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6.25 pm

Sir Thomas Arnold (Hazel Grove): It is always a pleasure to follow the hon. Member for Warwickshire, North (Mr. O'Brien) as we serve together on the Treasury and Civil Service Select Committee. I am sure that he will not be surprised, however, that I take issue with the general thrust of his remarks.

This Budget builds on the excellent work of the two 1993 Budgets in paving the way for the sustained recovery towards which the Government and the Chancellor are working. The hon. Member for Warwickshire, North, to put it mildly, overstated his case. The medium-term financial strategy set out on page 14 of the Red Book is clear. I believe that the Government have struck the right balance between monetary policy and fiscal policy. I said in the debate on the Gracious Speech that I was impressed by the transparency with which our economic policy was now made. That transparency is reflected in this year's Red Book and, indeed, in the Treasury's briefings.

In our modern world, with transparency should also come accountability. I invite the Government to consider one or two matters concerning the arrangements for debating the Budget. My right hon. Friend the Financial Secretary may prefer not to deal with these points this evening, and I quite understand that, but I urge him to pass my remarks to the Chancellor so that he and other Ministers can consider the import of my speech.

Is the timing of the Budget, just before Christmas, right, or should we take a fresh look at the new arrangements? For the second year running, we have had a bunching of economic debates. It is unrealistic to believe that the Opposition will ever forgo the opportunity of a full day's debate on the economy during our discussions on the Queen's Speech, notwithstanding the fact that that debate is likely to be followed soon by the Budget debate. Some more serious issues arise from the present timing. As I understand it, there is little time for representations to be made, either by individuals and other interested parties or by organisations, between the Budget statement and the start of the Finance Bill. That point needs to be looked at carefully. Perhaps ways can be found to deal with the problem; it is a real problem of which the Government should take note.

The Government are perfectly entitled to take a robust--almost authoritarian--view of their own responsibilities and they are entitled to ask their own supporters and, indeed, the House to back them up in the new arrangements for a unified Budget. I make it clear to the Government that I am not opposed to bringing together in one statement both public spending and the revenue-raising side of economic policy--far from it; I always felt that it needed to be done--but the Government's view needs to be set alongside the view of the House. Hon. Members on both sides of the House should take an interest in what are likely to prove to be rather truncated arrangements for the future debate on economic policy. It is slightly odd that last year--and I believe that I am right about this--seven months passed without the Chancellor taking part in a major economic debate. That is puzzling and it has meant that the regular appearances of the Chancellor and the Treasury team before the Treasury and Civil Service Select Committee

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have been altered somewhat in character. We must consider that and take account of it in planning for the future.

I welcome the arrangements that have been made in recent years for debates on the estimates because they allow for certain specific items of public spending to be considered very closely. However, I should like to register my support for the proposals of my right hon. Friend the Member for Worthing (Sir T. Higgins), one of my predecessors as Chairman of the Treasury and Civil Service Select Committee, a former Treasury Minister and now Chairman of the Liaison Committee, for time to be set aside during the parliamentary year for debates on the annual reports of individual Departments.

Those reports are a new feature of government and are a result of many other changes that have taken place in the House and in the Treasury in recent years. They provide us with an opportunity, Department by Department, to debate and perhaps amend--at any rate, to consider in great detail and, I hope, constructively--the spending plans of individual Departments.

My right hon. Friend the Member for Worthing has proposed that four days should be set aside, with half days given to individual Departments. That would enable the annual spending plans of eight Departments to be examined in one full parliamentary year and would represent an excellent compromise in respect of what I fear at the moment is an unsatisfactory situation.

I should like the Government to consider those points very carefully. As I said at the outset, I welcome the transparency with which policy is now being made but the House must reconsider accountability, on which I hope the Government will recognise that the views of the House are important and that they can help, not hinder, the Government in the formulation and execution of public policy.

6.32 pm

Mr. William Ross (Londonderry, East): The hon. Member for Hazel Grove (Sir T. Arnold) illustrated for us very vividly how dangerous it is to change the long-established procedures of the House, because when we do so it usually ends in tears. Not many voices were raised in objection when we decided to change the Budget from spring to autumn, but it was not long before voices began to question that change.

Given the time at my disposal, I regret that I cannot refer to many of the points that have been made today. Instead, I will have to gallop through what I have prepared because some of the things that I want to say I really just want to get on the record.

The Budget contains a long list of items that are helpful to small businesses and they are welcomed by my party. The Chancellor is well aware of the hopes that we in Northern Ireland have for an expansion of business activity over the coming months and years. We have a lot of catching up to do after the quarter of a century that we have just spent fighting terrorism and we need all the help we can get. We would hope to see investment as a result of the Prime Minister's initiative in calling an investment conference in Belfast next week and we are particularly interested in investment in manufacturing industry.

We have a problem, however, as our electricity prices are higher than elsewhere, mainly because so much of our generation is provided by oil- fired stations. That problem

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may be relieved in future with the gas pipeline, but that is some years away. The Chancellor will be aware that Northern Ireland burns just over 1 million tonnes of heavy fuel oil each year. I am told that that means that Northern Ireland pays about 25 to 30 per cent. of the heavy oil excise duty in the United Kingdom. That duty amounts to some £11 million to £12 million a year and it is a heavy impost on the Northern Ireland consumer.

It will be argued that this is special pleading, and it is, but it is special pleading in a special circumstance. This problem must be dealt with, and the sooner the better. It can be dealt with satisfactorily only by the removal of the tax on that fuel. I echo the call made by my party leader, my right hon. Friend the Member for Lagan Valley (Mr. Molyneaux), in the debate on 23 November when he asked for all of Northern Ireland to be made an enterprise zone. The line on the map defining such zones has created many anomalies which can be easily removed in respect of that small economy and territory only by the policy that he advocated.

Much has been said about the Government's decision to go ahead with their proposal to impose VAT on domestic fuel. My colleagues are, as has so often been the case, in the very happy position of being able to take a rather more dispassionate view of the Government's proposal than supporters of the main Opposition parties. Those right hon. and hon. Members feel duty-bound to voice the most strident attacks on the proposal and, in turn, to repel those attacks with whatever verbal weapon comes to mind and tongue.

We, like most hon. Members, recognise the need to raise revenue to meet Government obligations. We also believe in a balanced Budget, and I will return to that point if I have time. We well understand that VAT on domestic fuel is a tax on spending, which is, I am told, a tax beloved by Conservatives in particular. I suspect that taxes on spending are popular with all Chancellors since, once imposed, folk pay without really questioning where the money is going. Therefore, they grumble less about Government impositions in the long run. However, VAT on domestic fuel falls into the category of taxes that have been from their inception almost universally disliked, not least because in this case it has been very successfully portrayed by its opponents as a tax that bears more heavily on the aged and the poor. That is as true of that tax as of all universal taxes.

The Government's recognition of the unpopularity of the tax is confirmed by the cushioning measures they have introduced, which would not be needed if the proposal had that measure of acquiesence that most taxes enjoy and which means that the citizen simply pays up after a few grumbles.

Sadly for the Government on this occasion, our view of the tax has not changed. However, will the cushioning measures announced survive a defeat for the Government on the issue? How does the Chancellor intend to raise the deficit in his revenue which will result from a Government defeat? If the Chancellor is to maintain confidence in the City, he will have to give that information to the House and to the country.

Our view on the issue is slightly different from that of the main body of Conservative opinion in the United Kingdom. We have that different opinion because we were not counted as members of the Conservative grouping by the then leader of the Conservative party in

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the first election in 1974, whereas previously we had been so counted. Since then, we have developed a number of basic principles about how the nation's finances should be managed.

Not least among those principles is that one should never try to fix the exchange rate. One should not tax the basic essentials of the ordinary man or woman. I was very happy to hear the right hon. Member for Brent, North (Sir R. Boyson) go back to the last century in order to find a Conservative justification for that. We also believe that one should continue to seek a balanced budget and if one seeks long enough and hard enough, no doubt one will find it.

The spotlight of press publicity has been directed on the issue of VAT on domestic fuel, but another tax increase is of greater importance and it has passed largely unnoticed in our debates so far. The one redeeming feature of VAT on domestic energy is that it is levied on the ultimate consumer and therefore the consequences are evident and they finish at that point. That does not apply to the tax on vehicle fuel.

It is said that the only people who suffer as a result of tax on vehicle fuel are car owners, but that is a very misleading perception. In fact, hon. Members know that increases in the price of transport fuel feed through to every single item that we purchase. For producers, that places pressure on their profits, because they are expected to fund some of the tax.

Car ownership is treated by some sections of the population as a bad thing because of its environmental consequences. We are told that we should not use cars as much as we do and that we should use public transport or bicycles, or walk. That aim might be praiseworthy and possible for urban and suburban dwellers who have access to a comprehensive, high-frequency and cheap--that is, highly subsidised--transport system. Such a system might exist somewhere, but hon. Members have not discovered it.

When it is realised that many millions of our citizens simply do not have a transport system that is worthy of the name, the green agenda hits a blank wall of harsh reality. That simple harsh reality is that, for many millions of people, there is no alternative to a car for personal transport and that, without a car, social activity would vanish for every age group. It is also a fact that increasing the cost of travel to work would limit job opportunities for many people. Time does not permit me to pursue that point.

In the light of those facts, the concept of doubling the real price of vehicle fuel within a few years can only be nonsense that no sensible Government could long pursue. The Chancellor has committed himself this year, but will he have the good sense to reconsider the matter before his next Budget?

The Chancellor and the Treasury team will no doubt recall that the consistent position of the Ulster Unionist party has been that the public sector borrowing requirement should be eliminated as soon as possible. As was evident when the deficit took off for the clouds a few years ago, the PSBR could be diminished only by increased taxation and reduced public expenditure. Those two aspects have advanced over the past two or three years, and the resultant pain is evident and vocal, but so are the rewards, about which people are less vocal. Part of the reward is, of course, to be attributed to the fact that,

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at the moment, we have a competitive pound, which is a result of the market restoring the pound's true worth in September 1992. We also have low interest rates and low inflation. I cannot see very much change in the policy since September 1992, despite the change of personnel at No. 11.

Lord Lawson was the first Chancellor for a long time to reduce the burden of debt that he inherited. Regrettably, that false spring has vanished, but his successor is on the way to achieving that happy position once again. I hope that the Treasury team will succeed, for it is a very worthwhile objective. It will take time, but I hope that it will involve a shorter time scale than that envisaged a year or two ago. We should temper our hope with caution, for the increase in employment, the consequent saving in Government expenditure and the fall in inflation have done much to improve the PSBR this year. I must put it again to the Treasury team that the best way to deal with a sudden and drastic rise in the Budget deficit is to be honest enough to increase income tax. The effect on revenue is instant, the pain is immediately felt--

Madam Deputy Speaker: Order. I am sorry, but the hon. Gentleman has had his 10 minutes.

6.42 pm

Mr. James Cran (Beverley): I am grateful to be called. Making this speech is inevitably a dispiriting affair, because my hon. Friends usually make exactly the speech that one would have wished to make. That is my position this evening, because my right hon. Friend the Member for Brent, North (Sir R. Boyson) did exactly that. I did not agree with everything he said, but I agreed with much of it. Therefore, against that background, I welcome the Budget, not entirely without reservations, but my reservations are well outweighed by my support for what is contained in this set of measures.

I particularly support the fact that the Government are taking the long view. Throughout my lifetime, I have found that politicians--I do not regard myself as a politician particularly--always take the short view. The Government are rightly attempting to put public finances back into order again. In the past year or two, I wondered whether that would happen. I am delighted that public finances will be back in order a few years hence. Of course, that will not yield immediate benefits--nor should it--but benefits will undoubtedly come. That is why some Opposition speeches have been made in sorrow--because in 1994, we had 4 per cent. growth, which, historically, is very difficult to achieve in this country, and there will be 3.25 per cent. growth in 1995.

It is fascinating that all that has been achieved without those magical letters, which kept being flung at me a few years ago, ERM. No more than three years ago, every Government and Opposition Treasury spokesman spoke about the ERM, and every Confederation of British Industry publication which I read flung those letters and what they meant down my throat. The ERM was proffered as the universal panacea for every economic ill in the country. By contrast, everyone is now embarrassed to mention ERM. Those letters seem to have been expunged from the vocabulary of many of my colleagues and from that of Opposition Members who used to believe in them. "CBI News" never talks of them these days, and, happily,

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nor do Ministers. The lesson has been learnt that we do not require artificial devices to substitute for the internal discipline which Ministers and, indeed, politicians of all parties must show in economic management. That is what the Budget and its two predecessors are all about.

I was going to say that I am relatively pleased with the Budget, but I must say more than that. I am delighted with it from two points of view. First, the key to the economic policy of any Government, which is shown by the Budget, is that there is a need to control public expenditure within that which the country can afford. Secondly, the Government have a prime responsibility to control inflation. They are doing both.

I mention ERM not to embarrass those who originally supported it but merely to allow me to refer to EMU--full economic and monetary union. It is unworkable. I do not want it. I am not closed-minded enough to say that some countries in the European Union may not band together and pursue it. I say to them "bon voyage." Let them get on with it if that is what they want to do, but I hope that EMU is off the Government's agenda. It probably is, because I have listened carefully to what my right hon. Friend the Prime Minister has said. I read his Leiden speech containing references to the subject, and I could not disagree with much of it. I heard him, in particular, a few weeks ago, in answer to a question about EMU from my hon. Friend the Member for Hazel Grove (Sir T. Arnold), say that there was no appetite for such a development. That is exactly what I believe. Therefore, I am relatively sanguine at the minute.

Without ERM, we now have what I regard as the beginning--perhaps it is more than that--of a successful economic policy. As I have said, fundamental to that is controlling public expenditure. All Governments spend far too much, but Conservative Governments spend less. Labour Governments tend to spend much more. We have seen the statistics. I refer back only to the turn of the century, but my right hon. Friend the Member for Brent, North referred back to Gladstone. We both agree that Governments spend too much. We cannot insulate every citizen from every eventuality. Of course, the Government must provide services that citizens cannot provide for themselves, such as roads, education, defence and so on, but, by definition, there must be a limit because resources are limited. Clearly, social security must have a safety net, but it is a big spender and must attract the attention of those of us who want cuts. When I was elected to the House in 1987 the social security budget was about £37 billion. I have discovered that it will be not far short of £100 billion next year, and clearly the taxpayer cannot bear that financial burden. I support the Government and my right hon. Friend the Secretary of State for Social Security in their examination of housing benefit, for example. I am no expert on the subject, but I have talked to those who are and they tell me that it simply forces up rents.

I support the Secretary of State in his efforts to limit support for mortgage interest. I am very happy to report that I no longer have a mortgage, but when I had one I did not look to my neighbour to bail me out if I got into difficulties. I took out mortgage insurance and the Secretary of State suggests that everyone should have that cover.

My right hon. Friend is also correct to intensify the Department's efforts to combat fraud. I know, as everyone else does, that the majority of people are absolutely

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honest; there is no doubt about that. But, human nature being what it is, some people are dishonest. Therefore, I am delighted that the Government are urging us to rethink the social contract- -the relationship between the individual on the one hand and the Government on the other.

I am very pleased that the Government have recognised that bureaucracy is too big. The decision to cut spending by about £24 billion in the next three years is a painful one, but it is the correct decision and not before time.

The Government recognise that they must not spend very much beyond their tax revenues--although occasionally Governments will do so, especially during recessions.

I believe that high taxation is intrinsically wrong. I think that we should leave as much money as possible for the individual and he should decide what to do with it. I am not entirely happy with the Government's decision to impose VAT on fuel and other services. I wish the Government had applied a sharper knife to public expenditure before now, but because of the deficit problem I am forced, kicking and screaming, to face the fact that I must support the Government in the vote tomorrow evening. I see no other alternative.

I look to the Chancellor to use the revenue that I believe he will have to cut taxation next year. I leave him with one thought: of course we would all be delighted to see a cut in direct taxation, but in my constituency I am finding resistance to indirect taxation and the amount of money that is collected from it. Perhaps we should have future cuts in indirect taxation- -

Madam Deputy Speaker: Order.

6.52 pm

Mr. Richard Burden (Birmingham, Northfield): I was interested to hear the hon. Member for Beverley (Mr. Cran) conclude his remarks by referring to the imposition of VAT on domestic fuel. It is hardly surprising that that issue, more than any other, has dominated the debate about the Budget both in the community and in this place. VAT on fuel is certainly the Government's most unpopular budgetary measure--which takes some doing because there is a lot of competition. My constituents queued up to sign a petition opposing 17.5 per cent. VAT on fuel, and pensioners took the petition around the neighbourhoods to demonstrate how they felt about the issue. However, I do not wish to address my remarks to VAT today. Instead, I turn to the subject of housing and how it will be affected by the Budget. As we approach a new century, one might have thought that there would be a consensus among the major political parties about the importance of everyone having, as of right, a roof over his head and a decent home. All hon. Members would say that they agree with that aim in theory. However, that objective has not been translated into Government policy and the problem was certainly not addressed by last week's Budget.

The scale of the housing problem is frightening. The right hon. Member for Ealing, Acton (Sir G. Young) and I attended meetings with Birmingham council in his former role as Minister for Housing and he has praised the city council's record on housing and housing

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management. Despite Birmingham city council's good record and the councillors' best efforts, they face frightening problems. There are 17,000 people on Birmingham council's housing waiting list. There are 24,000 people on the transfer list and 10,000 of the households on the list are overcrowded. Even though 6,000 tenants a year achieve a housing move, the wait for decent accommodation is far too long.

In Birmingham--just one city, albeit a large one--48,000 private homes have been considered unfit for families to live in and 80,000 are borderline cases. Some 40 per cent. of the private housing stock needs urgent repair and 24 per cent. of private rented stock is considered unfit for human habitation. The council needs an investment of £1.3 billion to bring its housing stock up to scratch. That is the scale of the problem that we face. There are 15,000 inter-war council homes awaiting modernisation and 4,500 homes still have outside toilets. Against that background, Birmingham city council has lost 27,000 homes in the past 10 years--most of them family homes which are in greatest demand.

The city council has put in a bid for £71 million under its housing investment programme for the next financial year--not because that is all the money it needs, but because that is all it is allowed to ask for under the rules imposed by the Government. People in my constituency think that it is crazy that in Birmingham we need housing investment of £200 million, but we are allowed to ask to spend-- not actually receive-- under £100 million. Last year the council's allocation was £49 million, which was less than the year before.

What impact will the Budget have on those terrifying figures? The Department of the Environment's housing budget will be down by £770 million next year and £700 million the year after. Housing investment was cut by £500 million in 1994-95. According to figures published by the National Federation of Housing Associations, there will be a £300 million cut in housing association investment next year and a £320 million cut the year after.

How will those cuts impact on real families who are homeless or who are living in unmodernised, overcrowded, damp, cold conditions in Birmingham and elsewhere? The Government's 1992 autumn statement included plans for some 34,000 new rented home starts. This year's Budget has reduced the figure to 15,000--a reduction of 55 per cent. According to figures produced by the National Federation of Housing Associations, 124,000 affordable rented homes are needed each year--that is more than 300 a day--just to keep pace with demographic and labour market changes. Those new homes will not come from the figures projected by this Budget or from the policies pursued by the Government. It makes no sense from an economic point of view and it makes no sense for families who are in need of rehousing. Budget cuts to housing will result in the loss of about 4,000 construction jobs next year and about 7,900 by 1996-97. Lost tax revenues and high benefit payments will cost the Exchequer £35 million next year and £70 million the year after.

There have been some new housing policies. The Government have said that they will act to address problems with housing benefit. Hon. Members on both sides of the House have drawn attention to the spiralling

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housing benefit bill. But the Government have responded by blaming and attacking low-income families who often have no choice but to put up with the housing market that the Government created through their deregulation of rent and rent controls. We need investment in bricks and mortar. We need the new homes that people require and deserve. It is utterly appalling to blame and attack in the way that the Budget proposes those people least able to afford to pay.

Just last weekend a gentleman came to see me at my constituency advice desk. He is a housing association tenant. Housing associations are supposed to provide low-cost homes for people who need them. He had already faced in the past two years a 25 per cent. increase in his rent. He has now been told that there will be another 25 per cent. increase. According to the usual definitions of affordability of housing, people should not be expected to spend more than about 20 per cent., perhaps 22 per cent., of their income on housing costs. Yet that pensioner will pay roughly 50 per cent. of his income simply to keep a roof over his head. That is in the rented sector. Things do not look much better for owner-occupiers with the changes to assistance with mortgages for those on income support. Perhaps the construction worker who will lose his job next year as a result of the housing cuts will have difficulty paying his mortgage. What will be the consequence of that? He will not even receive assistance with his mortgage for the first nine months. He could end up with his home repossessed and becoming yet another appalling statistic. The Budget is a disaster for housing. It is a disaster for the homeless--the 160,000 households quoted in the statistics. It is a disaster for people living with their families in tower blocks who want to get out and should be able to do so. It is a disaster for people who are forced to pay rents that are far too high following the deregulation of the rented sector. The Budget is a disaster for the economy because it will cut the number of home starts. Although we talk about the recovery in the Chamber, if one asks people in the construction industry about the recovery they will say, "What recovery?" It is not happening in the construction industry or in housing.

The Budget will mean thousands of lost construction jobs. It will mean lost revenue to the Exchequer. The Budget is a disaster, but it could have been so different. It could have allowed local authorities to use their capital receipts to invest in housing. It could have allowed housing associations to do what they can do best and what they are meant to do best, which is to provide low-cost housing to people who need it.

7.2 pm

Mr. William Powell (Corby): As I have only 10 minutes available to me, I shall have to truncate what I wanted to say. It is my strong belief that my constituents are over-taxed at present and that the sooner my right hon. and learned Friend the Chancellor is able to reduce the general burden of tax on my constituents the better. One detects a note of fear beginning to creep into members of the Opposition parties when they tackle the subject of lower taxes. They are obviously beginning to become a little nervous about the potential consequences.

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Of course, my constituents would welcome lower taxes. Many of them would be divided as to precisely which taxes they would wish to have lowered. The general burden must be lowered. I hope that my right hon. and hon. Friends will bear it in mind that low interest rates are also in the interests of my constituents. I should hate us to be in a position in which lower taxes brought higher interest rates. There is no question but that we need both low interest rates and low tax rates, not low interest rates with high taxes or low taxes with high interest rates.

Today's debate has inevitably come to be dominated by the issue of VAT. I shall direct the remainder of my remarks to that issue. I have never made any secret of my anger that my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) introduced in his Budget of March 1993 proposals to extend the VAT base in the way in which he did. To my mind, that was a breach of principle and a breach of promise. The principle was that when VAT was introduced in 1972 it was agreed, as my right hon. Friend the Member for Brent, North (Sir R. Boyson) said, that it should not be extended to essential items. Clearly, heating and fuels are essential items. I resent and regret the fact that some of those who were in the House in 1972 did not defend in March 1993 the agreed settlement of the VAT base, under which essential items such as food, housing, transport and fuel should be left outside the scope of VAT.

The extension of VAT was a breach of an election promise. There is no escaping that fact. Sometimes it is necessary to do that. Sometimes one has to have the courage to recognise that there are higher considerations. Pledges given in good faith--I believe that ours was given in good faith-- sometimes have to be broken. Clearly, that can be the case. The consequence for the Tory party of the Budget of March 1993 has been disastrous, as hardly one of my right hon. and hon. Friends would not concede in private. To introduce a tax delayed and in two stages was surely a tactical error of the first dimension. We have already paid a high price for that decision in by-elections, European elections and council elections. I fear that that will continue. I have never for one moment sought to disguise that.

However, I must also recognise some other important factors. I do not regard VAT at 8 per cent. as acceptable. The only rate of VAT on fuel that I regard as acceptable is 0 per cent. That is no longer possible. To restrict VAT to 8 per cent. is wrong in principle. Then we would have three rates of VAT rather than two.

The original settlement was zero VAT and standard rate VAT--now 17.5 per cent. As soon as one introduces a third rate, what other items must be subject to that third rate? If one has a third rate, why not a fourth, fifth and sixth rate, as so many other countries of the European Union have? If we restrict VAT on fuel to 8 per cent., we will breach some fundamental principles.

I regard any tax that is implicitly accepted as one which some of our fellow citizens are unable to pay and requires us to compensate them so that they can pay it as highly undesirable in principle. Therefore, the compensation package has never been of the greatest interest to me, although I pay tribute to my right hon. and hon. Friends who have campaigned so tirelessly to ensure that a compensation package was provided for the elderly and those on social security. Inevitably, it is a leaky colander.

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I pay tribute to my right hon. and learned Friend the Chancellor for drawing the sting of VAT on fuel to some extent. It was to raise £2.3 billion, not £2.3 billion net, and it is now to raise only about half that sum. That shows how generous he has been with the compensation package. I must recognise that if the Government lose the vote it will put in peril the arrangements that have been put in place.

I hate the tax. It was profoundly misguided to introduce it. I shall never be reconciled to it, but I do not set out from there. I set out from where we are now. I would not have wished to be in this position, but I recognise that if the Government lost the vote tomorrow they would find themselves in a fairly chaotic position. Tomorrow's vote is procedural and there is no disguising that fact. The vote would not alter the rate of value added tax, but merely allow the issue to be discussed further, which would prolong much of the uncertainty. Although I recognise that my constituents hate the tax as I do, do I regard further uncertainty as being in their interests? I do not. Therefore, this is a real mess and there is no escaping that fact.

Where does that leave us? It leaves me having to ask where the Conservative party is going. There is no doubt that in recent months it has been badly off the rails. I think that it is still off the rails and I want some corrections to be made. Is that more likely if I make a heroic gesture, which I know to be a piece of personal self-indulgence, which would not necessarily be in the best interests of the country and, if it were, in the best interests of my constituents? I have not yet resolved that question.

I bitterly regret the fact that I am here for this purpose. We should never have landed ourselves in this situation and we must never do so again. My right hon. Friend the Prime Minister will have to pull the Conservative party together, if he is to complete the work that he has been elected to do, some of which is of the utmost importance, not least in Northern Ireland, as the hon. Member for Londonderry, East (Mr. Ross), among others, suggested.

My goodness, how on earth did we get here? How on earth can people who supposedly have experience have got us into this mess? I have to do my best to get us out of it and I will do so tomorrow.

7.11 pm

Mr. Jim Dowd (Lewisham, West): The House listened with care to the hon. Member for Corby (Mr. Powell). He has made himself the target of much attention from the Conservative Whips tomorrow. Regardless of the intellectual inconsistency of his argument--most of us would accept the careful way in which he put it together--I doubt whether people would agree that it would be an immutable transgression of the laws of taxation for value added tax on domestic fuel to remain at 8 per cent., rather than be extended to 17.5 per cent., and I have little doubt what advice they would give him.

This is the third time that I have spoken in a Budget debate and the third time that I have been caught by the 10-minute limit. I am sure that the rest of the House will be delighted to learn that, but I will push ahead none the less.

The Budget was a carefully crafted piece of work and was presented in a crafted way--I have got my praise out of the way first. Although hidden, its objective was clear. The fair sprinkling of soporific tedium that it induced in

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the House was simply an artistic embellishment on the Chancellor's part. Since the final statement by the right hon. Member for Kingston upon Thames (Mr. Lamont), Budget statements have been about the next Budget rather than the present one and this one was constructed in a similar vein. As I said, the objective, although hidden, was pretty obvious. It was a gamble on what next year's Budget will contain and do to contribute to Tory party fortunes at the general election thereafter.

Much of the language of the Budget seemed to have absorbed the advice that my predecessor, Mr. John Maples, offered in his infamous memorandum. This is the first time that I have had the chance to mention Mr. Maples since that memorandum, which has been quoted several times this evening. The Conservative party may rest assured that it will be quoted copiously between now and the next election. Although the language of the Budget statement made some genuflections to the way in which Mr. Maples was trying to encourage the Conservative party to go, the impact was different. The Chancellor used some of the phraseology in a plea to the country for understanding. He was saying, "We understand that things are not good for you, but we have got it all on track and, if you just bear with us, everything will come right."

Although the Conservatives seemed to promise a classless society of opportunity in the 1980s, the reality now is that the rich are getting richer on the backs of the rest of us--who are getting poorer--and the Budget does nothing to change that. While we trumpet the recovery, the voters do not think that the recession has ended. They still fear unemployment and have no more money in their pockets, so what we are saying is completely at odds with their experience. The good citizens of Lewisham, West--wise and perspicacious as they are--worked that out two years ago. That, in part, is why I am in the House rather than Mr. Maples. That is also the crux of the Government's dilemma. People do not believe them. That is not out of simple bloody-mindedness, but because the truth of their lives on the streets in which they live does not accord with the myopic technicalities of Tory protestations about growth and prosperity and nothing in the Budget has done anything to assuage people's fears. The recovery simply has not reached them.

Why should the people believe the Government when they tell them that everything is going so well? If there has been an improvement in recent years, it is due to the failure of Government economic policy, not their successes. The hon. Member for Beverley (Mr. Cran), who is not in his place now, spoke the magic words: he mentioned the exchange rate mechanism and the debacle over that. At the time, the Prime Minister said that the Government would not pull out and that to do so would be a betrayal of our future. He said that he and the right hon. Member for Kingston upon Thames would stick to it, through thick or thin. That was within a few days of the humiliation of our rejection, when we were thrown out of the ERM.

At first, the Government said that there would be no recession. When that proved not to be the case, they said that it would be shallow, but it was not. When they were finally forced to admit that we were in the middle of the deepest recession since the war, they said that it was due to international forces over which they had no control. Then, they magically rescued the nation from the recession, but the people did not believe them. They still

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do not believe the Government and they do not believe that anything that has improved since devaluation has been anything to do with Government policy.

We know what the Government were prepared to do to save our position in the ERM. They were prepared to jack up interest rates alarmingly, twice in one day. The real Tory nightmare would be what would have happened if interest rates had succeeded in stabilising the exchange rate of the pound within the ERM. Where would the recovery that has been built on the back of that devaluation have been then?

The strategy in the Budget was clear--to buy time to bribe voters with their own money before the next election. That action is consistent with Tory practice during the past 15 years. They frittered away North sea oil and the proceeds of privatisation. That was a golden opportunity, and it has been wasted. The full import of that decision will stay with this country and its citizens for many years.

The confusion of using the proceeds of capital sales to fund revenue is economic illiteracy of staggering proportions. We have heard that the proceeds of the intended privatisation of Railtrack are pursued simply as part of the "Budget arithmetic". Any organisation, whether in the public or private sector, will look at its capital portfolio to ensure that it is meeting the needs of the business, but one will not find it liquidating those assets simply to cover revenue. No householder would do so and no Government with an interest in the long-term future of the country would believe in doing so, but that is precisely what the Government have done for the past 15 years.

There have been many criticisms of the details of the Budget and I shall add a couple more. The ending of relief on mortgage interest payments for people who become unemployed is probably one of the most sinister attacks on the unemployed and those who become unemployed, as so many people will continue to do under the Government. The period for which the Government are now insisting that people must take out their own insurance cover is the time at which they are most vulnerable and most likely to need assistance in meeting their mortgage interest payments. The costs will be borne, as the building societies have made plain, by the borrower and loans will be unavailable to those at the margins, including first-time buyers and the least well-off. They will not be able to afford the money--anywhere up to £20 a month--to fund their insurance during the most dangerous period of unemployment.

On housing benefit, we have now seen the clear aim of the Government: they want, in effect, to introduce a contribution to rent by everybody on housing benefit. They tried that previously with the poll tax, and the 20 per cent. payment which everybody had to make, regardless of income. Everyone knows what happened to the poll tax. On VAT on fuel, the much- trumpeted extra pound from next April is, we now realise, worth only 30p. Even if one were to take that pound at face value, the calculation is that the average pensioner household will have to pay £1.69 in additional payments.

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The hon. Member for Colchester, North (Mr. Jenkin), in an intervention to the Secretary of State for Employment last Thursday, caught the mood of the Budget very well. He asked his right hon. Friend whether the Government had not achieved a "three-card trick" with the Budget. The Secretary of State, to give him his due, immediately recognised a trap when he saw one, and said that he preferred to think of it as a "triple crown".

A three-card trick--as anybody who has been to East street or Petticoat lane knows--is a con trick. To check that out, I went to the Library and looked up a dictionary, which defined the expression three-card trick as a card game much used by "street confidence tricksters". The Budget falls very much into the category of the three-card trick.

I shall go back to my friend, Mr. Maples. His memorandum states: "The Conservatives have let voters down, they have been in government too long, are complacent and have lost a sense of direction. They fail to fulfil promises, are clumsy at implementing policy and `shoot themselves in the foot'."

Nothing in the Budget has done anything to change that, and the British public know it.

7.21 pm

Mr. Alan Duncan (Rutland and Melton): I am grateful for the opportunity to comment on a Budget which can be fairly described as workmanlike. I am deeply suspicious about any Budget that is ever described as a "giveaway" Budget because, in my view, there is no such thing. If a Chancellor is giving something away, all he is doing is returning to people their own money.

The Budget has taken place at a crucial moment in the management of this country's post-war economy, because so many drastic mistakes have been made since the war. After the initial recovery of the 1950s, we saw a regime of stop-go, go-stop during the 1960s, a failure to invest and adapt large traditional industries which were living on subsidies, and no more than the management of decline.

Following the election to office of the previous Prime Minister in 1979, we saw a remarkable and significant departure from the post-war decline. Baroness Thatcher took steps to denationalise and liberalise, but unfortunately boom and bust discredited the excellent policies which she put into place.

I was very critical of the amplitude of the cycle and the causes which gave rise to it. I argued in my own book that there were important ways to show how the British economy, as it emerges from recession, can steer a surer path between boom and bust in the 1990s and beyond. I am pleased to say that almost everything in that little booklet is now Government policy, so I am hardly in a position to criticise what my right hon. and learned Friend the Chancellor has done.

My right hon. and learned Friend faces a severe challenge in the climate in which his regime must be put into place, and that is to sell the virtues of the long-term stability at which his measures are aimed to an unsettled and suspicious electorate. We have a climate in which people can plan, invest and borrow for the long term in a greater mood of certainty than has existed in about 50 years. That the Government have resisted the temptation to seek popularity in the short term by debasing the coinage is to be welcomed.

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