. The economy is growing. There now have been seven quarters of growth, and gross domestic product rose by 0.7 per cent. in the last quarter of 1993. It rose by 2.5 per cent. on a year earlier. Many other encouraging figures tell us that the recovery is spreading from one sector to another.
Manufacturing output is up, and exports to countries outside the EC have risen by 11 per cent. Retail sales are at a record level--a level which has never been achieved before--and new car registrations are up significantly.
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That is important, because it shows that consumers are gradually having the confidence to make longer-term spending commitments, and that can be seen also in the rise in consumer credit.As my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) said a moment ago, unemployment has fallen by 30,000 in March. It has fallen by 250,000 since the end of 1992, and vacancies are still at a high level. The unemployment rate is below the EC average. I mention that because the hon. Member for Peckham (Ms Harman) and the hon. Member for Dunfermline, East (Mr. Brown) are keen on saying that they want to solve the problem of unemployment, and that, if they solve that problem, they will solve the problem of the public sector borrowing requirement. Yet the magic socialist formula which they would employ to drive down unemployment and to bring about recovery is not available to the socialist Governments around Europe.
I remind the House that our rate of unemployment is below the EC average and that the Spanish rate of unemployment--when last I looked--was 22 per cent. If there were some magic socialist formula to bring down unemployment and to bring about recovery--rather than to bring about recovery and to bring down unemployment--would it not be likely that the Spanish socialist Government would be using it ? If the Labour party has some secret, why is it so mean as not to share it with the socialist Governments in Europe so that they can put it into practice ?
Mr. Hoon : The Chief Secretary's case appears to be that there is a massive upturn in consumer confidence in the United Kingdom, and that the Government are taking advantage of that. If that is the Government's position, why did the Chancellor tell the Governor of the Bank of England in January that he was much less sure that the pace of growth had picked up significantly in recent months ? In March, the Chancellor told the Governor that anecdotal evidence did not suggest that activity was growing strongly.
Mr. Portillo : The hon. Gentleman has completely misrepresented what I said. I said that new car registrations showed some sign of an increase in confidence among consumers who were willing to commit themselves to long -term decisions. I did not say that there had been a massive resurgence in consumer confidence. We know from surveys that confidence is relatively delicate.
We know that people making business decisions have felt the return of confidence, and that most people in business think that the recovery has now reached their sector. In time, the confidence which is felt by the people who are making decisions in business will ripple out to employees and to consumers, and that will be felt throughout the economy. However, there is absolutely no point in pretending that the recovery has been faster or has progressed further than it has. I am making no such pretence. I do say that all the signs are very good.
We have had another example of the Opposition wishing to talk the recovery down. We know perfectly well that the recovery is on track, but we have never made grandiose claims about its size or pace. This is not a technicolor utopia. We are concerned about having a recovery which is sustainable, and which is compatible with low inflation.
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The people who really matter--business men and investors--have confidence in the Government's economic policies, and this Bill is at the very heart of those policies. The themes of the Government's approach are the fixity of our purpose, the clarity of our economic policy and the transparency of the decisions which we make. We want sustainable non-inflationary growth to make the people of this country better off. Growth is not an end in itself--it is worth having only if it enables living standards to rise, and that means keeping inflation well under control.If inflation returned, it would bring all the old evils with it. There would be an arbitrary redistribution of income within our society, a distortion of investment decisions and all the pain that is inevitably involved in having to cure inflation again by adjusting interest rates and by the recessionary forces which then come about. Non-inflationary sustainable growth is our aim, and that must be based upon sound public finances. If we do not have sound public finances, we will pile up levels of borrowing, the interest on which must be paid by future generations. It is no part of the Conservative Government's policy to pass a burden of debt down to our children. That debt repayment burden which is now being faced by so many countries diverts resources from productive investment and threatens recovery by undermining confidence.
The Conservative principle of sound public finance is embodied in the Budget and in the Bill. We have projected to reduce the PSBR to zero by the end of the decade.
We also place emphasis on making our economy perform better and making reforms to the supply side of the economy. Free markets allocate the resources best to where they should be used, and where they can produce the best result. Interventionist policies, on the other hand, are a sure recipe for economic sclerosis. The Government are proud to be taking further measures to improve the way in which the economy works.
We are privatising British Coal and British Rail. We are making sure that incentives operate well within the economy by the changes and reforms which we are making to invalidity benefit with the introduction of a new benefit called incapacity benefit. We will also introduce in due course a job seeker's allowance to make sure that there are clear incentives for people to work when they are able so to do.
We have a clear destination in terms of where we wish to lead public finances, and we have set ourselves a series of milestones along the way. We have announced clear public inflation targets, and we are willing to be judged on the basis of those. We have set out firm public spending ceilings. It is our aim to make sure that the rate at which the new control total for public spending rises is kept below the trend growth rate in the economy. We took £10 billion off of our earlier public spending plans by the decisions made in the Budget, and the new control total of public spending is set to grow by an average of 0.25 per cent. in real terms per year for each of the years between now and 1996-97.
We are open in discussing our economic policy, and we have set it out clearly. The Chancellor has taken further steps to make sure that his monetary policy is transparent. We have now published--as has been mentioned in the House--the minutes of the monthly monetary meeting. We have established an independent panel of forecasters to display a range of views about future inflation and economic conditions.
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We have already set about publishing the monthly monetary report, and we have made the Bank of England independent to the point that it is able to decide the timing of interest rate changes. We have made clear to the world the indicators which we will take into account before we make decisions on monetary policy. In making the changes, the Chancellor has tried to make it absolutely clear to everyone that our interest rate decisions are to be taken for the only good reasons there are --that is, economic reasons--and not for political reasons. He will take decisions about interest rates based on features of the British economy, and not of any other economy.The Government's economic policy has a clear pattern. It is based on fixity of purpose, clarity and transparency. We have established in the economic field a rhythm of good decision-making which has led to a resurgence of confidence. The Bill is vital to that process. It protects non-inflationary growth by helping to sustain sound public finances in a way which does the minimum of harm to incentives and to the operation of the markets. That is essential if the Government are to meet the Budget objective of lowering the PSBR by £6 billion in the current year, 1994-95, in comparison with the projection that we made before the Budget. We will do that without affecting marginal income tax rates and without raising the rate of taxation on business.
I remind the House that the Bill is not just a catalogue of tax increases ; it carries forward the process of building a tax system that fosters wealth creation. The new enterprise investment scheme--which encourages "business angels" to put their management skills as well as their money into the new small companies that are the basis of future economic development--won considerable praise from all parties in the Standing Committee.
We have introduced some new taxes, to which the right hon. Member for Berwick-upon-Tweed (Mr. Beith) referred : the insurance premium tax and the air passenger duty. We have introduced them, however, in areas that--in comparison with practice in other countries--have arguably been under-taxed in the past. We are therefore ensuring that the tax burden is spread as widely as possible. Let me also remind the House that we have introduced rules allowing and promoting self-assessment in regard to tax.
The measures in the Bill are fair : the extra burden of tax that it has been necessary to raise has been spread evenly across the pattern of income distribution. That has been backed up by one independent survey after another. We are confident, therefore, that these measures will not damage the progress of recovery.
We have been careful to phase the tax increases to ensure that. Some of the impact of extra taxes was felt some time ago : excise duties were increased around Christmas. Other tax changes were introduced this month, and the two new taxes that I just mentioned will not come into force until the autumn. As I have said, we have spread the impact. My guess is that press expectations about the tax changes currently coming into effect greatly overplayed the impact that those changes will actually have on people's spending patterns, wage packets and salary slips. The recent impact on consumer confidence has been based not on actual experience of what tax rises are likely to bring, but on press reports and media speculation.
Mr. Beith : The Chief Secretary has just made a very significant point. He suggests that the largest collection of
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tax rises to occur in modern times has been spread in such a way that its impact on individuals will be much less than they have been led to fear, and that any disincentive effect on their willingness to work harder will therefore be very slight. Is he not opening the way to more tax rises generally, on the ground that they are never as bad as they are expected to be ?Mr. Portillo : The right hon. Gentleman knows perfectly well that Conservative Members believe in reducing taxes when that is prudent. Conservative Members do not attempt to advance any general argument in favour of raising taxes. But, when driven by fiscal prudence to introduce higher taxes in order to reduce public borrowing, our party takes care to ensure that the impact on incentives is minimal, and that phasing is sensible, so that the minimum damage is done to the process of recovery.
The Bill confirms the policies that I have described. It adds to the credibility of those policies, and will therefore increase confidence. Today, we have seen new figures showing that in 1993-94 the public sector borrowing requirement--at about £46 billion--was some £4 billion lower than the level that we predicted. That, clearly, is in itself good news, but I am the first to add that the PSBR is still the highest that we have ever had, in cash terms.
In the single month of March, the Government had to borrow £11 billion, the largest amount that has ever been borrowed in any single month. Total borrowing for the year still amounts to £900 for every man, woman and child in the country. That does not lead me to alter our earlier forecast for the PSBR in the current year--about £38 billion. It is right to celebrate good news when it comes, but I do not believe that the figures suggest that any change in Government policy would be appropriate.
The most significant factor in the achievement of that lower figure is not higher than expected tax receipts, but greater discipline in central Government spending and increased debt repayment by local authorities. Those factors cannot necessarily be repeated, and I therefore have no reason to believe that Government policy is in any way inappropriate at present. I believe that our current stance, and our determination to lower public sector borrowing on the course that we have set, should remain unchanged.
Mr. John Townend : I agree that the undershoot of £4 billion in the PSBR is very good news, but is not my right hon. Friend rather worried about the size of the increase in March--£11 billion, as he has just told us ? That is by far the highest increase in any month. Is not one of the problems the fact that, in national government--I found the same in local government--in the last month of the financial year each Department tries to spend every penny that it has so that it is fully spent up to its budget ? If we could control that, could we not lower the PSBR by even more ?
Mr. Portillo : As my hon. Friend knows, the PSBR is the difference between two large amounts--receipts on the one hand, and spending on the other. The pattern is fairly well established, February and March generally being the largest months in terms of the PSBR.
My hon. Friend has a point : there is an element of "spending up" at the end of the year. I deprecate that, and intend to bring the greatest possible pressure to bear on it.
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My hon. Friend will, however, appreciate that other factors are involved. There is nothing unusual about seeing a dip in the earlier part of the financial year, and the largest amounts towards the end. If the policies that I have described make the Government's economic strategy perfectly clear--along with the fact that we are now seeing the benefits of recovery and of sustained low inflation--let me ask the House to consider what alternative has been presented by the Opposition. How have they measured up to the test of clarity and decisiveness that I have set this afternoon ?It may be news to the House that the hon. Member for Peckham is responsible, on behalf of the Opposition, for the control of public spending pledges. How has she done in that regard ? As far as I am aware, there is not a single instance of the hon. Lady's overruling any of her hon. Friends in connection with any of their promises, pledges and proposed schemes, whatever the expense involved. Sound public finances are what we demand from the hon. Lady ; what we have had is the sound of public flannelling. The hon. Lady aspires to be the guardian of the nation's coffers, but the amendments that she tabled demonstrate that she is as committed as any other member of the Labour party to higher public spending and borrowing. That is especially notable, given that the hon. Lady was not a great contributor to our debates in the Standing Committee. [Interruption.] I showed a strong sense of delegation, but, even by the high standards that I set, the hon. Lady managed to delegate a considerable amount of the work to others. None the less, she was associated with amendments all of which would have increased public spending and borrowing. For example, her amendment to what was clause 28, on air passenger duty, would have raised the PSBR by £115 million this year and by £330 million next year.
It might be thought that, if the hon. Lady did that in one amendment, she must have balanced it in another. Then, however, she tabled new clauses 1 and 2. Did those clauses offset her proposals for air passenger duty ? No : they were designed to postpone the introduction of VAT on fuel and power, and would have raised public sector borrowing by £1 billion.
As the hon. Lady is honest and straightforward, one would have assumed that she would find some other way in our debates to balance her proposed increases in the PSBR. But she tabled amendments to clause 72 to increase tax allowances and restrict the married couple's allowance to 25 per cent. rather than reduce it to 20 per cent. Those amendments would have increased the PSBR by £2 billion this year and by £3 billion next year. She tabled amendments on capital gains tax which would have jeopardised a full £3 billion of revenue from that tax.
Throughout proceedings on the Bill, the Opposition's approach to public finances has been to find ways to reduce the Government's revenue and increase the PSBR.
Mr. Calum Macdonald (Western Isles) : If the Chief Secretary is the strict guardian of public finances, will he explain why the Government are this year abolishing sporting rates in Scotland ? That measure will exclusively benefit large estates, but it will cost the Exchequer £2 million. In this climate of financial straitjackets, how is it that Scottish landowners can receive a handout of £2 million ?
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