Dr. John Reid (Motherwell, North): I am grateful for the opportunity to address this great assembly this evening. I always feel that the House is at its best when it is jam-packed. Having listened to the Chancellor last week, I am a little concerned about his health. I know that he looks the picture of robust health and cultivates an image of bonhomie and strength, but he is beginning to suffer from an affliction which, unfortunately, has struck down so many Conservative Chancellors--chronic economic amnesia. The right hon. and learned Gentleman and his colleagues speak as though the Government have just taken office and compare this year's figures with those for two or three years ago. It is a contagious disease. The hon. Member for Fulham (Mr. Carrington) said--and it was a choice quotation--that he believed that within two years the economy would be robust. Within two years? The Government have already been in power for 15 years. He is effectively saying that within 17 years of the Conservatives coming to power, they may be able to speak of a robust economy.
Dr. Reid: There is a parallel with Moses' 40 years in the desert. In two years' time, Conservative Members may find themselves talking about turning the corner some 17 years after coming to power. Indeed, the Prime Minister has made that allusion during the past few weeks. I have heard so often that the Government are turning the corner that I have a grave suspicion that we are on a roundabout. The Government's 15-year economic record is plain for all to see, and the Budget must be viewed against that background. The story so far is a sorry one of low growth, low investment, high unemployment and high deficits.
The Chancellor has not achieved that single-handed. No one person could have done that alone. Since the Government first came to power, there have been nine Chief Secretaries to the Treasury, five Chancellors of the Exchequer, and two Prime Ministers--soon, no doubt, three. That sustained team effort over 15 years has left the country in its present sorry plight. Only one right hon.
Column 92Member has the distinction of failing in all three offices, having served as Chief Secretary, Chancellor and Prime Minister. Due to the Chancellor's efforts and those of his predecessors, this country has suffered lower growth than any other major industrial nation over 15 years of Conservative Government. The UK has achieved a growth rate of 1.7 per cent.--14 per cent. lower than the rest of the European Union, which had a growth rate of 2 per cent., 25 per cent. lower than the rest of the Organisation for Economic Co-operation and Development, which enjoyed annual growth over the same period of 2.3 per cent., and 30 per cent. lower than G7 countries, excluding the UK, with a growth rate of 2.7 per cent. The Chancellor says that we can look forward to growth over the next year. Let us remember that we are in nearly the 16th year of Conservative Government. The country has suffered the lowest growth rate over the past 15 years of any major industrial nation. The only thing as consistently low is the Government's popularity rating over the same period.
Mr. Michael Bates (Langbaurgh) indicated dissent.
Dr. Reid: The Government Whip protests. I can see that that may be a wrong comparison. The only thing much lower than Britain's growth rate is the Government's popularity over the same period. Conservative Members have spoken at length about investment, but that is the same sorry story. The private business sector now has lower investment than--not this time last year or in the 1980s--but, as a proportion of gross domestic product, than in 1979: 15 years ago, when a Conservative Government first came to power promising that such would be confidence in British industry under them that investment rates would rocket. The figure is now 12 per cent. compared with 13 per cent. for 15 years ago. It is unlikely that any of the Chancellor's actions will remedy that.
Government investment is less than half that of Japan throughout the 1980s, and at a miserable 2 per cent. of GDP it is less than the G7 rate, excluding the United States. It is getting worse. The Government intend by their measures to have even lower investment in the public sector than over the past 15 years, which itself had lower investment than previously.
The Government almost abandoned manufacturing for almost a decade. We remember the time of the supposed technological and industrial revolution under Mrs. Thatcher, with everyone working in hairdressing and other service industries or in the City of London. Manufacturing investment fell by 28 per cent. from the start of 1990 to mid-1994. Over the past four and a half years alone, manufacturing investment has fallen by over 25 per cent. Total investment is still 8 per cent. below the level before the recession. In terms of both growth and investment, the Chancellor's task is not to achieve something that has arrived from nowhere but to overcome the deficits and disadvantages of 15 years of Conservative Government.
I have not said much about unemployment because when historians look back on this Government, they will remembered above all as the Government of unemployment. Despite some 30 manipulations of the figures, unemployment has more than doubled in the 15
Column 93years since the Government took power. Tragically, long-term unemployment has almost trebled, from 340,000 in 1979 to more than 1 million today.
The Conservatives say that we should consider not unemployment but the figures of those in work. They are just as illuminating. The UK is the only European Union or G7 nation to have suffered a fall in civilian employment between 1979 and 1993. The total number employed has been falling at an even faster rate recently. The much-vaunted fall in unemployment is often paraded by Conservatives, but there has been a fall in employment itself. When the Government say that unemployment has fallen--due mainly to rigging the statistics--and that unemployment has in fact fallen by 400,000 since the end of 1992, we must realise that employment has fallen by an even greater number. If anything illustrates the Government's ability to create not jobs but statistics to cover unemployment levels, it is that the number of people in work has fallen by a greater amount than the supposed fall in unemployment--by 440,000 since the bottom of the recession in mid-1992.
Conservative Members said that the country was emerging from recession, led by massive trade exports. For the first time--not since 1979, the second world war, the first world war or the Boer war, but since the industrial revolution, since 1780, when statistics were first created--the Government have created the unenviable record-- Mr. Jacques Arnold indicated dissent .
Dr. Reid: The hon. Gentleman dislikes me repeating this point, but we should shout it from the rooftops. For the first time since the industrial revolution, the Government have managed to produce a deficit in our balance of trade in manufactured goods. Over the past 15 years, manufacturing output has fallen from 30 per cent. to 20 per cent. of gross domestic product--a drop of 33 per cent. in manufacturing products over one Tory generation. There is a current account deficit of more than £10,000 million per annum stretching to the horizon.
Nothing short of the collective genius of a Tory Cabinet could have taken a nation of makers and traders, underpinned by two centuries of trading surplus, fortified by North sea oil and boosted by sterling depreciation, and turned it into a nation of trading debtors. That is the record that the Chancellor had to defend last week. I do not blame him alone. It has been a team effort, and only one member of that team has held all three Treasury posts--the present Prime Minister.
What of the effects on our constituents? I refer to a specific item in the Budget that affects my own constituents. I support the introduction of a landfill tax; it is only right that polluters should pay. I have a warning for the Chancellor, however. I have in mind the fact that we have to reclaim the great Ravenscraig site. Landfill is not only a pollution issue, because landfill can be used for reclamation and development. It would be bizarre if the tax was applied in the same fashion to landfill that was being carried out for a positive purpose, such as overcoming toxicity or enhancing redevelopment. I hope, therefore, that the Chancellor and his Ministers will be careful when drafting that tax provision. Little positive is done in the Budget for the people of this country. Indeed, almost everything done in the Budget will affect our constituents for the worse. Three issues are relevant. The first is tax, which has concentrated most minds. I was interested when the hon.
Column 94Member for Hendon, South (Mr. Marshall), who is, understandably, not in his place at present, and his hon. Friend the Member for Fulham spoke about tax. I often ask myself why it is that when taxes are raised in the company sector, Conservatives describe them as "punitive". Whenever taxes are raised from ordinary individuals, it is because of some necessity to broaden the tax base. That is asserted as a requirement without any evidence to back up the assertion. It is taken as an a priori argument that it is a good thing to increase the tax on individuals, especially through VAT, but a bad and punitive thing to do the same to companies.
The Conservatives have created a minor poll tax for themselves through VAT on fuel. That tax has, with some justification, received the most attention in the press. However the Government tackle the problem, people out there realise that they will be hit. Despite the rebates, the most vulnerable in our society will be hit even harder. It will be a sorry epitaph if the Prime Minister has to enter the Tory conference not to the strains of "Land of hope and glory", but to the strains of "Keep the home fires burning, but only at low peep". That is precisely what the Conservatives have inflicted on millions of people. The imposition of VAT on fuel is another breach of a personal pledge by the Prime Minister. The Prime Minister has broken pledge after pledge; this one will not be forgotten. It is not only a question of VAT on fuel. After this Budget, the average family will be almost £6 a week better off. Does it not show the level to which the Chancellor has stooped that he parades--I think that I slipped up. It was a Freudian slip; I was thinking of the next Labour Government. People will, of course, as you well know, Mr. Deputy Speaker--
Dr. Reid: As anyone with the objectivity that some of our colleagues have--the objectivity that you are reputed to have, Mr. Deputy Speaker-- would know, after this Budget, the average family will be worse off. Before the Budget and before a number of handouts, they were £860 worse off per annum. When we are told by the Conservatives that there is no way in which we can reject VAT on fuel because it is an essential element of running the country, no one is fooled. The poor and the vulnerable are being taxed this year so that a war chest, a sleaze fund, a tax cuts fund can be set up by the Conservatives in the naive belief that, yet again, they can go back to the British people 12 months before an election, cut taxes and say, "There you are. We have put taxes down again. Now vote us in so that we can put them up within weeks of the next election."
Under the Conservatives, people are taxed not only from the cradle to the grave, but when they sit in front of the fire, when they insure their cars, when they go on holiday and when they take out insurance. The Conservatives have extended the tax base far more comprehensively than did any of their predecessors. There is nothing but woe in terms of tax for the average family.
What is there in the Budget for the homeless or for those who seek to become part of the great property-owning democracy that the Conservatives are supposed to encourage? Once again, there is nothing. Indeed, impediments are now being placed in people's way. Such is the collective wisdom of the Conservative party that the reason why housing benefit has gone up
Column 95never strikes it. It has been explained to us in the Budget, and subsequently, that we must cut housing benefit because we are spending too much on it. Let us ask the Conservatives why we are spending too much on housing benefit.
First, the Conservative Government reduced the subsidy for council houses by slashing the central Exchequer fund for council housing for the rational economic reason that Mrs. Thatcher, the Prime Minister of the time, hated council housing and thought that council housing equalled Labour politicians elected locally. If the subsidy on council houses is reduced, it does not take an economic genius to work out that council house rents will rise. In the social sector, the Conservatives created the rise in rents.
Secondly, the Conservatives deregulated rents in the private sector. Thirdly, there was the decimation of the construction industry. If there is deregulation of the private sector, the withdrawal of subsidies in the council sector and a shortage of housing, according to the law of supply and demand, rents automatically rise. The Conservatives are now reaping what they sowed against the advice of the Opposition. There is nothing in terms of tax, nothing for the homeless and nothing for those on unemployment benefit.
There is nothing beneficial in this Budget. As the hon. Member for Fulham said, this is basically a sit-still Budget; the hon. Gentleman praised that. I prefer to think that the Conservatives have run out of ideas. They are now coming round to the third recession of their period in government. Like a rabbit in the glare of headlights, they sit transfixed. They are sitting waiting. The Foreign Secretary sits and waits for a blessed retirement. The Secretary of State for Employment sits and waits for his opportunity. The President of the Board of Trade sits and waits for his call. The Prime Minister, presumably, sits and waits for the men in grey suits. According to the speeches that I have heard, some of his Back Benchers are sitting waiting for the men in white coats.
Unfortunately, the people who suffer from that waiting are our constituents. They have waited long enough. It cannot be too soon until the Chancellor, his Prime Minister and his Government are thrown out and until a Labour Chancellor can introduce a Budget that will start our country's recovery.
Mr. Jacques Arnold (Gravesham): I listened intently to the hon. Member for Motherwell, North (Dr. Reid), who told us that we are heading for a third recession. The fact is that we are coming quite fast out of the second recession. Perhaps the hon. Gentleman is giving away a natural lack of confidence. Perhaps he believes that in, say, 10 years' time, when we run into yet another recession, this Conservative Government will still be caring for the interests of the nation. Let us see what happens.
The hon. Member for Motherwell, North also dwelt lovingly on the past four years and on the impact that they have had on the average family--a period of recession and difficult times for that family. I admit that during the 15 years of Conservative government to which the hon. Gentleman referred, there has been some undulation in the economy. We had good recovery, then the first recession,
Column 96another good recovery and then the second recession. We are now going into another recovery. The hon. Gentleman failed to mention, however, that the average family is about £80 a week better off in real terms than it was when the Conservative Government came to power after the previous Labour Government.
The hon. Member for Motherwell, North referred to a "sleaze fund" and a "war chest" for the election. A Conservative Government ripping off less of taxpayers' money is not a war chest. That is leaving money with the people who earned it, and any Government should be working in that direction.
I have been present for most of the debates on the Budget statement. I have been most struck by the unanimous and strident line taken by most Opposition Front-Bench spokesmen in their speeches. On the first day of the Budget debate, the right hon. Member for Sedgefield (Mr. Blair) said:
"this Budget will go down in history as the VAT-on-fuel Budget."--[ Official Report , 29 November 1994; Vol. 250, c. 1104.]
One can understand the right hon. Gentleman's inability rapidly to absorb and comment on the Budget's considerable detail and therefore his reliance on a pre-prepared speech, but why take that line on a decision that was taken two years ago?
On the second day of the Budget debate, the first words of the hon. Member for Dunfermline, East (Mr. Brown) were:
"Yesterday, in what has become known as the VAT-on-fuel Budget".--[ Official Report , 30 November 1994; Vol. 250, c. 1225.] I hardly think that this is a "VAT-on-fuel" Budget. On the second day of the Budget debate some two years ago, the hon. Member for Dunfermline, East made great play of the introduction of VAT on fuel. That was a Budget in which he gloated:
"For people paying VAT, there will be `tax rises before breakfast, before lunch and before dinner.'"
I cannot help thinking that Labour Members condemning tax increases is rather like the devil renouncing sin. They have traditionally taxed and spent. They now propose to knock £3 billion out of the Government's finances by voting, yet again, against VAT on fuel. However, they do not say what taxes they would increase or what spending programmes they would cut.
Such fiscal irresponsibility would cause chaos in the financial markets on Wednesday morning and turbulence until March next year when the detail of taxation would finally have to be settled. The immediate chaos that would occur this week, which would destabilise sterling, would lead rapidly to damaging interest rate rises. That opportunism and irresponsibility from a Labour party that includes a carbon tax in its own party policy is particularly significant. In the Budget debate two years ago, the hon. Member for Dunfermline, East said:
"I say that there is no recovery that we will call a recovery when it assumes that 3 million people stay out of work. There is no recovery that is worth its name which does not begin to put Britain back to work."--[ Official Report , 17 March 1993; Vol. 221, c. 290-94.]
He went on to predict that unemployment would rise for months thereafter.
Column 97As we all know, unemployment is down to 2.5 million and is falling. There was no acknowledgement of that welcome trend from the hon. Member for Dunfermline, East. For a more objective assessment we should note that Anatole Kaletsky in The Times on 30 November said:
"the economy and the public finances really are healthier than they have been for at least 25 years."
Therein lies the explanation for the stridency of Opposition Members. A big enough barrage might drown out the clear message of this Budget: that this country is rapidly coming clear of the recession and is powering ahead. That will become progressively clearer to the electorate, and the bankruptcy of Labour economic policy will become clear too. The Opposition know that a trend--economic and then electoral--is clearly set and a succession of Opposition speeches today showed clearly that they had worked that out and that they are becoming windy.
Growth is 4 per cent. this year and manufacturing output is up 5 per cent. Industrial production is up nearly 6 per cent. Unemployment is down nearly 500,000 from its peak and it is falling faster. The current account deficit, to which reference was made, is down sharply and the public sector borrowing requirement is at last plummeting. Inflation is at a 27-year low, which is a tribute to firm monetary policy.
I draw the attention of my right hon. Friend the Financial Secretary to the Treasury, however, to the pressures on input prices of commodities and other raw materials. Important raw materials for factories in my constituency, such as lead for batteries, pulp for paper and plastic ingredients for containers, are priced internationally and they have all seen sharp increases due to world supply limitations. How the Chancellor reacts to the effects of that cost push will be important for further progress of the British economy.
I welcome the return in this Budget to the indexation of income tax basic allowances and in particular the priority given to the less well-off through the exceptional widening of the 20 per cent. tax band and to pensioners by the increase in their personal allowances ahead of inflation.
I also welcome the measures for small businesses and the assistance for new employment. I particularly welcome safeguards in respect of business rate revaluation. The small retail sector in Kent was very badly hit by the exceptionally high valuations that were made five years ago. I suspect that those valuations, which will come into effect next April, will be significantly less, thus reducing rate bills. Thanks to the Government's introduction of the unified business rate five years ago, the rate can go up only with inflation and therefore business rate payers are protected from profligate Labour councils.
Representing a Kent constituency, I am of course aware of the impact of the single European market on the off-licences, brewers and publicans in the county. The decision not to increase alcohol duties this year to diminish the differential between prices across the channel and in Kent is very much appreciated.
The House will be aware of my interest in Latin America, a region now growing rapidly with historically low inflation rates thanks to it following policies pioneered by the Conservative Government of free enterprise, privatisation and monetary discipline. There
Column 98are great opportunities in the region for British exporters and investors, but to achieve even greater success British exporters need to enjoy at least competitive terms for export finance. That is why I welcome the 10 per cent. cut in Export Credits Guarantee Department premium rates, which put them below the average charged by other G7 export credit agencies. The large increase of ECGD cover available for developing markets, such as those in Latin America, will also be welcomed.
I should like to consider a serious criticism. I want to draw the attention of the House to an aspect of fiscal and social security policy perpetuated and extended in this Budget which is doing progressive damage to the very fabric of our society and the families that make it up. There was a time when fiscal policies showed a strong bias in favour of the family unit. Over the past few years, we have split the taxation of the family. When a mother gives up paid work to care for her children, she forfeits not only her income but her tax allowance, which is worth at least £880 to the family and which is not transferable to her husband.
The married couple's allowance has been frozen and, therefore, eroded in value for the past four years. Its value is being further eroded by down- banding from standard rate to the 20 per cent. band this year and to the notional 15 per cent. band next year. The benefit to families has been reduced from £430 last year to £258 next year, a loss of £172. Furthermore, if the married couple's allowance had kept up with inflation and had continued to be applied to the standard rate, it would be worth £200 more next year.
Mortgage interest tax relief, of greatest value in the early years of a loan, tends to be of greatest benefit to families when they have purchased the family home, which they tend to do when the children are young. We have not only failed to upgrade it for inflation but we are down-banding its effect. In the south-east, where most families utilise the entire £30,000, the value of the relief has fallen from £1,200 at standard rate on 15 per cent. interest rates two years ago to £360 next year on the notional 15 per cent. tax band at reduced interest rates of 8 per cent. That loss of £840 is considerably offset by lower mortgage interest payments, but we should not underestimate the impact on families if interest rates rise in the years ahead.
For the average family with a full-time mother caring for the children, the impact of the loss of her income and tax allowance benefit, combined with the devaluing of the married couple's allowance and mortgage interest tax relief, is a severe squeeze on family net income.
We should contrast that squeeze with conditions for so-called one-parent families. Their finances have gone in the other direction. Wholly dependent on the state, or even with earned income comparable to that of two-parent families, lone parents today gain a favoured position through state benefits such as social security and housing benefits, all of which are not taxable.
Paradoxically, the Child Support Agency only accentuates that position. The role of a father as breadwinner for a young family is being economically undermined. The state is becoming a surrogate financial provider, with considerable social detriment, particularly to the development of children.
Column 99The Budget also increases pressures on mothers to go out to work. The personal tax allowance of a mother, which is otherwise useless, can be harnessed. The state reimburses lone mothers for child care costs when they go out to work. Mothers are being encouraged to switch from part-time to full-time work, not least by the announcement in the Budget of a £10 weekly premium on family credit for those who do so.
Social pressures are also building for women to go out to work, to the detriment of their young children. How often do we hear in the media denigration of the so-called non-working mother and praise of professional women who "manage their families"? We are seeing a growth in the number of latch-key children who get into trouble, delinquency or even crime. The growth in juvenile crime is surely not unrelated. I hardly think that the increase in creches and child minding is an improvement on mothers' care for their children. A generation ago, the overwhelming majority of mothers stayed at home to care for their children. Financial and social pressures are forcing an increasing number of mothers out to work. Even so, 40 per cent. of women with children under 10 remain at home and an additional 35 per cent. work only part time. Even higher percentages do so among the C, D and E economic groupings. The irony is that they are a silent majority, putting their children first in their personal scale of priorities. The minority of full-time working mothers, particularly professional women, tend to be the most vociferous in the media and, I fear, are listened to disproportionately by Ministers.
All those pressures on mothers to go out to work are having unforeseen side -effects in addition to their effect on child care. In a rapidly changing economy, jobs are decreasing in mass-manufacturing and mining, to the detriment of young low-skilled males, and are increasing in high-tech and service industries, where they are increasingly being taken by women. That is leading to increasing unemployment among young men, who become more vulnerable to crime and who do not have the financial means to become worthy husbands and fathers. That leads to increasing single-parent families. We seem to be encouraging a vicious downward spiral. Our current fiscal, employment and social security policies are putting growing destructive pressures on the family.
I urge my right hon. and learned Friend the Chancellor of the Exchequer, as his economic policies produce more fiscal room for manoeuvre, carefully to consider the tax and benefit treatment of families. Should we not only enhance the married couple's allowance but authorise the full transferability of a full-time mother's tax allowance to her husband? Those issues are vital to our future as a nation. The Opposition do not even appear to have grasped the problems. The Labour party's social justice commission ducked them. Benjamin Disraeli identified the Conservative working man as the chap who led a decent working life and cared for his family and its well-being and its future. We in the Conservative party should take up the challenge of our inheritance and back the Conservative working man.
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Mr. Alistair Darling (Edinburgh, Central): I sometimes wish that more members of the public could hear the hon. Member for Gravesham (Mr. Arnold) speak, not for the reasons that he would like, but because when I hear his onslaught against single parents, I believe that he speaks for a number of those on the Government Benches who characterise single parents as scroungers, as undeserving and as people who should somehow be reviled. That is most unfortunate and we hear it time and again from Government Members.
Mr. Arnold rose --
Mr. Darling: No, I will not give way to the hon. Gentleman. I shall refer to one non-controversial point that was raised by the hon. Member for Hazel Grove (Sir T. Arnold)--who I see is now in his place--about the scrutiny of the Budget. He said that there had been fewer economic debates than is desirable and he talked particularly about the Select Committee.
I remind the House that a year ago the Finance Bill was subject to a guillotine for the first time in recent memory. I understand why the Government guillotined the Bill. They did it for the curious reason that they did not want proceedings on the Finance Bill to conclude before the end of March because of a little difficulty with VAT--which has come back to haunt the Government this year. One result of the guillotine was that a large amount of technical detail in the Bill was never scrutinised properly. Committee members were in the absurd position of finding that we had time on our hands, having exhausted the subjects listed for discussion, but we could not begin to discuss the necessary technical detail--probably in a non-partisan manner.
I should declare a vested interest in the debate in that I am a member of the Institute of Fiscal Studies tax reform committee which was set up partly in response to the fact that the Government are not looking--
Mr. Arnold rose --
Any Finance Bill contains large sections that are non-controversial in party political terms, and if we are to do our duty as a House, and as a Committee which scrutinises the Finance Bill, we need proper time to review the proceedings. I hope that the Government are not, even now, thinking of some spurious reason for guillotining the Finance Bill yet again.
Listening to Tory Members' speeches, one might assume that the Conservative party had been in power for only the past two or three years. In fact, we are entitled to judge the Government on their performance over the past 15 years. In that time, we have seen low growth and high unemployment, there have been two
Column 101recessions and one unsustainable boom. Yet the Secretary of State for National Heritage, who introduced the debate this afternoon, said that the Government believe in stability. Stability is one of the things that we do not have under this Government and there is no sign that we shall attain it.
Despite the good news that they set out in their speeches, Government Members could not explain why no one believes what they say and why none of them responded to the memorandum prepared by Mr. Maples, who was a respected Member of the House and a respected member of the Government's Treasury team. He identified a major problem with Tory instincts: not the instinct for reducing taxation that we are constantly told about, but the Tory instinct for making the rich appear to be getting richer on the backs of the rest of the population.
Mr. Arnold rose --
Mr. Arnold: Will the hon. Gentleman face the fact that the scurrilous attack that he made on my motives, which he interpreted as an attack on single-parent families, exactly encapsulates the problem I spoke of? We are not facing the fact that, nine times out of 10, a two-parent family is better for children's development. A personal attack on me and the implication that I am attacking those mothers who, for one reason or another, have to bring up their children on their own is no way to deal with a very serious and growing problem.
Mr. Darling: The hon. Gentleman flatters himself. It was not a personal attack on him, as he well knows. I know from observing the hon. Gentleman during the past two years that he is no stranger to making attacks. I was attacking not his motives but what he said. The 1994 Budget has been subjected to a deal of criticism, some of it perhaps unfair. "Workmanlike" was the best that I read, but other people were unkind enough to say that it was boring or even to suggest that some right hon. and hon. Members might have nodded off during its delivery. Others have said that it was remarkable only because it was the Budget after 1993 and the one before 1995. The 1995 Budget will be the interesting one because 1996 is down for election year.
I believe that some of the criticisms of the Budget are misplaced. At the risk of being controversial, let me say that I believe that it was fascinating and remarkable for two reasons. First, it tells us that the Tory party is deeply divided in what remains of its philosophy, between the right-wing members, some of whom were celebrating at Alexandra palace on Friday night, and those who want to occupy the middle ground of British politics--Labour's ground. We saw signs of that right-wing legacy last week with the housing benefit measures. The Tories believe in rent control, but they want to use the tenant--a blunt and usually vulnerable instrument--as an instrument of control. There is now a restriction on the amount of help to be given to people who become unemployed and have a mortgage. No help will be given for the first nine months. The Chancellor's answer is that people should get insurance. Has he any idea of the cost of insurance? It can be as high as £7 for every £100 to be covered.
Column 102People in vulnerable occupations or who have been made redundant in the past may have to pay even more. Of course, the Chancellor did not say that when people take out insurance they will pay tax on top of the premiums. That is the double whammy for such people.
The second reason why the Budget is remarkable is that it raises a fundamental question--what are the Government for? What is their view of economic affairs? It seems to us and, I suspect, to a majority of the population, that their sole object is to be re-elected. Nothing else matters. The 1992 and 1993 Budgets increased taxes to record levels to pay for economic failure and to pay the bills that the Tories ran up to win the last election.
When the right hon. Member for Westmorland and Lonsdale (Mr. Jopling), who is not in his place, bemoaned the fact that some of the rebels would not come into line on the vote on VAT tomorrow night, as befits a former Chief Whip, he did not pause to reflect on the fact that one of the difficulties with VAT was that the Conservatives specifically said they would not increase the scope of VAT at the last election. They did not tell the truth. That is one of the reasons why the public are so unhappy about it.
We now move to phase 2 in a familiar cycle. Having raised taxes, the Conservatives plan to reduce them in 1995 so that the electorate will see the benefit of the reductions in 1996. The hon. Member for Corby (Mr. Powell), who is not here, said that Opposition Members were worried that the Conservatives might reduce taxes. No, we are not. The one thing that the Conservatives have blown once and for all is a matter of trust. People do not believe what the Conservatives say on tax or on anything else. They are not trusted. No political party can win an election unless it is trusted. So what are the Government for? Their sole purpose now is to buy votes, whatever the cost. The right hon. Member for Brent, North (Sir R. Boyson) was good enough to tell us that it was essential from the Tory party point of view to reduce taxes next year.
We have the absurdity that the Government are selling off Railtrack to raise funds to reduce taxes. As the Chancellor said, that was an integral part of the Tory calculations. That is not because there are any great benefits to the British public. Selling Railtrack will cost the taxpayer more from 1997 to 1998 because we shall have to pay increased subsidies to the operators to use the privatised rail track. Here we have an example of how the Government are going for short-term gain, which we the public and the taxpayers will have to pay for in the future.
There is no sign of stability. All that we have is great uncertainty. The Government's strategy of attempting to buy votes in 1996 will not work. A 5p reduction in the standard rate of income tax or the equivalent will not make up for the fact that, in the past two or three years, the Conservatives have introduced seven new taxes. That is equivalent to 7p in the pound. It will not work because people do not believe anything that the Government have to say. Even in the past week, a new tax has been introduced. Value added tax is to be extended to certain travel--pensioners travel, recreational travel and so forth--as my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) said. The people do not trust the Tories on tax and they never will.
Column 103The right hon. Member for Suttton Coldfield (Sir N. Fowler) spoke at the beginning of the debate. First, he had to take the precaution of reassuring the House that he supported the Government. It is a fine thing when a former Tory party chairman must start his speech with such reassurances. He wanted to stress that it was a mistake in political terms not to have introduced VAT on domestic fuel at the full rate. What a cynical approach. That is not the problem. Other Conservative Members identified what the problem is--the fact that they have introduced VAT rather than the fact that it was introduced in two parts. The right hon. Gentleman said that, for political purposes, it should have been introduced at one stroke because that would have made party management easier. That sort of cynical approach is one of the many reasons why people do not support the Government.
Mr. Nirj Joseph Deva (Brentford and Isleworth) rose --
Mr. Deva: I listened briefly to what the hon. Gentleman was saying. Can he explain what the Opposition are trying to do? He says that they have ditched all their policies of the past 15 years. Is that not trying to buy votes?
Mr. Darling: The hon. Gentleman might be better informed if, first, he attended debates of this sort for their entire duration and secondly, if he cared to study our various policy statements. The Government have no sense of direction or of the long term. Growth has been abysmally low throughout their full term in office--the past 15 years. Increasingly, as the Dudley by-election will show, the Government have lost touch with reality and with people the length and breadth of the country. The electorate are not looking for tax cuts designed to buy votes. No one likes paying tax, but if people are to be taxed they want to know that their taxes are going for some positive purpose. They look for a long-term improvement for themselves and their children. Increasingly, they worry about the future and they are afraid.
As the hon. Member for Rutland and Melton (Mr. Duncan) said, the Government face an electorate who are increasingly unsettled and suspicious. They are looking for a Government who are on their side and not on the side of privilege. The Government must not forget that people are faced with the prospect of VAT on fuel but see the chief executives of privatised industries, such as British Gas, getting huge pay increases, about which the Government do not even seem to care, let alone try to do anything. Is it any wonder that the people do not trust the Government and have no faith that they will act on their
Column 104behalf? So often they appear to be the Government of the vested interest and of privilege--the Government who have nothing to say for the vast majority of people.
Mr. John Marshall rose --
Mr. Darling: We pointed out that the regulator ought to have jurisdiction on such matters. As the hon. Gentleman raised the subject, I shall point out that the Prime Minister's formal call for restraint has been roundly rebuffed. I see that he has been considering alternatives, such as giving institutional investors, shareholders and others a greater say. At least the Government are beginning to recognise that there is a problem, which is a significant shift in the position that they took when the announcements were first made. We, on the other hand, are suggesting something positive.
People have every right to be afraid because, as my hon. Friend the Member for Warwickshire, North (Mr. O'Brien) and, I think, my hon. Friend the Member for Fulham (Mr. Carrington) said, if £6 billion is to be put back into the economy next year because of tax cuts, what will that do to inflation? The economy is growing. If the markets are to be reassured, the brakes will have to be applied hard after Christmas. There is a very real prospect of interest rate rises to slow down the economy after Christmas, to allow the Government to reduce taxes and buy votes. People will pay a double penalty. They have had high taxes and high interest rates, and they may have still higher interest rates to enable the Government to reduce taxes for the sole purpose of trying to win the next election.
Indeed, the problem of high interest rates is bound to strike fear into the hearts of many people, be they in business or elsewhere. Interest rate rises have been necessary so far because of the lack of capacity in the economy. That is because the Government will not accept that what is needed is investment in our economic capacity so that we can achieve sustainable non-inflationary growth. It is too early for the Government to start celebrating low inflation--the test for that will come in five or six years, and certainly after any election.
The Government have no purpose or direction and precious little philosophy left, but the Chancellor is trying to scramble to the middle ground, at least in part. However, the contradictions of the divided Government show through. Take the help--if I can call it that--for the long-term unemployed, the numbers of whom are growing at the rate of 350,000 a year. There is too little help, and why does it start only in April 1996? Does the year 1996 ring a bell? It may be an election year, and would not it be convenient if unemployment started to full in the summer before an autumn election? The Government know that there are very good social and economic reasons for tackling the problem of long-term unemployment, yet they are not prepared to do something about it until 1996.
Venture capital trusts are an example of a worthwhile idea which stands every chance of being undermined by becoming a major tax break for the few. I saw that one of