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Column 1395That is the principal achievement of the Budget. We now have sound public finances on which to build in the future. That has meant that there was no great scope for tax cuts or tax reform in the Budget, but I welcome the measures to encourage investment in small businesses, especially the measures to improve the attraction of venture capital trusts and the enterprise investment scheme. I believe that those will be successful in encouraging risk equity investment into new technology and manufacturing.
I also welcome the fact that more small businesses will be able to pay their PAYE and national insurance contributions to the Revenue quarterly rather than monthly. That will achieve a useful reduction in the burden on business.
As I have said, there was not much scope for tax reform, but I should have liked to see more tax simplification. I suspect that we shall have another highly complex Finance Bill, following last year's massive Bill, and I am pleased to hear that Lord Howe is now chairing a committee to consider how we can try to simplify our tax regime. I hope that, when the committee makes its recommendations to reform the law, the Treasury will consider them seriously. If we consider the income and corporation taxes Acts as a whole, there can be no doubt that the legislation is far too complex.
There is not much time left. I should like to mention one omission from the Budget. I should have liked to see some help for charities along the lines proposed by the Charities Tax Reform Group. Charities are carrying an extra burden of VAT. I hope that my right hon. and hon. Friends will be able to consider that in the future. Subject to that, I welcome the Budget, because it establishes sound public finances.
Mrs. Anne Campbell (Cambridge): This is the first time that the Budget speech has been available on Internet, but the people who read it will have been disappointed. I checked what else the Government were doing on Internet, hoping to get hold of some information which might be of some use in this evening's debate.
I looked at the page on the worldwide web, which is put out by the Department of Trade and Industry and it turned out to be a large file. It took several minutes to download, and while I was waiting I wondered what on earth the information could be. Would it be useful information that would help my constituents, such as a list of which banks were actively promoting the loans guarantee scheme or details of the job seeker's allowance--something of real use?
When the information arrived, it was extremely disappointing. It turned out to be a colour picture of the hon. Member for Esher (Mr. Taylor). Nothing daunted, I surfed a little further on this wave of information and downloaded another large file. When that turned out to be a colour picture of the hon. Member for Harrow, West (Mr. Hughes), I am afraid that I just gave up.
That illustrates the attitude of the Government extremely well. On a facility with the capability of providing useful information, we found pictures of Ministers and copies of their speeches. It was more like an extended election address.The Government are driven in one direction only-- to try to con the British public into giving the Conservatives a fifth term. They will be
Column 1396disappointed, I am sure. It is obvious that all the penny pinching and cuts this year are to allow the Chancellor to put in place the bribe package before the next election. But the British people will not be conned.
The British people have realised that the Tories cannot be trusted with tax. They will remember their local Conservative candidates saying before the last election, "There is no need to extend VAT," "There are no plans to raise VAT," and, even more dishonestly, "We are the party of low taxation." What a joke. Can anyone believe anything said by a Tory candidate at the next election when the Tories have raised taxes by the equivalent of 7p in the pound? It is obvious that the elderly and the poor are being made to pay for the Government's dishonesty. They are paying for the Government's ineptitude and the encouragement for fat cats to become even fatter. While we see around us the stress and pain of poor housing, unemployment, low pay and inadequate pensions, the chief executive of British Gas basks in the luxury brought by a £500,000 a year salary. He then has the cheek to put up gas prices, adding to the agony of VAT on fuel, and then to offer discounts to those sufficiently well-heeled to be able to pay by direct debit. One of my constituents who normally pays his bill by direct debit is so outraged by the iniquity of this that he has written to me to say that he intends to cancel his direct debit forthwith and to do everything possible to ensure that British Gas gets as little of his money as possible this winter, even if it means living in freezing conditions.
It is now clear that the people of Britain are fed up with Tory injustice, tired of Tory sleaze and want a better, brighter, fairer future, which the Tory Government are incapable of providing. My constituency has a large private rented housing sector. I wish to talk a little about that and about the effects of the cuts in housing benefit announced earlier this week by the Chancellor. I have to declare an interest because part of my house in Cambridge is let--much below the market rent, I have to say. More than 3,000 tenants in the private rented sector in Cambridge receive housing benefit, and market rents in Cambridge are high. A basic bedsit averages about £45 a week and a two-bedroom flat about £108 a week. In many cases, rents are as high as in London.
The use of private rented accommodation is feasible only if it is either poor quality and therefore cheap, or if the tenant earns a high salary. Most tenants receive housing benefit, of course. That is what makes it possible for them to use the private rented sector. I learned from my council housing department today that the rent allowance threshold in Cambridge is likely to be about £71 a week. Many tenants in the city will receive housing benefit for property that is more expensive than that. I wonder what will happen to those tenants when their housing benefit is reduced to finance the Government's election bribe. Some will get into debt, some will fall into arrears, landlords will serve eviction orders and some tenants will be thrown on to the street.
The reduction in housing benefit is an admission that the Housing Act 1988 has failed. That Act deregulated rents and permitted landlords to charge whatever they thought they could get. Opposition Members warned the Government of the day that that would have a disastrous effect on the provision of private rented accommodation,
Column 1397and so it has. The number of properties in that sector has fallen dramatically as a percentage of the total provision, and homelessness has rocketed as a result.
The Conservative Government pledged to make Britain the best housed nation in Europe. They pledged to protect tenants from high rents by means of housing benefit. All those pledges are now revealed to be as empty and dishonest as the promises to cut taxes at the last general election. There is good evidence that the people of Britain are seeing through the Conservative Government. One of my constituents was reported in my local evening paper the Cambridge Evening News as saying:
"I wish the Government would think more about the general well-being of people. I don't like living in a society where you see people having to beg on the street and hear of old people dying of hypothermia. It is so depressing thinking that everyone has to be out for themselves all the time and that if you fall down no one is going to care."
There is another item of expenditure which badly affects many people throughout the country and I was sorry not to see it dealt with in the Budget. I refer to the cash available for community care. The Secretary of State for Health is already aware of the enormous difficulties created by the underestimate of spending by social services departments in implementing Government policy--estimates, I have to say, which were forced down by the Government.
We have heard recently about social services departments which have already spent their cash allocations for the whole year. My authority in Cambridgeshire has a projected overspend of more than £1 million and has taken drastic action to reduce spending. When the Secretary of State for Health received a delegation from my Labour colleagues in Cambridgeshire county council recently, she waved aside the protests and simply told them to get their act together. That has aroused resentment and deep anger. Dedicated carers who rely on help for their elderly and disabled relatives are in despair. Hours of care have been cut, respite care is disappearing and we shall see more family breakdowns and more stress-induced illness in people who already carry an intolerable burden.
The hon. Member for Macclesfield (Mr. Winterton) repeated the message of the Labour Front Bench and called this the "VAT Budget". Yes, it is the VAT Budget, and that is how it will be known. It is not just that, however, as there are another seven tax increases still to come as a result of the tax increases announced last year. This is the Budget that failed to redress the evils of last year's Budget. This is not a Budget for people, but a Budget for a failing Tory Government to prepare the way for tax bribes nearer the general election.
Mr. Phil Gallie (Ayr): May I commence by complimenting my right hon. Friends and colleagues on the production of what is, in the main, an excellent Budget? It is prudent, realistic and practical and based on the long-term interests of our nation. It is good for business, the long-term unemployed and those taxpayers at the bottom of the income tax scale. Without a doubt, it creates optimism for the future, but it is not perfect- -few Budgets ever are.
Column 1398I would have liked to have concentrated more on the Budget's positive aspects, but given the 10-minute rule I feel that I must concentrate on the imperfection, which is the introduction of full-scale value added tax on domestic fuel. We will suffer a lot of pain because the tax comes in five doses: a statement of intent in March 1993; approval in November last year; implementation in April; more pain at present; and implementation next year. The introduction of VAT on fuel is a bad move.
The measure is bad on several counts, including temperature gradients, and it does nothing for people in the north of Scotland. On that basis, it is unfair. It hits the elderly and the vulnerable and it certainly hits families with mortgages and young children. It also hits the lower to middle-income groups, who always seem to suffer from tax changes.
The use of domestic fuel is a matter not of choice, but of necessity. That is the factor underlying my disappointment that we have gone ahead with the second phase rise.
I wrote to my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) in March 1993, saying that I would support the 8 per cent. tranche, given the financial circumstances that the country then faced during an exceptionally long and continuing world recession. I underlined, however, that my support would not be extended to the 17.5 per cent. lift. I made that point last year, when I went into the Lobby to support the introduction of VAT at 8 per cent.
I accept that good provision has been made for pensioners and people on income support. Every time reference is made to his stated expectations of the appropriate compensation and what the Government actually provided, evidence of discomfort crosses the face of the hon. Member for Glasgow, Garscadden (Mr. Dewar).
I welcome the moves on energy insulation and draught proofing, as well as the improvements in the cold weather allowances that were announced. I can point to constituents--pensioners in single-fuel houses--who are better off with the 70p addition, which compensated for the 8 per cent. lift. That knowledge is based on an examination of their fuel bills. On that basis, however, I still suggest that VAT on domestic fuel is a bad tax. In principle, it is bad when Governments are obliged to give with one hand and take back with the other.
I have had a sombre thought. Let us remember the community charge. I, for one, mourn its passing. People on social security were compensated for the 20 per cent. of the charge that they had to pay, but that was soon forgotten. The generous payments that are being made to pensioners and those on income support now will also soon be forgotten. They will be there in April, but then it will be summer and fuel bills will be low. By next winter, extra payments to help with VAT will have been forgotten. People will see the 17.5 per cent. VAT on their fuel bills and will not switch on their fires and heating systems. That fills me with concern.
Another aspect is the considerable amount of hype when my right hon. and hon. Friends have pointed out that past reductions in fuel costs, following privatisation of the energy industry, probably compensate for the additional costs resulting from the imposition of VAT. I was involved in the electricity supply industry in the run-up to privatisation. I was not terribly popular among my colleagues because I advocated privatisation. I pointed
Column 1399out to them the benefits that would follow for the consumer. I advocated privatisation because I thought that there would be benefits, but now those are being taken back by the Inland Revenue. I cannot support that and I will not support it when we go into the Lobby on Tuesday night.
Having said that, I have spent some considerable time in the Chamber during the debate and have listened to Opposition Members' comments. The hon. Member for Dunfermline, East (Mr. Brown) condemned the Government's tax takes in recent times. He stands against every element of public expenditure reduction. He has even pledged to increase public expenditure. Even the most elementary primary school arithmetic suggests that his sums do not add up. I could not possibly go into the Lobby with someone advocating those policies. I also listened to hon. Members on the Liberal Benches who mentioned a carbon tax. Let us think back to the difficulties we had with coal only 18 months ago, when people suggested that we should do everything that we could to preserve the coal industry. A carbon tax is a tax on coal. It is a tax on fuel, the same as VAT, but more selective. Who in their right mind could go into the Lobby with individuals who advocate such a tax?
Yesterday, the hon. Member for Falkirk, East (Mr. Connarty) spoke for 40 minutes, yet he did not turn up for the winding-up speeches. He said:
"I personally look forward to the day when there is no mortgage tax relief, because I believe that it should be replaced by a housing benefit for everyone. Those in the private and public sectors should gain some support for the principle of having a roof over people's heads."--[ Official Report , 30 November 1994; Vol. 250, c. 1281.] How can such a person advocate tax cuts and yet be prepared to put in place new taxes and levels of expenditure that are uncosted and totally unnecessary?
I will have no truck with Opposition Members on tax-related matters and I certainly will not be in the Lobby with them on Tuesday evening. [Hon. Members:-- "What about VAT?"] I will not be in the Government Lobby or in the Opposition Lobby because, in the words of one Opposition Member--I think that it was the hon. Member for Garscadden--many Members will be "less than honest" if they consider the issue of raising taxes and go into the latter Lobby on Tuesday night.
My right hon. Friend the Member for Thanet, South (Mr. Aitken) suggested that he was a "chief rebel" on the Back Benches. I have no intention of becoming a rebel. I was elected as a Conservative Member of Parliament and I will support all Conservative manifesto pledges. I do not believe that the increase in VAT was a manifesto pledge. At the last election, I argued against such taxes and feel that I cannot go the whole hog and support the Government on that issue. My right hon. and learned Friend the Chancellor asked hon. Members who stood against the tax to come up with alternative solutions. There could be an immediate £600 million saving from the £1.5 billion VAT requirement with the removal of the requirement for plus payments.
Another option which I would suggest would be to bring the tax on wine into line with those on beer and spirits, and people in the distilling and brewing trades would certainly welcome that. We could have slowed down on our stated objectives regarding the PSBR, and there are other aspects which could also have been brought in.
Column 1400I go along with my hon. Friend the Member for Bridlington (Mr. Townend), who said that one level of VAT which could have been introduced was VAT on national newspapers of 8 per cent. That perhaps would have been acceptable, given--
Mr. Harry Barnes (Derbyshire, North-East): The speech of the hon. Member for Ayr (Mr. Gallie) was of some interest, in that we saw him struggle with his conscience and finish up with a very boring goalless draw. He said that he would, in the end, do nothing in connection with VAT. Perhaps he will not need to be here for the debate which is to deal with it.
The hon. Member for Beaconsfield (Mr. Smith) referred to the situation in Northern Ireland, where he was previously a Minister. There are points from the Budget about Northern Ireland which need to be referred to. There is a great possibility of a peace dividend arising in Northern Ireland, and we must be sure that that dividend goes to Northern Ireland itself so that the problems about which the hon. Gentleman talked, including high unemployment and social deprivation, are dealt with.
I recognise that, within the public spending provisions, the adjustments downward for Northern Ireland are marginal compared with other areas. I hope that that suggests that expenditure is liable to be roughly maintained, and that that is something which will continue in the future.
Another matter regarding Northern Ireland is that hon. Members who represent constituencies in Northern Ireland--whatever their political complexion--will vote against VAT on domestic fuel. Some will not be doing that because of any great political conviction or analysis, which may not be very different from some of the views of the Conservative party. They will be doing it because of the overwhelming feeling which exists in Protestant and Catholic working-class communities throughout Northern Ireland. People live in bad conditions of high unemployment and deprivation, and hon. Members representing those people must respond to the pressure that is being put on them. When the vote takes place in the House, I hope that the Government will be obliged to respond to that pressure.
A major characteristic of the Budget which was praised by the hon. Member for Bridlington--and which I would want to attack strongly--is public spending cuts, and the economic and social impact which those cuts will have. There will be a £24 billion cut in the planned projections during the next three years, and the cut from 44 per cent. to 41 per cent. of national output will be covered by public spending provisions.
The hon. Member for Bridlington commented on things to attack, such as overseas development. That seemed to me to be disgraceful. Some things must be done about the overseas development budget regarding the aid-trade provision, and especially the trade-arms arrangements, which exist. In overseas development, Britain falls way behind the figures which we should be aiming for, and that budget, for which hon. Members have no form of responsibility, should not be attacked in developments in the future. The overseas development budget should be increased.
Column 1401The public spending cuts are in the contingency reserve, as are the provisions for local government, transport, housing and education. Scotland is added to that, but, according to the Red Book, Scotland is reflected within those other areas. How we can have such a massive reduction in the contingency reserves is of great interest, because it means that we are not prepared to move and adjust as circumstances become difficult in the future.
The major area that is attacked in the list is local government. Earlier today, we heard the statement on local government finance for England and provisions in connection with the standard spending assessment. The House may remember that, when the poll tax was initially floated and propaganda about it was simplistically put over on television in Conservative party broadcasts, we were told that 50 per cent. of moneys in different areas would come from the rate support grant, while the remainder would be divided between money raised by the poll tax--now the council tax--and money raised by the national business rate. Nothing like that exists at the moment. In my area--North-East Derbyshire--the rate support grant is 27.5 per cent., down from the projected 50 per cent. figure. That means that the difference must be picked up considerably elsewhere, and it will be picked up considerably by the national business rate. There is supposed to be concern among Government Members about burdens on industry, but the burden of the national business rate needs careful examination. There is also a tremendous burden which comes in terms of council tax payments.
North-East Derbyshire is by no means an area of easy employment or of a massive development of middle-class culture and provisions. It includes areas such as Clay Cross, Holmewood, Barrow Hill and Renishaw, which have very high levels of unemployment, but the council finishes up--in terms of money which it gets per head of population or per council tax payer--way down at the bottom of the list of grants provided. In fact, two years before last year's adjustment in the methodology of the SSA, North-East Derbyshire was ranked at 295 out of 296 councils in England and Wales. There can be no justification for that.
The only council beneath us was East Dorset, which is a well-heeled area in comparison with North-East Derbyshire. We know what was wrong with the methodology, including some things which were wrong in terms of the ages and social mix. A slight improvement took place last year, and North-East Derbyshire moved up from 295 to 275--it felt like the relief of Mafeking-- although no money came back for the money that had been lost in the past. The council was still in a disastrous position when compared with many others.
There are massive problems in local government finance, which requires redistribution. Until the figures are analysed, we cannot be sure whether the new provision changes the position of North-East Derbyshire. As there is to be no change in the methodology of SSAs--apart from the police, which is outside the control of the district council--it looks as if we will finish up very much in the same position.
The fiddle essentially operates in terms of the enhanced population figure which is to used calculate grants, and which is then multiplied into every other grant that
Column 1402councils can get. In North-East Derbyshire, the enhanced population is in fact a reduced population, because its daytime population is much smaller than the population who live there and who need services and provisions. People who are lucky enough to have jobs go to Sheffield and Chesterfield. When the pits were there, people used to go to Markham and Bolsover in neighbouring areas and, because of this, our area faces massive problems.
The points which I have illustrated merely in terms of local government could be added to if we talked about other areas which have been cut from the projected figures. Education is to be cut. How on earth will we ever get a society in which people have potential and the skills they need to take upon themselves the opportunities and jobs which should grow in the hi -tech economy if we are scraping around in connection with educational provision?
If I had more time, I would mention the other expenditure headings. I wanted to mention the other side of the coin to public spending, public finance. The details contained on page 11 of the Red Book reveal where the resources come from to meet the declining commitments of the Government. One of the interesting comparisons is that between the sums raised by income tax, VAT and excise duty. For the first time, the money raised through VAT and excise duties is greater than that raised through income tax. That reveals the unjust and unfair nature of our society.
Sir Peter Fry (Wellingborough): I will not pursue the arguments of the hon. Member for Derbyshire, North-East (Mr. Barnes), but I too have great reservations about the way in which local government finance is calculated.
Although many aspects of this year's Budget deserve applause, it should be judged by other criteria besides its effects upon the economy. As I am not an economist, accountant or merchant banker, it is the social and political background against which the Budget has been presented which is of the greatest interest to me.
The further progress towards economic recovery is welcome. The Chancellor, apart from putting a further dent in consumer confidence, particularly in the housing market, has done what he can to ensure that that recovery continues. The diversion of resources to help the long-term unemployed into jobs and out of long-term dependency on state benefits must make sense. The introduction of transitional relief, which will help many businesses that face rate increases as a result of the latest revaluation, is of considerable help. I must strike a discordant note from the Conservative Benches, however, by saying that, frankly, a number of other aspects of the Budget lead me to understand that many in the country are not as enthusiastic about it as some of my parliamentary colleagues are.
I can understand people who say that, if our economic recovery is so marked and the forecasts for the future are as good as is claimed, why is it that they, too, cannot share in that national recovery. After all, they are the ones who have suffered most in the past couple of years.
Let me make it clear that I am not asking for any massive tax handouts, or even for tax cuts. If we are doing so well after the tax increases imposed at last year's levels of taxation, why is it so necessary to impose further tax increases in 1995 and 1996? Is it absolutely necessary to
Column 1403turn the screw of direct taxation even further this April? That is the question that my constituents ask. No one is claiming that there is a feel-good factor. If it ever is produced, it will probably be due to the fact that the economy is overheating, so we will have to put the brakes on it again. People are entitled, however, to ask, at long last, whether we cannot have a not-feel-so-bad factor. There is little in the Budget to encourage most people to believe that the next 12 months will be any easier for them than the preceding ones. I do not believe in massive handouts, but my party, which prides itself on being the party of the family and home ownership, could have avoided further reductions in the value of the married man's allowance and in mortgage relief. In the latter case, that new policy, which will reduce the help to those who become unemployed and who have a mortgage, will hurt a number of people. If we expect them to pay for extra insurance, surely we could have left them some of their tax relief so that they could afford to take out that insurance.
Last year, I withheld my vote on VAT on fuel until I was assured that a package of help would be available to pensioners and those on income support. When that was provided, I promised to support the Government. I shall keep my word next Tuesday. I am conscious, however, of the many people who are just above the income support level, who would find it much easier to bear the full 17.5 per cent. VAT rate if their tax allowances were not cut in April.
One of the most disturbing features of the past year has been the activities of the over-greedy directors, particularly those of former public utilities, such as the water companies and British Gas. Many people, particularly supporters of the Conservative party, are absolutely sick and tired of having to put up with annual pay increases of 2 or 3 per cent. when all that the Government seem to be able to do is wring their hands when some companies pay their directors enormously more.
I believe that my right hon. and learned Friend the Chancellor lost an opportunity in the Budget at least to put down a marker that the Government would act if such payments continued. Those pay increases give the wrong message to the vast majority of people. I have yet to see that queue of American or foreign companies which is supposedly waiting to recruit those directors at such highly inflated salaries. We should have imposed a higher rate of tax on those high salaries or done something to the share option schemes, which have enabled many directors to become millionaires in a short time.
Another element of the Budget is its part in the continuing and disappointing attack on the road user. Despite the report of the Royal Commission on environmental pollution, it is clear that petrol duty would have to be increased massively to make much difference to car ownership. The extra duty is merely extra income for the Treasury. That duty will not deter people from using their cars, but will just make it more expensive for most people to get to work, to take their children to school and to make other essential journeys. It is equally important to consider the effect of that increased duty on the road haulage industry. Its costs will go up by 1.5 per cent. as a result, while its overall profit levels have dropped to just 3 per cent. The only consequence of that increased duty is that its cost will be fed straight through into industrial costs, which will be paid for by the consumer.
Column 1404This year's increase in duty comes on top of last year's increase, which made our duty on DERV the highest in the European Union. As a result of Budget changes, we also have the highest rate of vehicle excise duty for the heaviest lorries. I must point out to my right hon. and learned Friend that our industry depends upon road transport to get its goods into markets. Other countries in the Union have realised that and have adjusted some of their tax rates accordingly. The further burdens on the road user and the cuts in the road building programme are not helpful towards the more efficient running of our economy. Even if we succeeded in applying all the recommendations contained in the report by the royal commission, traffic levels would still increased massively, as would road congestion; the cost of travelling by road would go through the roof.
This afternoon's statement on local government finance is another area where an opportunity has been lost. I do not want to talk too much about that now, because I hope to catch your eye, Mr. Deputy Speaker, during our debates on that subject later in the year. Suffice it to say that I believe that my county will be adversely affected. I give due warning that at the moment I can see no way in which I could go through the Lobby in support of the grant when it comes before the House for approval later in the Session. Looking at the Budget as a whole, I have a feeling that an opportunity has been lost, because although the economy is recovering and we have been told that the news is good, the evidence provided by Opposition Members and in the columns in the newspapers suggests that the Government's confidence and happiness is certainly not being shared by our fellow citizens.
I will vote for the Budget resolutions because I believe that the Government have acted correctly in concentrating on economic considerations. I will not do so with a great feeling of happiness or satisfaction. I detect that my reaction to the Budget is shared by many people. After coming out of a deep and distressing recession, we need something to lift our spirits. The people who support our party need their spirits lifted; dare I say it, there are moments when I need my own lifted, in the present circumstances.
I very much regret that the Chancellor was unable to provide the type of help that we would like. I end on this note: there is a danger that, if we continue effectively to hurt people by taxation that is too high, with a promise of jam tomorrow, first we are not sure--one never can be sure--that the jam will arrive, and, secondly, I do not believe that people will necessarily agree that it is better for teachers to be made redundant in 1995 than to have a slightly bigger tax cut in 1996 or 1997.
My hon. Friends must address themselves to that issue. I hope that they have got it right, but, if they have got it wrong, the results will be disastrous.
Mr. Tom Cox (Tooting): Many of us in the House have seen Budgets come and go. The Chancellor of the day makes his speech to wild cries of "Hear, hear" amid the waving of Order Papers, but, once the small print has been read, what a different story it all becomes. Give this Budget a month, and the only thing that people will remember is the disgraceful increase in VAT on fuel to 17.5 per cent. I attended a public meeting in
Column 1405my constituency last evening, and everyone wanted to ask about that increase on fuel. It will cause many problems for the Government, and rightly so.
The Government have not listened. They have shown no sympathy, no understanding of the opinions of the general public. However, all hon. Members know, on whatever side of the House we sit, how difficult it will be for people if we have a hard winter. We know what the needs will be of the elderly and disabled and of those with young children, who need to keep their homes warm.
I have to tell the Minister that the supposed extra payment is already being laughed at. Help the Aged has already said:
"The compensation does not make up for the VAT rise. Old people often find themselves choosing between eating and heating." What an appalling indictment of a Government who have been in power for 15 years that, according to an organisation represented by Members on both sides of the House, elderly people must choose between keeping warm or keeping fed.
At the meeting that I attended last evening--a public meeting, not a party meeting--the utter contempt for the Government and their policies was quickly and clearly shown. The Government will pay dearly for their action on VAT, as they will soon learn at the forthcoming Dudley, West by- election.
Throughout the country, housing is a major problem, be it in large cities, smaller towns or rural areas. Alongside unemployment it is the No. 1 issue but, as other hon. Members have said, nothing in the Budget encourages a house-building programme. No one can dispute the need for it. No one can say, "Yes, we would like to do it, but where will we get the money?" We know that billions of pounds are being held by local authorities throughout the country, as a result of the sale of council properties, which could be used in such a programme; and we all know--whatever may be the supposed rules that govern the spending of that money--that, if the Government wanted it to be spent on that aspect, those rules could be changed in a matter of days. Every single one of us knows that, and we know how widely supported such a change of policy would be.
Hon. Members, whatever party we belong to, receive report after report from housing associations and from groups involved with housing, which clearly outline the need for major house-building and major house improvements throughout the country. Why do the Government ignore those reports? I ask the Minister: how many properties will be built this year by local authorities or housing associations and how many by private developers? What will the yearly figures be for housing construction?
We all know that the housing construction sector of the United Kingdom should be playing a major overall role in the economic life of the country, and the number of workers that it could employ, who now have to be paid benefit because of their false unemployment. Vast sums could be saved. Many sectors that supply materials have an automatic spin-off in creating other jobs that would take people out of the unemployment problems that, sadly, confront so many people throughout the country.
As the previous speaker, the hon. Member for Wellingborough (Sir P. Fry), said, the Budget and the Government have ignored many of the key issues that
Column 1406they had an opportunity to tackle. They could and should have been tackled but, sadly, they were not. Against the background of what the Budget could have done, but did not do, and what, sadly, it did do--the disgraceful increase of VAT to 17.5 per cent.--no wonder the Government are so scared of facing the electorate.
"On reflection, this was probably a good Budget and entirely appropriate for the current economic circumstances. It should create a climate of stability which is necessary for long-term sustainable recovery."
I entirely agree with those sentiments, and I very much welcome the Budget as announced by my right hon. and learned Friend the Chancellor of the Exchequer.
The background is truly remarkable. We have low inflation, we have manufacturing growth and productivity at record levels and of course we have an export boom. However, in the past few weeks, in what has been something of a feeding frenzy by the media, everything has been concentrated on the negative. Unless, in the Budget, something fresh and exciting in their terms was produced, they tended to dismiss it. I shall therefore examine what is happening in the real world, in my constituency. My constituency is still substantially agriculture-based. It is one of the prime cereal-producing areas of the country. When I went to the Royal Smithfield show a few days ago, the transformation in that sector was obvious for all to see. Skill and innovation in agricultural machinery is making that entire sector of the British economy dynamic. Britain exports more tractors, for example, than any other country in the European Union.
In Newmarket, the bloodstock industry is in very considerable recovery. It is one of the main employers in East Anglia. Prices of bloodstock are increasing and employment is returning to that vital part of the employment picture in my constituency.
Small family businesses are the lifeblood of west Suffolk. We are witnessing considerable improvement and optimism, as manifested in the fact that there are many new shops in the towns of Newmarket and Bury St. Edmunds--the main two towns in my constituency. Over the past 18 months, unemployment in my constituency has fallen by a third, and in Bury St. Edmunds it is under 5 per cent.
Budgets address great macro-economic cycles and look at the big picture. But of course economics is about real people and employment and decent living standards. Such conditions are manifestly coming to pass in my constituency. I applaud the aim at the heart of the Budget, which is to continue to reduce debt. That is being done in a way that makes us unique among our European competitors.
An extraordinary feature of the economic recovery and one of its main elements is the exceptional export performance. The Budget reinforces what is essentially an export-led recovery. Low corporate taxation and the low social cost of employment give Britain a unique competitive position compared with the rest of Europe. We are a trading nation par excellence, and we export more per capita than even the Japanese.
Column 1407Every time since the war that Britain has had an economic recovery as powerful as the current one, there has been a balance of payments crisis, but this time precisely the reverse is the case. Like a record that is stuck in a groove, the Opposition launch totally misplaced attacks on manufacturing industry. It is true that some old industries have disappeared, but new ones are developing and many of them are based on high technology. Britain is in a virtuous circle brought about by low interest rates, moderate wage settlements and cost control. All that has been helped by the Budget.
In the past three months, export volumes have risen by nearly 3 per cent. This year, exports to the Pacific rim countries and Latin America have gone up by a third. It is significant that much of that export success and employment is being created by the former nationalised industries. Those industries, which were once such a huge drain on the British taxpayer, are now at the forefront of teaching the rest of the world how to privatise and are role models of how to operate. People from many countries visit Britain to see those privatised companies whose export success is extremely noteworthy. While Labour continues to thrash around looking at and debating clause 4, we are getting on with an export drive that is based on new technologies developed in Britain.
In the past, recoveries have been based on a souffle -like property boom. That is no more, because the current recovery is based on exports and investment, and everything flows from that. Britain is a world leader in industries such as telecommunications,
pharmaceuticals and chemicals. The business-friendly environment that the Budget has projected opens further export possibilities, and business success and employment will flow from that. By cutting the PSBR, the Budget ensures that interest rates will remain low. Sound money and stable finances are the routes to business success and continuing employment.
I welcome the additional boost to exports provided by the cut of some 10 per cent. in the export credits guarantee insurance scheme. That is a logical extension of our trade promotion efforts. In countries such as India and South Africa, where we have strong and historic commercial ties, the cut will give our business men the chance to create welcome export opportunities. I hope that, instead of what has gone on so remorselessly in the past, our balance of payments in future will be permanently in the black, and will be based on the competitiveness that the Budget will effectively help to bring about.
I am privileged to be the vice-chairman of the Small Business Bureau. For many years, we have tried to put ideas to the Chancellor about how to improve the lot of small businesses. Therefore, I wholeheartedly welcome my right hon. and learned Friend's proposals to raise the VAT registration threshold, the transitional business rates relief scheme and quarterly VAT payments.
Another helpful feature is the review of procedures for insolvent companies. Every hon. Member knows of constituents who have had their businesses taken away from them during the recession, perhaps by the too quick action of the banks. The Budget proposes a 28-day period during which banks, creditors and business men can sit down together to try to work out a scheme to ensure that small businesses under threat can survive. That will prove to be one of the most significant and constructive innovations in the Budget.
Column 1408I spoke about our propensity in the past to go for bricks and mortar. I welcome the fact that next year the tax concession on mortgage relief will be reduced to 15 per cent. I hope that that concession will eventually be phased out. I should like to fly a kite for the future. In his reforms, Lord Lawson of Blaby introduced a capital gains tax rate of 40 per cent. In an era of low inflation, that needs to be looked at again. Although indexation has proved helpful, Britain is now in a different inflation scenario. I hope that capital gains tax will be phased out and that people in private companies will not have to pay any capital gains tax on their shares in unquoted stock.
The Budget is a watershed. Every Chancellor is tempted to court short-term popularity. There have been a number of important policy innovations--