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Mr. Willetts : I agree with my hon. Friend. One of the curious features of the British system for financing industry, which I know the Financial Secretary to the Treasury is currently reviewing, is the fact that we have equity investment and short-time variable-rate bank lending, but that we have failed to secure something in between--fixed-term, fixed- interest corporate debt.
The reason for that is obvious. When an economy suffers from high and variable rates of inflation, people resort to equity finance, or variable interest rate finance, because they cannot obtain the classic form of debt finance that my hon. Friend described. It should be one of the many advantages that we secure as a result of this economic recovery, with the prospect of sound public finances and continuing low inflation, that the corporate bond market at last revives. That will lay the basis for an increase in business investment.
We have heard a lot today from Labour Members about what will happen to consumption as a result of the tax increases under the Bill and under the 1993 Budget. It is perfectly clear that if there is a significant increase in taxation, there could be some impact on consumption. However, the question is also what will happen to investment. If, over the coming year, business investment improves dramatically, with business gaining confidence as it sees a sustained economic recovery opening up in front of it, and improving prospects in the American economy and, let us hope, in the continental economies, Britain will continue to enjoy an economic recovery. That recovery will be based on improvements in business investment, improvements in exports to growing economies around the world and less dependence on increases in domestic consumption than there inevitably was in the early stages. As the Bill lays the basis for an economic recovery that will be well balanced and sustained, I am confident that the House will give it a Third Reading tonight. 9.26 pm
The Conservative manifesto sets the parameters for this debate. The Conservative party promised the British electorate lower taxes and a prudent approach to borrowing. It said that that did not mean that public spending must fall--quite the reverse. That is the context in which this year's Bill should be judged. Taxes have risen. The Government's approach to borrowing could hardly be described as prudent, certainly not by the hon. Member for Havant. The Chief Secretary has set the tightest public spending parameters in recent history, and is boasting about it.
The House will be interested to learn that the first Bill to be called a Finance Bill became law in 1894, so this year is the centenary of Finance Bills. [Hon. Members :-- "Oh."] It obviously comes as a grave disappointment to the House that the Government have not organised celebrations for this centenary ; they seem to have overlooked the anniversary.
No street parties are being organised to celebrate the tax increases, and there is no Victorian re-enactment of the Government's prudent approach to public borrowing. There is no reconstruction of late 19th-century workhouses to underpin the Government's approach to public
Column 978expenditure. I have to disappoint my hon. Friends by telling them that there is not even a letter from Larry Whitty inviting the Labour party to join in. We all understand why, in spite of the undoubted talent of Sir Tim Bell, the Government have chosen, no doubt in shame and embarrassment, to overlook the Finance Bill centenary celebrations.
In fairness to the Government, I point out that they have celebrated in one way. They have produced a bumper edition, running to two volumes--the longest Finance Bill ever. It has been criticised for its length, for its incoherence, for its opaque drafting and for its complexity. We as a House have been criticised, not unjustly, for the way in which we have dealt with its contents. I do not accept the broad approval given by the right hon. Member for Berwick-upon-Tweed (Mr. Beith) to the way in which we handled the Bill. I point out that his own record of truancy in Committee was exceeded only by that of the Chief Secretary.
Mr. Brown : I accept that, when the right hon. Gentleman was in this country, he attended our proceedings. However, he was not fully engaged in the debates. I recall him going through his briefcase and signing coloured photographs of himself with the words, "To Michael, in frank admiration-- Michael", with a little kiss at the bottom. I accept that the Chief Secretary's absence from our proceedings was wholly due to the fact that he was visiting South America. Of course, it is not unknown for politicians with extreme right-wing views to ensure that they keep their connections with South America in case they need an escape route. I make no criticism of the Chief Secretary for that. Indeed, I wish him well if he ever feels the need to flee the country.
The Labour party accepts, and always has accepted, the case for informally timetabling the taxes management part of the Bill, and for taking the main tax changes on the Floor of the House. Labour Members also accept that there is a good case--on that matter, we make common cause with the right hon. Member for Berwick-upon-Tweed--for a less adversarial Select Committee type of proceeding on taxes management issues. What happened in practice, Mr. Lofthouse, is that the Government imposed a guillotine on the whole of the proceedings, day by day, in the most heavy-handed manner.
Column 979hon. Lady for correcting me on that matter. It is probably the only matter in any such debate on which she has managed to correct me. Nevertheless, let me proceed with my criticism of the way in which we were required to deal with some of the matters.
The Government manipulated the guillotine, which found, Mr. Deputy Speaker, that we had ample time to discuss the consequences of the European Commission's third directive on life insurance. Indeed, we had a surfeit of time to discuss that not especially controversial matter. However, when we came to controversial clauses--the Financial Secretary referred earlier to what was then clause 241, which he eventually, quite rightly, withdrew--we came up against the guillotine and found that the time for Labour and Conservative Members to speak was dramatically restricted. That is a stupid way in which to conduct our affairs. If such matters are to be timetabled in future, there should be much fuller discussion of how the timetabling should be managed in practice.
The Government ordered the debate so that we had to agree to clauses which enacted schedules before we were able to discuss the contents of the schedules themselves. They abused the guillotine by encouraging their own Back Benchers to filibuster, thus avoiding the burden which should rightly be borne by Ministers, of explaining clauses to the Committee.
The Government sulked when we kept them back to vote on those clauses, and drew inferences from the fact that we voted against those clauses that should not have been drawn. They steadfastly refused to let us discuss VAT on domestic fuel, when we all knew that the electorate would have liked us to discuss it and have another vote on it.
They tabled last-minute amendments in the name of Conservative Back Benchers and accepted them, thus smuggling them into the Bill. It was supposed to be the first Finance Bill under the new unified Budget process. In fact, the Government have ensured that there is even less consideration of the wider context, including public expenditure, than usual. The House has not discussed departmental spending plans since May 1991. It was some unified Budget.
We complained about those points during the passage of the Bill. Conservative Members complained about procedural issues as well, and outside bodies that like to make representations to us complained that it was unsatisfactory. Some of those reservations were shared by Conservative Members-- [Interruption.] --and I shall give way to one that I think shared some of them.
Mr. Stern : Does the hon. Gentleman agree, as a fellow veteran of many Finance Bills, that, for the first time, the effect of the procedure which he is deprecating and in which the Labour party refused as a matter of principle to take part, was to produce an even debate from both sides of the Committee, which we have never had before ?
Mr. Brown : I am in favour of an even debate from both sides of the Committee, but that was not what we were treated to in our proceedings. I have said that we would like to agree workable timetable arrangements. I would have
Column 980liked to refuse to attend the Business Committee on principle, but I was not given my notice until just before it was due to meet. I did not even have the opportunity to refuse on principle to attend. Many Conservative Members share the Opposition's disquiet about the way in which the arrangements worked in practice. They blamed the Opposition Whips Office, and someone they referred to rather darkly as Don. We, the Opposition, take that to be a reference to Don Portillo, who we feel is largely responsible for imposing what used to be called Spanish practices on the way in which we proceeded. In Committee, Labour Members would try to make progress only to be told, manana, or the day after manana.
The Chief Secretary took a relaxed view. If my hon. Friends feel despondent about the way in which we proceeded in Committee, I should say that it has not all been in vain. When we began our proceedings in Committee, the Finance Bill, if someone wished to purchase the two volumes rather than get them free from the Vote Office, cost £27.30. Its value has now risen to £29.45. I am sure that that is the result of the value that Labour party scrutiny has added to the document. Given the passage of time, however, the increased price may be the result of inflation. The Committee sat for so long that, if I become any older, it may be that I shall not qualify for medical treatment in a Tory trust hospital.
All Chancellors of the Exchequer, like shadow Financial Secretaries, enjoy their little jokes. Last year, the then Chancellor, the right hon. Member for Kingston upon Thames (Mr. Lamont), made special mention of the tax increase on small cigars, the subtext being "as smoked by you know who". This year, "you know who" got his own back by increasing tax on cigarettes and cheap champagne.
The Chancellor was less successful in justifying the impact of this year's Finance Bill on his fellow citizens. In a desperate effort to explain, he grabbed the first analogy that came into his head, just as we have often seen him do during Treasury questions. Predictably enough, it was about beer prices. Equally predictably, it has not really helped to explain the impact of the Government's tax rises. Three pints a week ; a week is thus a very short time in politics. The Opposition had our worst fears confirmed when we learned that the Chancellor drinks in the sort of places where beer costs £4.20 a pint. How much in character it is for the Conservative party to say to the electorate before the election, "We will get the drinks in," only to say after the election, "Oh, we borrowed the money for the last round. It's your round now." That leaves the bemused British taxpayer to get in a £6 billion round--the most expensive round of drinks in British history.
I want to be fair to the Government and, as the Financial Secretary would be the first to acknowledge, helpful as well. That being so, I offer the House an alternative--and, I think, a better--analogy to help explain this year's Finance Bill. I think that the Bill and its background should be restaged as a modern reworking of Macbeth. The irresolute and over- ambitious Macbeth, steeped in wrongdoing, could be played by the Prime Minister, having achieved high office not by murder but by toothache. Baroness Thatcher would have to be Duncan, but the Chief Secretary could stand in for her--I know that he has always wanted to. The right hon. Gentleman could play Lady Macbeth. The Chancellor and the President of
Column 981the Board of Trade would quarrel over which of them should play Malcolm. My view is that eventually the role will be played by a more genuine Scotsman.
The scene where Macbeth hears voices reproaching him for the past would provide an easy way of explaining the background to the Finance Bill. The voices would cry out things such as, "We have no plans to increase VAT" ; "There will be no VAT increase" ; "Government has no higher duty than to protect the value of the currency" ; "I will stand by Norman Lamont, David Mellor, Michael Mates and Tim Yeo" ; "We shall maintain mortgage tax relief" ; "Government should not gobble up all the proceeds of growth" ; "Britain is at the heart of Europe and is a strong and respected partner" ; "Those who create prosperity should enjoy it through lower taxes". "Membership of the ERM is now central to our counter-inflation discipline". Finally, to round off that metaphysical scene, there should be an old woman's voice cackling derisively from another place, "We must stand by John, we must stand by John." I offer that as a much more convincing metaphor for what has been going on.
There is another useful scene in this modern production which would be helpful to Tory Members--the scene where Macbeth stares at his empty chair and then sees the spectre of his former comrade in arms, cruelly and bloodily despatched at his own instigation, staring reproachfully back at him. Who could we find to play Banquo ?--the right hon. Member for Kingston upon Thames (Mr. Lamont)!
This is the first Finance Bill since 1987 that we have had to do without the right hon. Gentleman. We miss him. The Chief Secretary pointed to Norman's tax rises, seeking to distance himself from them and, indeed, present himself as a sort of successor regime, while keeping the resources. His argument seems to go as follows : the Conservatives put taxes up ; the Labour party told the electorate about it ; the electorate will never forgive the Labour party. That is not the sort of logic that one expects from a future leader of the Tory party.
My time is running out, so all the other jokes must be saved for next year's Finance Bill. However, I cannot conclude my contribution to the debate without referring again to the tests which the Chief Secretary set us. Having said that he set the tests himself, he then said that we have not passed them. I shall present him with a test that he set himself earlier. At election time, he told his constituents :
"Conservatives want to cut your taxes . . . higher tax and national insurance would hit those who work harder and do overtime." If he still believes that, I invite him to do the only thing he can--join us in the Lobby tonight and vote against the Third Reading of the Bill.
Mr. Dorrell : I congratulate the hon. Member for Newcastle upon Tyne, East (Mr. Brown), as ever, on the quality of his jokes. I assure him that there will be ample opportunity in future Finance Bills in this Parliament and, indeed, in future Parliaments for him to deliver his jokes from that Dispatch Box and to entertain the House with his speeches, as he has grown accustomed to do with considerable aplomb.
It cannot happen often that debate on the Third Reading of a Finance Bill provides the opportunity for an agreement
Column 982to emerge between the hon. Member for Peckham (Ms Harman) and my hon. Friend the Member for Bridlington (Mr. Townend). However, in the debate today, the two of them agreed on something important : that the Bill would represent the defining moment and the turning point in the progress of this Parliament. I agree with both of them. The debate will prove to be a turning point in this Parliament because the Bill lays the foundations for secure and sustained recovery that will continue for several years to come--well beyond the date of the next general election. That is the basis on which the Government will be re -elected.
That is not the only basis on which the Bill will prove to have been the defining moment of this Parliament. Not only does the Bill contain the clear basis of sustained recovery and the Government's plans for delivering that, but, during the passage of the Bill, the Labour party lost any credibility as a serious contributor to economic debate in Britain. The Bill serves to strengthen the Government's position and set the foundations for economic recovery. It has served to shoot to bits the economic credibility of the Labour party.
I shall deal first with the question of sustained recovery. My hon. Friend the Member for Havant (Mr. Willetts) and my right hon. Friend the Chief Secretary rightly laid considerable stress on the secure course of recovery that is provided for in the Bill. It is provided for because my right hon. and learned Friend the Chancellor of the Exchequer set out to deliver in his Budget a plan
"to sort out once and for all the public finances of Britain". The Budget delivered by my right hon. and learned Friend on 30 November showed clearly how he intended to deliver that objective. It showed first how he intended to deliver proper control of public expenditure.
As the House knows, my right hon. and learned Friend was using a system established by my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) in his days as Chancellor in the early months of this Parliament. That system will establish securely proper control of the share of national income which is taken by public expenditure.
As used in the last round, the system delivered reductions in public expenditure plans of £10 billion and allowed my right hon. Friend the Chief Secretary to publish plans which, during the next three years, will deliver an average growth in the the total of public expenditure of 0.25 per cent. There will be less than 1 per cent. growth in public expenditure during the full three years of that plan. That was the first key element of re-establishing proper control of public finances.
The second key element, which we all know is not enormously popular but which is indispensable, is the revenue-raising measures that were included in the 30 November Budget, following on from the Budget of my right hon. Friend the Member for Kingston upon Thames last March. [Hon. Members :-- "Tax-raising measures."] They were tax-raising, or revenue-raising, measures.
The reason for that is clear and is straightforward. When public expenditure plans have been made, we must then address the question of how to finance them.
The Government believe unequivocally that it is better to tax than to borrow, and that is one of the differences between this party and the Labour party. Where we set out public expenditure plans, we also set out plans for
Column 983financing that public expenditure on a secure and sustainable basis. That was the second element in my right hon. and learned Friend's Budget plan.
The third element is that on which my right hon. and learned Friend is able to count because he has controlled public expenditure and because he has set in place secure and realistic tax plans. That element is the growth which will continue right through the rest of this Parliament and beyond. My hon. Friend the Member for Ludlow (Mr. Gill) was right to stress the opportunities for this country to trade its way to improved living standards and improved prosperity. It is because the Budget sets out the disciplines which underwrite that trading success that we are able to look forward to that in the years ahead.
Ms Eagle : The Financial Secretary said that the Conservative party prefers to tax rather than to borrow. Will he explain how we have ended up with the largest public sector borrowing requirement in history and the greatest tax increases since 1945 ?
Mr. Dorrell : The hon. Lady's statistics are wrong. The PSBR borrowing total for last year which was published today is, by a significant margin, a smaller share of national income than was incurred through the 1970s. The key difference between what happened then under the Labour party and what will clearly happen under the Government is that, as the economy recovers, so borrowing will be brought down and be eliminated by the end of the decade. That is the difference between the plans of the two parties.
The hon. Member for the Western Isles (Mr. Macdonald) was right. It is not just a question of how much one taxes--it is a question of how one taxes. The hon. Gentleman used the word "fair", but he did not explain to the House how it is fair to tax at 83 per cent. the incomes of those who hold important entrepreneurial posts in Britain. How can one build a successful economic recovery where key decision-makers in Britain keep 17p of every pound they earn ? The Government have changed that and we are unapologetic for having changed it. As a result, not merely that individual, but the whole community benefits as a result of a more vibrant, growing economy.
Mr. Macdonald : At a time when every single ordinary person in the country is having to pay extra taxes, how is it fair and right that landed aristocrats should be receiving and sharing out £2 million worth of tax cuts ? Does not that expose the hypocrisy of the Government's position ?
I would like to know from the Opposition how it is fair to have a tax system which taxes the marginal income of savers at 98 per cent. The Opposition claim to be interested in investment and saving. How can one encourage savings and investment in the British economy when the return from savings is taxed at 98 per cent ? It is because Labour has a narrow, myopic view of what fairness represents that it entirely failed to deliver a vibrant economy during its years in office.
Column 984The Government have made clear the importance that they attach to low marginal tax rates and their commitment to such rates. We believe that that is the way in which to deliver a successful market-oriented economy.
I have said that the Bill marked not only the moment when the Government set out their plans, but the moment when the Labour party lost its credibility. In fact, many Opposition Members know that to be true. My hon. Friend the Member for Esher (Mr. Taylor) quoted the hon. Member for Dagenham (Mr. Gould). This is a sad moment for me : the hon. Member for Dagenham was my tutor at Oxford, and I have always enjoyed quoting his comments, but I fear that this may be one of the last occasions on which I am able to do so.
It is an important point, however. As my hon. Friend the Member for Esher recalled, the hon. Member for Dagenham said :
"I think the Labour Party ought to accept . . . that we will always be likely to have a higher tax burden than our opponents because we believe in public spending."
That is why Opposition Members are uneasy about the debate that has been going on over the past few months : they are aware that it is dishonest, and that they are involved in an argument that means that they cannot deliver to the British people.
Not only the hon. Member for Dagenham knows the truth of the matter ; the hon. Member for Hartlepool (Mr. Mandelson)--who was here a few moments ago, but has now disappeared, perhaps wisely--knows it as well. He is making himself unpopular with his colleagues. He was recently quoted in Tribune as saying :
"As we all know, the question which matters is what will Labour do instead ?'"
That question--the Mandelson question--is one that we have asked throughout the debates on the Bill, but we have received no answer whatever.
I must not be unfair ; we have been given the occasional hint. Last August, the hon. Member for Dunfermline, East (Mr. Brown) was heard to talk wistfully about the attractions of low tax : Labour, he said, might not wish to tax for the pure hell of it. I am not sure why the hon. Gentleman felt that he could speculate ; perhaps he thought that he could talk about such matters safely while the hon. Members for Sheffield, Brightside (Mr. Blunkett) and for Oldham, West (Mr. Meacher) were on holiday abroad.
The hon. Member for Peckham had a rather more serious go in September, to which my right hon. Friend the Chief Secretary referred. Earlier in the debate, she sought to dismiss it, but I now have a copy of the document on which my right hon. Friend commented. It is a report by the London Policy Forum, which was set up by the regional executive of the Greater London Labour party. I shall not weary the House with the long list of names comprising that group, but the working party chair of the economy group was none other than the hon. Member for Peckham.
The report states :
"Mortgage interest tax relief should be phased out for existing"
"Mortgage interest tax relief should be phased out for existing borrowers. In its place, new borrowers would receive a Mortgage Benefit calculated according to their means."
Ms Harman rose
Mr. Dorrell : Before the hon. Lady intervenes, let me tell her that she cannot simply dismiss this as something that is unimportant in the affairs of the Labour party. However, I am happy to give way.
Ms Harman : The document from which the hon. Gentleman is quoting is from an unpublished draft by a working group of which I was not a member and whose proposals were thrown out. The public and the House can believe nothing of what the Government say about their own proposals, let alone what they say about ours. The Minister has engaged in downright and deliberate misrepresentation and he should withdraw what he has said.
Mr. Dorrell : I have no intention of withdrawing. I shall quote from the covering letter to the document from Mr. Terry Ashton, who is the general secretary of the Labour party in Greater London. He is not, one would have thought, an unimportant figure in the Labour party. He said :
"The London Policy Forum is being used as a model for regional policy forums in other parts of the country. With its detailed analysis of the problems and challenges facing London, and its many innovative ideas,"
including presumably this one
"I am sure that this document will be of major benefit to Labour's campaign to win over voters in the capital."
I am certain that it is of major benefit to somebody, but I doubt that it is of major benefit to Mr. Terry Ashton or his friends. Throughout our debates on the Bill the Opposition have tried to present themselves as being against tax increases, but everybody knows that is an implausible argument. People know that tax and spending form the same issue. They do not take seriously a party that seeks to argue against tax increases while at the same time the hon. Member for Brightside says that we should increase expenditure on the health service by £6 billion ; the hon. Member for Oldham, West criticises us for not spending 0.7 per cent. of national income on overseas aid ; and the hon. Member for Blackburn (Mr. Straw) wants to abolish controls on the spending of capital receipts by local authorities. Why does he want to do that ? Presumably it is so that local authorities can spend more.
We have not yet seen fully worked through the proposals by the hon. Member for Kingston upon Hull, East (Mr. Prescott) on minimum wages. Is the rate to be £3.40 or £4.05 ? When they decide we will tell them how much it will cost, but I am certain that if they want to spend that amount on minimum wages they will have to show the British people how it will be paid for in tax. The British people understand very well that no one can promise to spend without demonstrating how the money will be raised.
Mr. Dorrell : No, because I have just three minutes left. The hon. Member for Peckham, who is supposed to be responsible for stopping such bids, yesterday spoke at the Dispatch Box against tax increases and in the same debate she called for increased spending on child care. The
Column 986Opposition think that they can get around it by tabling amendments that would benefit a company to the tune of only £3 or £10, but that sort of shadow boxing fools nobody.
We all know that, as the hon. Member for Dagenham said, Labour wants to spend more money. We also know that, when it does, it goes to the electorate to raise it in tax. Over the past three months a surreal argument has been going on in Britain. Labour appears to believe that the electorate will suspend disbelief and allow it to peddle these two mutually inconsistent lines without spotting the fact that they are inconsistent. But that will not happen because people know that bills have to be paid and that they are higher under Labour.
They have good reason to know that because the difference between Labour councils and Tory councils is clear to every taxpayer in the land. Labour has sought to obscure and obfuscate the fact that the council tax is £131 higher under Labour than it is under the Conservatives. Labour has not even been able to convince Mr. Peter Kellner on its arguments.
How dare the Opposition talk of excessive tax ? It is a dishonest and fraudulent argument that they have not been able to sustain. The people of Britain know from bitter experience that Labour spends more and that the bills of Labour Governments and Labour councils cannot be avoided.
The difference between the parties is neatly encapsulated in a single figure. Under Labour, successful entrepreneurs pay tax at 83 per cent. Under the Tories, the take-home pay of the man on average earnings has increased by £83 a week. It is the same number in two very different contexts. Labour taxes people at 83 per cent. ; we have raised people's living standards by £83 a week. Eighty-three is the number ; 83 is the litmus test. Under Labour it is tax and under the Conservatives it is living standards.
That is why we should give the Bill a Third Reading.
Question put :--
The House divided : Ayes 305, Noes 260.
Division No. 216] [10 pm
Ainsworth, Peter (East Surrey)
Alison, Rt Hon Michael (Selby)
Allason, Rupert (Torbay)
Arnold, Jacques (Gravesham)
Arnold, Sir Thomas (Hazel Grv)
Atkinson, David (Bour'mouth E)
Atkinson, Peter (Hexham)
Baker, Rt Hon K. (Mole Valley)
Baker, Nicholas (Dorset North)
Banks, Matthew (Southport)
Banks, Robert (Harrogate)
Beresford, Sir Paul
Biffen, Rt Hon John
Blackburn, Dr John G.
Body, Sir Richard
Bonsor, Sir Nicholas
Bottomley, Peter (Eltham)
Bottomley, Rt Hon Virginia
Boyson, Rt Hon Sir Rhodes
Brooke, Rt Hon Peter
Brown, M. (Brigg & Cl'thorpes)
Browning, Mrs. Angela
Bruce, Ian (S Dorset)
Carlisle, John (Luton North)
Carlisle, Kenneth (Lincoln)
Clark, Dr Michael (Rochford)
Clarke, Rt Hon Kenneth (Ruclif)