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Column 952I shall put on record two or three reasons why the changes that I have just recommended for the medium to longer term are necessary and make sense. Those reasons are based on realism rather than on pie in the sky. The first reason, to which other hon. Members have alluded earlier today, is that in the world of global capital movements and instantaneous financial transactions, there is increasing competition, as the hon. Member for Ashfield (Mr. Hoon) said, between national tax authorities.
That is one of the realities of the modern world which has a secular tendency to drive down rates of taxation, especially marginal rates--it may even drive down average rates of taxation as well. That is a healthy development because it means that people have to seek better and better value for whatever public expenditure they can afford to finance through taxation. The more that it can be honestly financed that way rather than on the back of public borrowing, the better.
The first reason, therefore, why it is necessary to make the strategic reform that I recommend is that, with the growing competition between national tax authorities, especially the competition affecting taxes on income and capital, it will be strategically necessary for the present Chancellor and future Chancellors to find a variety of ways in which to make our taxation regime, especially on those two items, as attractive as possible internationally.
More and more of those forms of tax will essentially be voluntary taxation. In other words, in the world of mobile investment, mobile corporate decisions and mobile high net worth individuals, people will be able to decide to situate here rather than there on the basis of the tax regime that applies.
My second reason is topical because something that the Trades Union Congress said about changes in the labour market was reported in the press today. What we see now and shall continue to see--incidentally, a similar point was made in yesterday's debate on child care by Opposition Members-- is a gradual erosion of the income tax base because of the relative decline of full-time paid employment. Opposition Members know that better than most people do. There has been a relative growth of part-time and casual employment, and of self-employment.
The figures are interesting. As the hon. Member for Edinburgh, Leith (Mr. Chisholm) did yesterday, I shall pull some figures out of my pocket. Our population is 56 million people. Some 31 million of those 56 million people are not in work for very good reasons ; they may be pensioners or below the age of employment. Some 3 million are registered as unemployed--these are round figures--and 1 million people would like a job if they could get one, but have more or less given up the hunt.
Those figures leave 25 million people in work, of whom 3 million are self- employed. Some 6 million are in part-time work, which leaves 16 million people, out of my total of 56 million people, who are in full-time work as employees and who contribute to the Revenue in the classic way that has been the case since 1944 and the days of Sir Paul Chambers. They contribute through PAYE--pay as you earn--with the employers doing the bulk of the tax collection work on behalf of the Revenue.
Those figures mean that fewer than one third of the total population are being required largely to support the rest of the population, whose needs are varying, through the auspices of tax and national insurance. That suggests to me a greater need to consider my third reason for making the change to which I have referred--the move towards the
Column 953kind of expenditure tax system recommended some time ago by Professor Mead. That system takes account of the erosion of the income tax base and is much better tailored to capturing revenue when, increasingly, potential revenue is escaping the tax authorities because of the black economy, the tendency for people to consume and the need generally to maximise the tax take from a shrinking tax base.
Mr. Stern : I cannot let my hon. Friend get away with what he said a couple of minutes ago. It is neither fair nor proper to suggest that the 6 million self-employed people do not provide a significant proportion of the tax and national insurance that the country needs. That was what my hon. Friend, no doubt inadvertently, implied.
Mr. Forman : I did not intend to make that point. I am grateful to my hon. Friend for clarifying the matter. I was saying that the bulk of taxation, especially on income, as my hon. Friend knows better that I do, comes from people who pay income tax, and national insurance of course, at the standard rate. About 95 per cent. of all taxpayers, as my hon. Friend knows, pay only at the standard rate and not at the higher rate, whatever it may be. Therefore, those arrangements, which have grown up since the days of Sir Paul Chambers in 1944, are still the bedrock of the buoyancy of our revenue generated on the income side.
My third argument in favour of moving gradually--the Government have already begun--towards an expenditure tax model for the tax system is that it has an in-built bias in favour of investment and savings as opposed to consumption. Many hon. Members, including, I suspect, some Opposition Members, think that we need more of an investment bias in our economy over the next phase of the recovery. Indeed, there are many signs from the current degree of re-stocking that that investment bias is now taking place and we are glad about it. In a nutshell, whatever fun we may be able to have at the expense of the Labour party--I am sure that we may have some sport--and whatever may be the shortcomings from a technical point of view of the enormously long and complicated Finance Bill, nonetheless, in the Budget, which is after all the reason for the Finance Bill, the Chancellor took the right and responsible decision to give priority to closing the public sector deficit. That will happen not in one year but over several years. He did it at the right time and in the right way and I pay tribute to the Finance Bill.
Mr. Enright : During the speech of the Chief Secretary to the Treasury, I was reminded of nobody so much as the Emperor Caligula--not because of his coiffure or his attire, although those indeed rival the appearance of the emperor
Mr. Enright : I was not reminded of Caligula because, as my hon. Friend has just said, the Chief Secretary made his horse a consul, although he has a considerable number of asses working for him in the Treasury. Indeed, when the right hon. Gentleman took on the hon. Member for Lancaster (Dame Elaine Kellett-Bowman) as his special adviser, he instantly doubled the IQ of the Treasury.
Column 954Where the Chief Secretary reminded me most of the Emperor Caligula was in his fiscal policy, because it was the Emperor Caligula's aim to go forth, to tax and increase taxes and spend them not on the good of the people, but on the good of himself and his friends. That is precisely what has happened. In excusing himself, the Emperor Caligula regularly gave specious reasons why he had to impose the taxes for the grandeur of Rome, and also regularly pointed out how much better he had been than the excellent Emperor Tiberius, which was not at all true.
If one considers the claims of the Government, we discover that they are quite false. We may always take a three-month period or a six-month period or a one-year period and extrapolate from them something which is reasonable, but let us consider a ten-year period and find out how the United Kingdom compares with the leading industrial countries.
The average UK unemployment over 10 years is the highest in comparison. Its growth rate is the lowest. In terms of inflation, only Italy is higher than the United Kingdom. In terms of high interest rates, again only Italy exceeds the United Kingdom. In terms of exports, the UK is the lowest.
There are two areas on which the Government have especially concentrated, and one has been inflation. Therefore, one would expect that Italy had done even worse than the United Kingdom over those ten years, but that is not the case. Italy's employment record, its growth record, its export record and its expenditure record are all better than the United Kingdom's, and Italy is scarcely a model of good government. Yet Italy outstrips us over 10 years, which says something about the depths into which we have fallen.
The hon. Member for Ludlow (Mr. Gill) talked about a brand image. A brand image is what one presents to customers. To objective customers, the Government look cheap and tawdry. They are an imitation of that which they would be like to be : an imitation of honesty, an imitation of looking to the long-term future, and a complete failure in so doing.
The little discussion among accountants on the Conservative Benches was interesting, because one of the great bugbears of British manufacturing industry has been that accountants have taken control of boards, and, simply for short-term financial reasons, have destroyed great swathes of manufacturing industry. They have served the country ill in their commanding position. Accountants are essentially the handmaidens, they are the servants and, too often, they have become the bosses. That fact was mirrored in the speech of the otherwise humane Member for Carshalton and Wallington (Mr. Forman).
Ms Eagle : Does my hon. Friend agree that the startling fact that one quarter of all the accountants in the European Union come from the United Kingdom bears out some of the points that he is making about the deadening effect they have on our manufacturing industry and our ability to compete in the modern world ?
Mr. Enright : I am grateful to my hon. Friend for making that point. I must confess that it is not something that I had dwelt on in those terms. However, it is true that service industries can be creative and constructive, but too many of our accountants are precisely the opposite.
Mr. Forman : I rise to intervene in the hon. Gentleman's speech simply because of my known connection with the accountancy profession, to which I do not think that he can attribute the relative decline of our manufacturing industry over a long period. Indeed, the decline in employment in manufacturing goes back to 1964. There are many other reasons for the decline, which are to do with the state of industrial relations and with the growth of competitiveness in other countries. He travesties the position to pretend that it is attributable to the accountancy profession.
Mr. Enright : I hear what the hon. Gentleman says, and I would not wish to say that all accountants are in the same boat. Nevertheless, it is true that certain attitudes of management in British industry have been responsible for its decline.
One only has to work on the continent--one sees it starkly in Africa--to see that the quality, not of all British industry management, but of too much of it, is very poor. That problem has not been addressed by the Government : by the Department of Employment or by the Department of Trade and Industry. It is a matter of serious concern, which should be addressed. We need a whole variety of training, but training in management at all levels is crucial. We do not do it well, as they do on the continent, and it is most certainly not done as well as in the United States and in Japan.
I shall not only consider the cash, the pennies, the awesome sums that are produced, but consider a little the humanity which should be behind our fiscal and financial policy.
Conservative Members regularly say that the whole question of a minimum wage will drag us down as a country. I find that an extraordinary statement. I have believed since my early youth, because I was taught it, that there is such a thing as a just wage, and that it is right in society to fight for a just wage. If a minimum wage is not a just wage, I do not know what is.
It is quite wrong to say that industry cannot manage a minimum wage. Why not ? Industry elsewhere does. Industry in Germany does. Every single company that has come into the country manages to produce what would be the equivalent of a just wage.
Mr. Forman : Did not the hon. Gentleman hear the hon. Member for Newcastle upon Tyne, East (Mr. Brown), speaking from the Opposition Front Bench, respond to my observations by saying that what he is saying is not Labour policy ?
Mr. Enright : On the contrary, I listened carefully to what my hon. Friend said. I might have jumped on him if he had said something deadly wrong in moral terms. In fact, he did not do so. He said that we, the Labour party, refused to quantify a minimum wage.
It is about time that the Secretary of State for the Environment and the Under-Secretary of State for Employment, the hon. Member for Maidstone (Miss Widdecombe), who have recently joined the Church of
Column 956which I am a member, stopped choosing a la carte. The teaching of a minimum wage and of consultation of trade unions or appropriate bodies has been the morality, not the policy, of the Catholic Church, going back to Pope Leo XIII and "Rerum Novarum". It was reaffirmed by "Quadragesimo Anno".
I see that the hon. Member for Harrow, West (Mr. Hughes), the Government Whip, is shaking his head. Pope Pius XII, who can scarcely be accused of any leftist, let alone communist, tendencies, attended the foundation of the European Coal and Steel Communities treaties and made a speech in which he said specifically that trade unions were an important part of the consultation process, and that the future development of industry depended on consultation with workers' representatives. That is extremely important.
Pope Pius X11 said that the treaty was not solely about economics, and not simply about the trade of certain commodities, but about bringing justice towards ordinary people, health and safety at work and treating human beings with the dignity they deserve. It is about time we reminded ourselves of those basic moral values. Hon. Members may put them aside if they wish--I most certainly will not do so--but I shall not have them sneered at by Conservative Members.
German industry, a good deal of American industry and Japanese industry are able to observe moral edicts of the sort that I have described and still be profitable. Surely it is common sense that any company that wishes to be successful should take on board its work force, should have it going enthusiastically along with the company, should be consulting it about the future, and should be consulting it about deficiencies.
Mr. Ian Taylor : I am intrigued by the use of papal infallibility to bolster a Labour party policy. In hard terms, however, the reality is that, if we are to have a minimum wage, the state must bear in mind the fact that, ultimately, it may have to subsidise a higher level of unemployment, because entry into work is often barred because companies cannot afford that minimum wage. The alternative is to subsidise companies to take on someone and to pay him the minimum wage. Is that not precisely what France is now experiencing, with all the troubles it faces with high youth unemployment because of a minimum wage ?
Mr. Enright : The hon. Gentleman is normally much more intelligent and perceptive than that. First, it is not the policy of the Pope and infallibility. The Labour party came a long time after that. I ask him to cast his mind back--assuming that he was taught religion properly--to the Acts of the Apostles. They held all their goods in common and gave to each according to each as had need. That is a fair principle. I think that it was taken up by Karl Marx, or someone like that. If the hon. Gentleman considers the description of the early Christian community, he will find similar words in his New Testament.
I suggest that the second part of the hon. Gentleman s intervention was even further out of line--his suggestion that a minimum wage would make unemployment much worse. For 15 years, the Government have set their face against a minimum wage. They have asked us to accept that they are wonderful in their deregulating exercises. In fact, they have quadrupled unemployment. I need no lessons in reducing unemployment from Conservative Members. Their approach is an absurdity.
Column 957There is more than one absurdity. A Minister from the Department of Employment talked in European Community Standing Committee B about child labour. That dreadful dragon of a Commission was proposing that we contain the number of hours that children work. He complained about that. He seemed to be saying that children should be allowed to work all hours. In one way or another, he seemed to suggest that they should be open all hours.
The next day the Secretary of State for Education was telling us about the problems of truancy, and how we can solve them. I can say without any doubt that a large proportion of truancy or unauthorised absence from school arises because children are doing milk rounds or paper rounds. They are the same students who often go to school and fall asleep. They do not absorb the basic elements. We must keep a balance, instead of resisting every proposed change.
The Government, by their fiscal and financial policies, are shoving us into a real poverty trap. They cannot complain about the breakdown of the family if their policies are almost deliberately designed to destroy the family.
The hon. Member for Carshalton and Wallington said that, if value added tax was 15 per cent. throughout and we then sliced off income tax, the result would be much fairer, more reasonable and simpler. It is clear that he is not aware of what has happened to families in my constituency.
The pits having been deliberately put out of business by the Government, most of my constituents rely on low-wage jobs. Some of them are paid £80 a week. I have in mind especially an industrial estate. I went to the factories within it to ascertain what they paid for a standard 40-hour week. I found that they were paying £80, £100, £105 or £115. The wages were hovering at those levels.
How do people pay the taxes that are so heinously demanded by the Government if they are on those low wages and bringing up a family of four ? No one can do that. The result is destructive. The consequences lead to crime and the cause of crime. It is true that not all kids commit crime, but it does not surprise me that many of them get into criminal situations.
We need an education for skills and ideals. It should not be one that is utilitarian and materialistic. We need education that teaches people to think beyond the 5p, 10p or £2,000 that they claw unto themselves without thinking about the morality of doing so. We need also an integration of various policies. There appeared today before the Select Committee on European Legislation a note written by the Minister for Energy, a well-known intellectual. He wrote that the European policy on energy is not acceptable to the United Kingdom. What is that policy ? The rest of Europe is saying that there is a requirement to integrate social and energy policies. That is clearly true, but that did not happen with the closure of the pits.
We shall be left, because of the short-sighted way in which the Treasury team conduct our country's policy, reliant upon external sources for our energy by the turn of the century. At the turn of the century, when every expert from the United States, Japan, Africa or wherever points out that the main source of energy will once again be coal, the pits have been shut down. Misery has been created, and
Column 958the public sector borrowing requirement has been created by the Government. People will go cap in hand to get their money from employment exchanges which no longer have the ability to employ. The Government are absolutely encapsulated by what Ian Byatt said last night. Ian Byatt, who is supposed to protect the customers of water, was asked : "To whom are you responsible ?" He did not say the customers ; he did not even say the companies ; he said the City. That is the sort of morality that is preached by the Government. I was shocked by the reply. It is the reason why, if the Government had any sensitivity, they would sack him at once, and all the people he has appointed.
The country has the skills, the people, the resources, and the resourcefulness to solve its problems. What it needs is leadership. The Government offer none.
Mr. Stern : I shall not attempt to follow the hon. Member for Hemsworth (Mr. Enright) in the wide-ranging nature of his speech, except perhaps to say that in view of the fact that he was bandying Christian doctrine across the Floor of the House--I can take a fairly detached view as I come from a somewhat older religion than Christianity--his remarks about accountants were peculiarly un-Christian.
In some fairly brief remarks, because I know that some of my colleagues also wish to speak, I shall concentrate on one aspect of the Finance Bill which has been the most important to me, namely, the technical changes that have been introduced.
This has been a far-reaching Bill in terms of changing the structure of a number of areas of taxation which go back right to the dawn of income tax and which the Government have rightly and extremely bravely taken on and changed. I am referring both to the preceding year basis of assessment for income tax which has been around as long as anyone can remember and which the Government now propose to bring to an end, and the method of assessment, which will bring us into line with many more successful systems of assessment and collection of tax.
I congratulate my hon. Friend the Financial Secretary on introducing the reforms, despite a barrage of criticism both as to the manner of the reforms and their form. I shall deal briefly with both of those aspects.
The Finance Bill, of which we are now seeing the final stage, has been criticised--and in many respects rightly--for its length. It is the longest Bill that we have seen recently. I only hope that it is not a prelude to a longer Bill next year. As was pointed out in Committee, one of the reasons why it was such a long Bill was that it attempted to rewrite large sections of taxation legislation, rather than simply amend it. In doing so, it incurred a large amount of criticism from professions such as solicitors and accountants not for the fact that it attempts to make changes but for the manner in which those changes are made.
Those criticisms are largely unfair because it seems that, if a root-and- branch reform of a whole system of taxation is being attempted, it is much more helpful to set out the
Column 959new law in different terminology and in a completely unified set of precepts than to attempt to pander to those who are used to one set of terminology and language and who wish to see the reform appear to be part of the previous system, rather than something totally new. I noticed that my hon. Friend was criticised by someone for whom I normally have a great deal of admiration--the president of the Institute of Taxation. He criticised my hon. Friend for the changes in language and the length of the new measures that have been introduced. I should point out to my hon. Friend that the president of the Institute of Taxation is a well known and highly respected solicitor. It is not perhaps surprising that a member of the legal profession should object to changes in terminology which cause changes in the patterns of thinking in that profession.
As someone who was trained more in the use of mathematics than wording, I agree with the principles perhaps first set out by Professor Whitehead in "Principia Mathematica". He pointed out that all words are merely an expression of a different aspect of number. Therefore I find it much less difficult than the president of the Institute of Taxation to accept the new concepts and the new terminology introduced in the Bill in terms of setting out a working system for the impact of income tax on most people for most of the rest of their lives.
Mrs. Anne Campbell (Cambridge) : I am grateful to the hon. Gentleman for giving way because I am listening carefully to what he is saying. Does he agree that it is not so much the wording of the legislation that is being objected to as the complexity of the additional taxes being introduced in the system ? The previous Chancellor, to give him credit, tried to streamline the system and make it simpler for those who had to administer it. The real problem is that a number of new taxes have been added without any attempt to simplify or streamline the system. That shows that the present Chancellor does not have a grasp of what he is saying.
Mr. Stern : I am grateful to the hon. Lady, but she has misunderstood my point. Of course, she is entitled to make her point in her own way on those parts of the Bill that I was not discussing if she succeeds in catching your eye, Mr. Deputy Speaker. The part of the Bill that I was discussing related to the changes being introduced in terms of self assessment and the current year basis of assessment, to which the hon. Lady's comments do not apply. We are not talking about--this is the point that I was making--the complexity of language ; we are talking about an entirely new concept being introduced in new terms. That is what I was congratulating my hon. Friend on, and the provisions in the Bill will be much longer lasting as a result.
Having examined the new system of law, I shall turn to an area which my hon. Friend and I discussed in Committee with regard to the change to the current year basis of assessment of income tax. As I pointed out, and my hon. Friend agreed in Committee, the changes introduced in the Bill were incomplete in one respect in that it was necessary to give an early indication of the new anti-avoidance provisions to complete the new pattern of current year assessment. In Committee, my hon. Friend gave an undertaking that as new businesses are already subject to the new system of assessment introduced in the Bill, it was necessary to give at least an early indication of the new anti-avoidance provisions. I hesitate to remind my hon. Friend that he gave
Column 960an undertaking to issue a consultative document before the end of the fiscal year ; he missed, but not by much. I am grateful to him for at least making the attempt.
I am a little worried about the consultative document that my hon. Friend has published. The anti-avoidance provisions which have now been published as a consultation document rely rightly on a number of triggers to come into effect. However, they seem to repeat an error, which my hon. Friend admitted in the debate on what was then clause 240 of the Finance Bill--to confuse evasion and avoidance. I shall briefly remind the House that evasion is illegal and is to be stamped on at every opportunity, but avoidance is perfectly legitimate and has been praised by judges on many occasions. It has always been accepted that it should never be a target for penalty by the Inland Revenue, yet in the anti-avoidance provisions which my hon. Friend has now published, it seems that he is proposing to depart from that principle.
One of the triggers which is proposed in the anti-avoidance provisions is the shifting of profits into the year in which only half are effectively assessable. It is proposed under the anti-avoidance provision that the remedy available to the Inland Revenue will effectively be to tax those shifted profits at an effective rate of a maximum of 60 per cent. The profits will be taxed fully in the year in which the Inland Revenue says they should have been, and by 50 per cent. also in the year in which they appear. This to me is a wholly inappropriate and unsupportable aspect of tax to prevent avoidance. It is a tax determined after the event, and often as a result of disagreement, and is purely to prevent something that is perfectly legal in the first place.
All the other anti-avoidance provisions which my hon. Friend is proposing merely restore the status quo. They restore taxation to what it would have been if the attempt to avoid tax had not taken place. I ask my hon. Friend sincerely to look again at the one area of anti-avoidance which I have highlighted because what is proposed in the document which has been published is a wholly unacceptable penalty for a perfectly legitimate action.
It will take some time for the new proposals to bed down. I have no doubt that, as in so many other areas of major tax reform, there will be changes to be made in future Finance Bills. It would be foolish to accept that that will not happen. I conclude my brief comments as I started, by congratulating the Government and, in particular, my hon. Friend the Financial Secretary, not just on attempting a major reform which has been long overdue, but on carrying it through in this Bill and, so far, apparently carrying it through with great success. 8.13 pm
"All professions are conspiracies against the laity."
I know that that applies to accountants, but I am sure it does not apply to lawyers.
In the course of many interviews which the Chancellor gave in the immediate aftermath of his Budget, he emphasised that he did not want to be one of those Chancellors whose Budgets are rapturously received at the time, only to prove--as the details were examined more carefully--to be a Chancellor whom history would recall
Column 961got it wrong. He did not say so specifically, but perhaps he was thinking of Lord Lawson's giveaway Budget which helped the Conservatives to win a general election, but for which, arguably, the country has been paying ever since.
It already appears that the Budget embodied in the Bill--when it is examined in detail by the electorate--is proving to be as damaging to the interests of the country as Lord Lawson's Budget. Despite the Chancellor's warnings to himself, he seems to have proved to be a Chancellor of short- term popularity only.
At the time of the Budget, he appeared to be at the height of his popularity, certainly with Government Back Benchers, in what we could describe as the "Who will succeed the Prime Minister ?" handicap stakes. Tory Back Benchers waved their Order Papers like successful punters celebrating a visit to the winners' enclosure. Unfortunately, we cannot re- run history, but it is difficult to see that such a rapturous reception would be given to the Budget today if that speech were to be delivered again.
Indeed, most political commentators appear to date the decline in the prospects of the Chancellor succeeding the Prime Minister from the date of the Budget speech--a speech which, of course, led to the biggest series of tax rises in our history. If the support which we have heard from Government Members is reflected in the country, why have the prospects of promotion for the Chancellor of Exchequer been seriously diminished ? After all, the electorate which will choose the next leader of the Conservative party is on the Government Benches. If they are so enthusiastic about the Chancellor's Budget, why have they appeared to withdraw their support from the person who is responsible for it ?
I shall be grateful if whoever succeeds me in the debate addresses that argument, because there appears to have been a serious loss of confidence in the Chancellor's prospects among the parliamentary Conservative party. Conservative Members will decide whether the Chancellor succeeds the Prime Minister, and they must do so presumably on his record as Chancellor. They appear to support the Budget, but they do not appear to be enthusiastic any longer about the Chancellor becoming the Prime Minister.
Could it be that, up down the country, their constituents are giving them a barrage of criticism about the effect of this Budget on their financial circumstances ? Could that be influencing the minds of Conservative Members when they think about who they would like to succeed the Prime Minister ?
The Third Reading debate gives us the opportunity of considering whether the fears of my constituents--and, I know, those of other hon. Members across the country--are justified. The House has been able to examine in detail in the period since the Budget speech whether the Chancellor's warning to himself was justified. We have had opportunities since the Budget speech, in Committee and now at Third Reading of determining the precise effect of the Budget. What is our verdict and how has the Budget already affected the country's economy ?
I suggest that we begin by looking at the Bank of England's quarterly survey which was published at the beginning of the year. The survey noted that the main force then driving the recovery was consumer spending. It follows that that is dependent upon consumer confidence.
Column 962The Government's claims for a recovery at that stage were set out in the figures for January which showed that retail sales were up by 0.6 per cent. over December, and indeed were 3.5 per cent. higher than in January 1993.
All the indicators now show, as people have begun to appreciate the impact of the Budget on their personal finances, that consumers are significantly less confident and that the consumer-driven recovery is stalling, if it has not already stalled. We have some up-to-date evidence of the attitude of consumers towards the present state of the economy.
A Gallup survey of consumer confidence which was conducted on behalf of the European Commission in the first two weeks of April was published this week. The poll showed that consumer confidence has fallen close to the second lowest level recorded in the 14 years since the poll was established. The results show that only 15 per cent. of those polled said that they expected their household finances to improve during the next year, with 45 per cent. predicting that they would be worse off. That is a negative balance of some 30 per cent.--similar to the 31 per cent. negative balance in March 1990, just as the economy went into recession. That was the second lowest figure ever recorded by that polling organisation. Gloom about household finances seems to reflect also gloom about the country's general economic prospects. In the same poll, 43 per cent. of those surveyed were pessimistic about the country's economic prospects, compared with 21 per cent. who were optimistic. That is negative balance of 22 percentage points.
In the context of a Third Reading debate about the impact of the Budget, it is interesting to compare the position in the last two weeks of April--when 22 per cent. of opinion was negative--with that in January, immediately after the Budget and perhaps before its impact had settled in. Then, the number of optimists equalled the number of pessimists. There has clearly been a significant collapse of consumer confidence since the Budget, and that survey suggests, along with other evidence, that the tax increases contained in the Bill are to blame.
Consumer confidence was actually rising in the last quarter of 1993, before the publication of the Chancellor's Budget proposals. As the details of those proposals have sunk in, however, and people have begun to appreciate the consequences for their personal finances, there has been a rapid and significant decline in that confidence. This week also saw the publication of a CBI survey showing that retail sales growth exactly reflects the loss of consumer confidence. It is likely that in March, for the second month running, sales were broadly level--or only slightly up after a decline in February. The CBI survey has precisely tracked the level of confidence tracked by Gallup in relation to individual consumers.
If Conservative Members are not satisfied with either the evidence of their own constituents or that of the surveys that I have mentioned, particularly the Gallup survey, perhaps we should examine what is arguably the most authoritarian view--I am sorry ; I meant authoritative. [ Laughter .] When hon. Members hear who is involved, they will realise that that may have been a Freudian slip. The most authoritative view of the state of the economy resulted from a survey of one : the occupant of No. 11 Downing street. We now know what the Chancellor of the Exchequer really thinks about the state of the economy, as a result of the welcome publication of the minutes of his monthly meetings with the governor of the Bank of
Column 963England. Those minutes reveal a private view of what is happening in the British economy that is significantly at variance with the Chancellor's public pronouncements.
In January, when the Chancellor was publicly proclaiming the benefits of economic recovery and growth arising from his Budget, he was privately telling the governor of the Bank that
"He himself was much less sure that the pace of growth had picked up significantly in recent months".
He went on to admit that
"In addition, the Budget measures were likely to cause activity to slow".
To be fair to the Chancellor, he has remained consistent : in the March meeting, he indicated that anecdotal evidence did not suggest that activity was growing strongly. However, that too is at variance with what Treasury Ministers have said about the state of the economy during our debates. They have suggested that the recovery is well established, and that the Budget certainly did not contribute to any slowing of activity or anything approaching a stalling of the economy.
The overall message given in private by the Chancellor to the governor of the Bank of England suggests that, in reality, he is not very confident about growth and recovery. Indeed, the general theme of the minutes for January, February and March is the necessity to stimulate recovery by lowering interest rates. The essence of his debate with the governor is this : the Chancellor is not very optimistic about the state of the economy and feels that it is necessary to reduce interest rates, while the governor is concerned about the impact of such a reduction on inflation.
Mr. Willetts : It is a great pity that, when the Government make a significant move towards greater openness in the discussion of economic policy, all that we hear is a selective quotation from minutes in an attempt to make implausible party political points. The main message from those discussions is clear. Let me quote from the minutes of the March meeting :
"there were no signs of a pause in growth."
That was the clear consensus of the Bank of England and the Treasury. It is a shame that the hon. Gentleman, having welcomed the publication of the minutes, should then try to misinterpret them.
Mr. Hoon : I am sorry about that. Inevitably, all quotations from a long document will be selective--the hon. Gentleman would rightly protest if I tried to read out the minutes in full--but I do not accept that I have represented the discussions unfairly. In essence, the Chancellor expressed the view that recovery was not well established and was not developing, and that interest rates should therefore be cut ; the governor of the Bank of England replied that, although that might be so, lowering interest rates at that stage would incur the risk of higher inflation. I consider that a fair summary of the debate that took place.