House of Commons Hansard Debates for 5 Dec 1994

Mr. Chris Smith (Islington, South and Finsbury): When the Chancellor sat down last Tuesday, there was a muted waving of Order Papers by Conservative Back Benchers, many of whom had been asleep the previous 84 minutes--but there were few cheers anywhere else. I was astonished that the Secretary of State for National Heritage had the effrontery to talk about the end of boom-bust economics--that from a Government who in the course of the past 15 years produced the two biggest busts and the largest unsustainable boom since the war. This is a tinkering Budget. It attempts to trumpet a success that no one in the country really feels. It does practically nothing about low levels of investment and little about high levels of unemployment. It leaves in place seven imminent tax rises, stubbornly there for the people of Britain to put up with. The Budget looks more to the fortunes of the Tory party in 18 months' time than to the needs of the British economy now.

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Of more significance than that which the Chancellor said last Tuesday is that which he did not say. He said nothing at all about tax rises already built into the system. He left firmly in place the reduction in mortgage interest tax relief, new taxes on insurance that are about to be implemented, air travel tax and, above all, the rise to 17.5 per cent. in value added tax on domestic fuel. The Chancellor himself has stopped trying to claim, as other Ministers have tried in the past year and a half, that VAT on domestic fuel is necessary for environmental reasons. The Prime Minister was not so circumspect. In Prime Minister's questions last Thursday, he was at it again. He said that VAT at 17.5 per cent. was needed to meet our Rio commitments. That is patent nonsense. Even on the Government's own figures, the carbon dioxide that will be saved by imposing VAT on domestic fuel will total less than 1 per cent. of Britain's overall output. There will be minimal environmental gain for maximum social pain.

Those who can afford the imposition of VAT on domestic fuel will continue using the same amount of energy. Those who cannot afford it will save energy. They will not instal condensing boilers, extra lagging or home insulation--they will go cold. The Government will achieve a tiny reduction in overall energy production and will put the entire burden on the backs of those least able to bear it. That is why we will seek tomorrow night to take the first step towards rolling back the Government's retrograde action.

The real story behind the Budget is not what it will achieve this year but what it puts in place for next year. The Government's Budget agenda is wholly and utterly driven by the Tory party's electoral needs. The Tories believe that income tax cuts in November 1995 will bring them electoral victory in 1996 or 1997. They are wrong, because the people have rumbled them.

People know that taxes were brought down with a great flourish immediately before the 1992 election and that, 11 months later, after the Government had been safely voted back into office again, taxes went back up. Election bribes are never permanent. People know that, over the past two years, they have had the biggest tax rise in history. Last year and this year, there was the equivalent of 7p in the pound on income tax, yet the Government have the gall to think that 2p, 3p or even 5p off income tax in an election year will somehow compensate in people's minds for the tax-rising story that the Government have imposed on us all in the past couple of years. That will not take VAT off domestic fuel and it will not make our pensioners any warmer; voters will not be fooled again.

Mr. Alan Duncan (Rutland and Melton): The hon. Gentleman has been clear and open in saying that he wishes the second stage, at least, and probably the first stage of VAT on fuel to be removed. Will he, therefore, be equally open with the House by telling us exactly how the revenue from that tax would be replaced? Would he take the money from the extra £1.3 billion that has been given to the national health service? Would he raise the tax by some other means or would he add to borrowing? Which of those three choices would he make?

Mr. Smith: None of them. As we have spelt out on many occasions in the past few months, I would look first to tax loopholes which the Government, only two weeks ago, told us did not exist. They said that tax loopholes were entirely a figment of the Labour party's imagination.

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At least they have had the decency in their Budget to admit that there is £1.5 billion of tax loopholes, and there is more of that to come.

The second part of the answer to the hon. Gentleman is that we should look at some of the windfall profits that the privatised utilities have made. The third part of the answer is that we should look at the executive share options from which the people who now run the privatised utilities are gaining benefit, which are undertaxed at the moment. People would rather that we looked fairly at taxing those who can well afford to pay--those who are evading and escaping tax at the moment--than looked at taxing pensioners by putting VAT on domestic fuel.

The Chief Secretary to the Treasury (Mr. Jonathan Aitken): The hon. Gentleman sounds positively loopy and windy about the completely phoney taxes which he suggests can be introduced. Surely he is aware that all Governments, of whatever political colour, always endeavour to close loopholes, just as my right hon. and learned Friend the Chancellor of the Exchequer did this year. There is no possibility of gaining from closing loopholes the sort of bonanza that the Labour party suggests. As for share options, surely the hon. Gentleman is aware that they are taxed already.

Mr. Smith: This is a remarkably different tune from the one that the right hon. Gentleman was playing just a couple of weeks ago. He told us then that there were no more tax loopholes left. He now tells us the same, yet the Government have found £1.5 billion of tax loopholes in the meantime. Share options are taxed at their value when they are given. When they are taken up, a substantial additional profit is often made by the person who holds them and that needs to be looked at.

Mr. Dorrell: I have the advantage over the hon. Gentleman of having been a member of last year's Finance Bill Committee. It introduced proposals to close a number of tax loopholes, the most important of which roused some controversy among my hon. Friends and which Labour voted against. I refer to the decision we took, which was unpopular in some parts, to close the tax loophole that was attached to capital gains tax loss indexation relief. If Labour wants to be taken seriously on tax loopholes, it should vote with us when we close them.

Mr. Smith: My colleagues, who were members of the Standing Committee which considered the Finance Bill, debated that matter very fully. They argued clearly that their opposition on that matter related not to the principle of what the Government were doing but to the way in which they were doing it.

I must tell the Chief Secretary to the Treasury and the Secretary of State for National Heritage that if the idea of taxing share options rather more fully than they are taxed at the moment is such a lunatic idea, why is the vice-chairman of the Tory party now recommending precisely that course of action in the famous Maples memorandum? I am surprised that they are not leaping to their feet to defend the Maples memorandum.

In his Budget statement, the Chancellor of the Exchequer had the effrontery to refer to what he called the danger of

"the emergence of a deprived underclass".--[ Official Report , 29 November 1994; Vol. 250, c. 1079.]

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Where has the Chancellor been living for the past 15 years? Deprivation is not in danger of emerging; it has emerged. Indeed, it has been created by the policies put in place by this Government. It is prevalent up and down the country and it hurts.

Has the Chancellor not seen the evidence? Thousands of homeless families have been deprived of the most basic of human requirements while unused capital receipts, which could be used, lie idle and thousands of building workers are on the dole. We have a stockpile of bricks sufficient to build a town the size of Derby. The measures in this Budget, cuts in housing association funds and crude market capping of housing benefit payments are simply going to make the problem of homelessness worse.

Not content with hampering local authority efforts to tackle the issue of homelessness, we now know from the announcement by the Secretary of State for the Environment on Thursday that the Government are intent on clobbering local authorities across the board. Let me give the Secretary of State for National Heritage one example of the impact of that from his own area of responsibility--the future of our public library service.

The public library service is essential. It is valued and cherished and it is regarded by people as a vital public service. However, as a result of year after year of council cuts, forced on local authorities by the Government and now redoubled in this year's settlement, libraries around the country are suffering grievously. Fewer than 40 libraries in the entire country are now open for 60 hours a week. Most of those are in Edinburgh and Aberdeen. We are now told that a consultant's report has arrived on the Secretary of State's desk which states that the library service is ripe for privatisation. Well, I give the Secretary of State a clear warning today: the Opposition will resist root and branch any attempt by him or by anyone else to sell off our public libraries into private, unaccountable and undemocratic commercial hands.

Instead of spending money on consultants, the Secretary of State should be ensuring that there are enough books, that the roofs are not leaking and that the opening hours are convenient for the public. While we are at it, perhaps he can tell us where libraries go, if anywhere at all, if they want to bid for national lottery funds. Unless they are in an historic building, what category can libraries qualify for, or are libraries just going to be told that it is hard luck and they have fallen between five different stools?

Let us consider for a moment what has happened to the Department of National Heritage in the Budget decisions. On the day of the Budget statement, the Secretary of State for National Heritage proclaimed that the Budget was a triumph for his Department. In fact, it is nothing of the sort. If we take out the extra amount for the British library over the next two years, the Department of National Heritage is the second-biggest loser among Departments.

Yes, the Arts Council has a £5 million increase, and that is better than was intended a year ago, but it still has not made up last year's cut in real terms and this year's inflation. The Arts Council is still worse off than it was two years ago, and the implications for orchestras and regional theatres in particular, which are struggling to survive at the moment, are severe. Perhaps the Secretary of State will tell us also what on earth the British museum has done to deserve a £1 million cut in cash terms next year.

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What about the Sports Council? It was noticeable that the Secretary of State mentioned sport only briefly. The Sports Council is on a standstill cash budget. That is particularly hard to fathom, given the Prime Minister's ringing declarations about the importance of sport in his speech to the Conservative party conference. Is the standstill cash budget for the Sports Council by any chance connected with the Government's intention to reduce the Sports Council's purview to a core list--a restricted list--of sports, leaving a vast range of sporting activity, from rambling to dance, out in the cold? Opposition Members regard any such limitation on Sports Council activity as wholly unacceptable.

Mr. Pike: Is it not true also that, in addition to the cuts affecting the Sports Council and the Arts Council nationally, the decisions that were announced on Thursday with regard to standard spending assessments will mean that many local authorities will have to attack their recreation, sports and arts budgets?

Mr. Smith: My hon. Friend is absolutely right. It is not just the library service, which I outlined earlier, that will suffer when local authorities are forced to cut their budgets. It is noticeable that even Lord Gowrie, a former Conservative Minister who now chairs the Arts Council, has said strongly that he regards the best public support for the arts over the past few years as having come from Labour-controlled local authorities, especially in the north of England. He is absolutely right. That work is now at risk because of the settlement which was made on Thursday.

Mr. Oliver Heald (Hertfordshire, North): Does the hon. Gentleman say that public spending must increase and that, if there is any scope for tax cuts next year, rather than do that, the Labour party would spend the money on heritage, local government and the other issues which he raises?

Mr. Smith: No. We have a series of cuts in real terms in the budgets for essential sections of Government expenditure. If the Government's agenda is to make cuts in sectors of vital Government spending this year to sweeten the way for tax-cutting bribes to the electorate next year, that is a disreputable political activity.

Mr. Dorrell: That was not the question of my hon. Friend the Member for Hertfordshire, North (Mr. Heald). The hon. Gentleman seeks to argue that we should spend more on different aspects of public expenditure, from local authority capital receipts to individual bits of the heritage budget. Does he argue that we should spend more, in which case how should it be financed, or does he accept those budgets and the tax consequences that go with them?

Mr. Smith: I am not accepting the budgets that have been put in place by the Government, because they involve a series of cuts in expenditure on vital aspects of Government spending. The Secretary of State mentions capital receipts. He is clearly unaware that capital receipts exist and that they are not being used at the moment. Our argument is that they should be released.

Mr. Heald: Will the hon. Gentleman give way?

Mr. Smith: No. I must make progress. I have already given way to the hon. Gentleman.

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Let us consider what is happening to the British Tourist Authority. The Secretary of State rightly said that tourism was extremely important. He said, "I want to place so much stress on the importance of tourism." A special £2 million a year initiative for London was announced, which is all well and good, but the English tourist board is financially far worse off than it was two years ago. It has seen the steady erosion of its funding year by year--this Ministry is not the first to reduce its funding-- and the substantial cuts have not yet been made good.

This funding cut occurs at a time when the British tourism market is declining as a share of the growing global market in tourism. We could, and should, be making enormous progress in the industry, but we are falling behind the rest of the world. Our position will not be helped by the Chancellor's decision--little noticed until now--in the Budget that the zero rating of passenger transport will be confined to public passenger transport in the generally accepted sense. At face value, that may seem fine and reasonable, but one should consider the consequences of the decision, especially for the tourist industry. The Budget's exclusion of non-passenger public transport will mean that the foreign visitors who come to enjoy our heritage--the people about whom the Secretary of State spoke so warmly--and who travel on preserved steam railways and take canal and river trips, the schools taking coaches to sports matches and the pensioners on days out to the seaside will have to pay value added tax on their trips. That will hit some crucial areas of the British tourist industry very hard.

Before the Secretary of State starts trumpeting the Budget's willingness to help tourism, he ought to look very seriously at what that VAT decision will mean for the industry. He should have a word with the Chancellor of the Exchequer because we will want to do something about the situation in Committee.

Overall, the Department of National Heritage faces a spending decline year by year. That is not all due to British library funding finally concluding in 1996; real funding cuts are in store and the figures prove it. The Department's budget will fall from £957 million this year to £837 million in 1997. I do not think that the Secretary of State should be proud of that.

The Government are already betraying their lottery promises. They said that the introduction of the national lottery would not lead to cuts in core funding of the arts, sport and heritage, yet that is precisely what we face in coming years. We also remind the Chancellor that the lottery has provided him with substantial benefits. In the past three weeks, the Chancellor has made about £18 million from the lottery. Where is that money going? In light of that fact, it is even more inexcusable for him to take an axe to the Departments that are at the heart of the national lottery's appeal.

It is claimed that the Budget will be good for the environment. Spending on the home energy efficiency scheme has increased. Of course that is welcome, but it is a paltry increase of £10 million which will bring the scheme's budget to a total of £80 million. There is a long waiting list of people who need work done, and the Government have allocated an extra £10 million for insulation work. But the Chancellor will receive an extra £1.5 billion from VAT on domestic fuel and the energy utilities are making substantial profits from advance bill payments that people have made in order to avoid VAT.

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In light of that, £10 million is a tiny sum. Let us not forget that all that the home energy efficiency scheme is allowed to do is insulate doors and windows and lag roofs--no cavity wall fill, no condensing boilers, no secondary glazing. People would be hard put to save 17.5 per cent. of their heating bills by doing only home energy efficiency scheme work.

Above all, the Budget was a Budget of missed opportunities. There was an opportunity to abandon the rise in VAT on fuel. The Government did not take it. We shall offer the House that opportunity tomorrow night. The Government had the chance to do something of major significance to tackle unemployment, but a scheme that will be introduced only in a year and a half and that is a pale shadow of what Labour proposed is hardly up to the task.

The Government had a chance to launch a real national programme of energy conservation work. All we got was a miserly £10 million, trumpeted as a grand advance. There could have been a chance to make strides in the work of the National Heritage Department. One supremely important example is the future potential development of a nationwide information super- highway--a world of new interactive communication that could revolutionise the way in which we work, do business, learn, shop or relax. A surgeon in Aberdeen could carry out an operation under the step-by-step guidance of the world's leading expert in New York. A schoolboy in Dudley could tap into the entire resources of the British library from his schoolroom. In order to achieve it, we ought to aim at a truly nationwide network reaching every part of the country, going into every school, every public library, every hospital and every GP's surgery. It could be done at no cost to the taxpayer, provided that the Government put the right framework in place. They have not done so.

The President of the Board of Trade last week simply continued the uncertainty for both British Telecom and Mercury, ensuring that ultimately Britain will lose out on some of the benefits that could flow. Another wasted opportunity. The Budget, like the Government, is a catalogue of wasted opportunities. The Budget is exactly the same as the Queen's Speech. There is nothing in it. It does as little as possible. What there is is not worth it. The Government are a do-nothing Government paralysed by their own divisions and lack of direction.

If the Government do not want to govern, they should make way for someone who does. If they cannot see the problems, they should make way for someone who can. If they cannot hear what the people are saying, they should make way for people who do. Britain cannot wait for two years of a won't-look, won't-listen, won't-govern Tory Government. We need a Labour Government to put it right.

4.42 pm

Sir Norman Fowler (Sutton Coldfield): I welcome many features of the Budget and the public spending round that has gone with it. I congratulate my right hon. Friend the Secretary of State for National Heritage on his excellent speech. It demonstrated at the outset the clear embarrassment of the Labour party on the issue of the monarchy, which it properly raised. We look forward to a much fuller debate

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on that issue, and in particular to hearing the views of the hon. Member for Bolsover (Mr. Skinner), which he has already given in an intervention today. All that I should say is that in no sense or shape does the hon. Gentleman speak for the people of Britain. I agree with my right hon. Friend the Secretary of State about tourism. As Secretary of State for Employment, I was the sponsoring Minister for tourism, responsibility for which has moved around Whitehall from the Department of Trade and Industry to the Department of Employment. I hope that it will now remain with the National Heritage Department.

I particularly welcome the extension of family credit, which my right hon. Friend mentioned today. When we examined the matter in the mid-1980s, we faced a familiar problem: should we try to deal with the problem of people with children in relatively low-paid work by means of the general benefit of child benefit or by directing resources to those most in need of benefit? We decided to introduce the new benefit of family credit, and I am delighted that more than half a million people now benefit from it. I am sure that directing resources is the right way of tackling the issue of employment and creating employment.

Before going further into the challenge of the Budget, I should say that, apart from an Adjournment debate in July, this is the first debate in the House in which I have spoken since standing down as chairman of the Conservative party. There are certain re-entry problems when one ceases to be a paid spokesman of the Government or, as in my case, an unpaid spokesman.

Let us take an entirely hypothetical case. No one would be impressed by an ex-Minister if he suddenly started to advocate policies that were the exact opposite of what he had proposed in Government. He would lack all credibility, because there would always be that unworthy suspicion that his views had more to do with the nature of his departure than the issue itself. His undoubtedly well-publicised statements might be regarded not so much as a cry for help as a scream for attention.

Fortunately, that is an entirely hypothetical case. I know that in the Conservative party all ex-Ministers--I see a distinguished one behind me-- and certainly all ex-party chairmen remain sturdy supporters of the Government's policies and their previous statements. It would be less than honest, however, if I did not acknowledge that there were certain re-entry difficulties. One has to find the ground between being a creature of the Whips and not having a Whip at all. I do not think that textual analysis of my statements will be required to find out where I stand.

I remain a firm supporter of Government policies. I believe that my right hon. Friend the Prime Minister deserves much more credit than he has received for the undoubted strength of the economy, which we are debating in this Budget debate, and a series of other policy initiatives, in particular the initiative on Northern Ireland. I also believe that other policies can be developed further. I was one of those who was disappointed that the Government did not proceed with the privatisation of the Royal Mail. As I shall make clear in a moment, I believe that there is further potential for reform of both the tax and the welfare systems.

In this spirit of--how shall I put it?--friendly frankness, let me say one thing to my right hon. Friend the Financial Secretary to the Treasury, who will reply to

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the debate. In my last weeks as party chairman, I was asked to sum up the results of the European elections. They were not good, although they were not as bad as some had predicted: they were certainly nothing for the Liberal Democrats to crow over. One part of my explanation was that, although economic recovery was strong, there was an absence of a feelgood factor because taxes had taken a toll on public support. I should have thought that that was a reasonably uncontroversial diagnosis of where we were.

Extraordinarily, the Treasury press office took my remark as a call for immediate tax reductions and ran round--how can I put it?--briefing against me. Let me make it clear that I never called for a reduction in tax irrespective of the strength of the economy. That would be absurd. The Treasury, which complains readily enough, as I remember from my ministerial experience, about other Departments' leaky habits, should take care not to follow that same path. If it is in any doubt, it should do what ordinary mortals do and use a telephone and check.

So let me set out my views in a way that even the most obtuse member of the Treasury press office can understand. The Budget is good because my right hon. and learned Friend the Chancellor has wisely made the goal of sound public finances the first priority. That must be the first aim. The economy is strong, we have low inflation and low interest rates and exports are increasing. The Chancellor has repeated his aim of achieving a balanced Budget, which I very much welcome.

With hindsight, it would have been better to have introduced the increase in value added tax on fuel at the same time rather than in two instalments. That fact is generally recognised, although many economic commentators at the time advocated the two-part policy. At this stage, we cannot do a U- turn on that policy and I found that part of the speech of the hon. Member for Islington, South and Finsbury (Mr. Smith) totally unconvincing.

I agree entirely with what Lord Lawson said in the Evening Standard on Friday:

"This is not an optional extra. Its loss would hole the Government's entire fiscal strategy below the waterline, undermining the credibility of the Chancellor's resolve to hold the line on public spending and putting into serious doubt the Government's ability to govern. The reaction on the world's financial markets would be immediate and dire."

Those words of an ex-Chancellor of the Exchequer should be heeded. I do not believe that we should simply leave it at that. The time has come for us to reconsider income in retirement and to find out what options are open to improve the economic position of pensioners. Fortunately, the position of those retiring has improved steadily as more and more people retire with some form of pension in addition to the basic state pension. That is an extremely good trend and 60 per cent. of pensioners now have some form of occupational pension, which is to be welcomed and developed.

Pensioner policy is, by definition, a slow burner; it takes time for policies to work their way through. We should not exaggerate the effect that any policies introduced in the past few years can have on the present generation of retired people. Many people are still without occupational pensions and the average income of pensioners--even those with such pensions--is modest. For example, after the Budget a widow will receive a

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pension of £59 a week. If she is covered by an occupational pension of, on average, an extra £53 a week, she will have about £5,800 a year. By most standards, that is a modest income, given the problems that may be faced in retirement, yet that modest income is still subject to tax.

In spite of the fact that age-related allowances have increased over and above statutory indexation, which I welcome, we must grasp the fact that modest incomes are still made subject to income tax. To my mind, that, almost more than anything else, emphasises the importance of the Government returning to their aim of reducing the burden of direct taxation. I very much welcome what my right hon. and learned Friend the Chancellor said on that subject.

I have no quarrel with the Chancellor's judgment. The strength of the economy must undoubtedly and unquestionably come first. Obviously, when that has been achieved, the Chancellor will have an opportunity to consider improving the tax position, which must include the position of retired people. The reduction of income tax must remain a priority for the Government. We said that in our manifesto at the last election: we took pride in what we had achieved and promised more. The case for further income tax reductions remains overwhelming. Too many people pay too much tax, and too many people still pay tax.

Another group of pensioners pay no tax at all, or, if they do, it is very little. Those are the pensioners who rely on the basic pension, which brings me to my second argument. No reform of the tax system will help them; help will have to come in some other way. One option is to increase the basic pension for everyone. For example, we could increase pensions in line with earnings, which has been the expressed policy of the Labour party for the past two or three elections. One has only to read the report by Sir Gordon Borrie and his colleagues, however, to understand that that flagship Labour policy is being quietly scuttled. If the commission's report is adopted, as I believe it will be, there will be no chance of that being Labour party policy at the next general election. Even if it were, I am not at all sure that it would deal with the group of people with whom I am most concerned.

The problem is that, through no fault of their own, a group of retired people have been unable to build up an occupational pension. That might be due to a variety of reasons--perhaps their firm had no occupational pension and there were no alternatives. They might have been members of a scheme, but were deprived of the true value of the pension because of the scandalous early-leaver rules that used to exist. We should not forget the toll that those provisions had on occupational pensions. They may have been caught by historic employment practices, such as the pre-war rule in some local education authorities that married women teachers had to give up work. Whatever the reason, they have ended up depending absolutely on the basic pension, with little or nothing more.

Here, my argument comes full circle. We introduced family credit because we were unable to help the families we wanted to help through the general child benefit. We can now help pensioners through a pension credit system-- in other words, by adding to the basic pension of those whose income most urgently needs supplementing. Rather than relying on general increases in the basic pension, we should direct resources where they are needed, although, clearly, the basic pension would remain price protected. For those who do not have the benefit of

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other retirement income, or who have a limited amount only, pension credit would come in as an additional weekly payment, in a similar way to family credit.

I freely concede that we examined that plan closely when carrying out my review of social security. We took the view then that family credit was the financial priority and I could not be more pleased that that view is now so well accepted by the Treasury. I am not sure that that was always so, but I am delighted that it is so well accepted now that the Treasury is advocating its extension. I hope that it will go to the next stage.

What we need most is fresh consideration of the incomes of retired people. A combination of tax reductions and the pension changes that I have advocated would create an enormous advantage for pensioners. I welcome the strong economy and the improvements that the Government have achieved. I welcome low inflation, low interest rates and growth in the economy and I certainly agree that we must not put any of those at risk, but we have a duty to guard the interests of retired people and to ensure that they too share in the general improvement in the economy.

4.57 pm

Mr. Peter L. Pike (Burnley): I am happy to be able to take part in this debate. First, I must comment on a meeting that I had last Friday in my constituency with the North West Society of Chartered Accountants. Unlike the right hon. Member for Sutton Coldfield (Sir N. Fowler), the society was not convinced that we are seeing positive signs of an economic recovery that is here to last. Its members spelt out two messages that they wanted me to convey to the Government and to Eddie George at the Bank of England.

First, the society thought that an increase in interest rates would destroy any economic recovery that was beginning to start. Its members said that it would clearly be a great folly for the Government to move in that direction. The society also believes that the Government and the Bank of England have failed to recognise the importance of small industries. The Government will say that that is not true, but the society believes that the Government have failed to have proper consultations with people such as chartered accountants on the changes that they are making and on the implications of those changes.

The problem with the Government is that they always say that they are going to have consultations, but they take note only of those that yield the result that they want. If people do not come forward with the conclusions that the Government want, they just disregard them. They take note only of those people who respond to consultations along the lines that the Government want to underline, and they do not have anything like a genuine consultation at all. One of the points that I made in an intervention to the Secretary of State was about the proceeds from the sale of nationalised industries, proceeds that, since 1979, have totalled £77 billion. I accept what the right hon. Gentleman said about all of that being shown in the Red Book, but those proceeds have nearly always been used for revenue expenditure, not capital expenditure. We have disposed of assets to prop up the accounts of the nation.

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The Government originally estimated that the total proceeds from the sale of nationalised industries this year would be £5.5 billion, but that figure has increased to £6.3 billion. The original Government forecast for next year was £1 billion, but the total will now be £3 billion. What will happen when they have no more assets to sell? There can be only two conclusions--the Government will have either to put up taxes to replace the income from the sale of nationalised industries or to reduce expenditure. The Government are caught in a cleft stick in the matter, as the number of assets left to sell reduces year by year. I am totally opposed to that policy, but that is the policy with which they are proceeding and it will get more difficult for them every year.

Since the former Chancellor--the right hon. Member for Kingston upon Thames (Mr. Lamont)--introduced VAT on fuel, concern about that has been the item that has featured most consistently in my mail, week after week. One must recognise that it is a problem, whatever the Government may say about the compensation that they have given to the most vulnerable and to the poor. The fact is that the compensation is not sufficient.

The Government must take into account the fact that their use of an average amount means that there will be some losers and some gainers. I do not believe that the compensation is sufficient, but if one accepted that on average it was sufficient, some people would still lose. My constituency, which goes into the Pennines, is colder than average, and it will certainly lose.

My hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) referred to the people whom this tax would hit hardest--the people who must decide at what time they put on their heating or when they can have a gas fire. People in my constituency must decide whether they are going to have a hot meal every day or have the heating on. That is the stage we have reached after 15 years of Conservative rule.

In its briefing, Shelter deplores the measure, which it says "can only lead to increased fuel poverty for everyone on a low income--poor households spend a greater share of their budget on fuel."

That is absolutely true, and the briefing goes on to say: "increased benefit rates will not compensate people on low incomes for the losses this will cause".

I hope that those Conservative Members who are expressing concern about the issue will choose not to abstain tomorrow, but will seize the opportunity that has been given by the Opposition to vote to have a rethink on the issue and to axe the next phase of the VAT increase.

My constituents who have written about the issue feel that, at this juncture, it is particularly obscene that the chairman of British Gas has received a pay increase of over 70 per cent. We all know that many of the chairmen of privatised industries have, through pay increases and share options, done extremely well out of privatisation, but that does not go well with the Government saying that it is not a matter for them and that they will not intervene in the matter. The Government must show concern, because such pay increases are not acceptable, and they do not go well with those on low pay. Since the abolition of wage councils, levels of pay have fallen and the number of people on low pay has increased. What a scandal it is that, in 1994, we see people on low pay.

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The Budget imposes a 14 per cent. cut in training and in help in finding the unemployed jobs. The right hon. Member for Sutton Coldfield referred to the extension of family credit to those without children, but that will help only about 20,000 people. I do not begrudge those people who have children and who are getting help through family credit, nor do I decry those people who will get help as a result of the new move, but the fact is that family credit will be paid for, not only by income tax payers, but by industries which are already giving their workers fair pay. It is nonsense that we should ask them to subsidise those industries which are low payers. There is no doubt that low pay is not an incentive for people to work well and to produce well. Therefore, it is time that we had a national minimum wage and did away with the scandal of low pay and poverty pay.

The Budget also imposes a £1 billion cut in housing for next year, half of which will come in housing investment. At the same time, local authorities are once again not allowed to use their capital receipts. What a welcome there would have been if the Chancellor had provided another year --as was done in 1992--in which capital receipts could be used. Local authorities are not able to build any houses, and they cannot even meet their statutory commitments for mandatory grants. The Financial Secretary to the Treasury, who is sitting on the Front Bench, is a former housing Minister, and he knows that many councils now have a queuing system for people waiting for grants because they do not have the money available.

The Chancellor said that he was going to cap housing benefit for the private rented sector. It has been said many times that the private rented sector would, if left to market forces, collapse and wither away. It would obviously not die, but the sector is underpinned by the benefit system, because it depends on the benefits which enable people to go into the sector.

People do not choose to go into high-rent homes--they go because they have no alternative. As a result of the Government's policies since 1979, we do not build council housing. It is true--in Burnley, in every other local authority in Lancashire and throughout most of the country--that, if council houses were available and councils were able to build houses, people would go into council housing. The Government would therefore not even have to contemplate capping housing benefit, a move that will solve no problems and will create additional problems for them.

I have mentioned using capital receipts. What nonsense it is that the Government will not allow councils to use their capital receipts when doing so would not only help to solve the housing crisis which exists throughout the country but would help to get people back to work and to improve the economy. Not only would the building industry improve but, as people who move home buy carpets and curtains, other markets would be encouraged.

Mr. William Ross (Londonderry, East): The hon. Gentleman will recall the Financial Secretary to the Treasury telling the House last week that any council that had paid off its debts could use its capital income as it pleased. Would the hon. Gentleman's objections to the Government's privatisation policy have been lessened if the Government had applied exactly the same policy to

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the sums which they received from privatisation, and paid off the national debt rather than used them for revenue purposes?

Mr. Pike: The hon. Gentleman makes a valid point. The point that I was making earlier was about the difference in how the Government had used those sums for revenue purposes. There may have been some merit in using them for capital investment because it would have solved some of the country's long-term problems. As I have said many times before, I could have a good holiday by selling my house and going on a world cruise but when I returned I would have no house in which to live. By selling nationalised industries and using the money for revenue purposes, the Government have got rid of their assets. So the hon. Member for Londonderry, East (Mr. Ross) makes an extremely valid point.

Mr. John Marshall (Hendon, South): Will the hon. Gentleman give way?

Mr. Pike: I shall make one further point before giving way. Housing associations are always pointing out that they cannot build affordable housing to rent. Last week's Housing Associations Weekly said:

"A cut of £300m for the second year running in the approved development programme announced in the budget will lead to a 40 per cent. slump in new starts . . . New rented starts will fall from 25, 000 to 15,000 next year . . . while low-cost home ownership/ shared ownership plunges from 20,000 to 12,500.

The number of construction jobs lost . . . will be 4,000 next year and 7,900 the following year".

Mr. Marshall: The hon. Gentleman was discussing the revenue impact of privatisation. Does he accept that, in 1979, British Steel, British Airways and Rover were a substantial charge on the Exchequer but that, today, they all contribute to the Exchequer through corporation tax?

Mr. Pike: I could answer that in many different ways. Had many of the industries that have been privatised been free of some of the shackles imposed on them, they could have been run profitably and viably. The problem with the water industry, for example, was not its ownership but lack of investment. Had the Government opened it up and allowed private investment and different controls, the industry could have overcome some of the problems to which the hon. Gentleman referred.

I shall make two final points, the first of which refers again to what the Association of Metropolitan Authorities said on housing capital. The Local Government Chronicle of 2 December said: "hundreds of thousands of council homes would become unfit to live in because of the cuts."

That underlines the problem of housing grants to which I referred. In its bulletin, the Trades Union Congress refers to the Chancellor's stated priority of creating jobs. He said that his second priority--the right hon. Member for Sutton Coldfield referred to his first priority--was a Budget to cut unemployment. The TUC says:

"there is no overall assessment of his measures on employment or on the level of employment. As shown above, the jobs package is minimal and many of the measures are delayed until 1996 even on a pilot basis. The TUC's analysis is that any favourable impact of these measures will be more than offset by the cuts in capital spending and the cuts in general government expenditure."

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What we saw last week and shall vote on tomorrow is a bad Budget for jobs and for tackling the country's problems. It is another good reason why the Government will go when we get a chance to remove them at the next election.

5.13 pm

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