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Usually I win the argument, but many people in my constituency receive less in housing benefit than they should. Gobbledegook is the best that the Secretary of State for Social Security can contribute to the housing problem.

We will find that people who need income support will receive no help on paying mortgage interest for the first nine months. They are told to insure against not being able to pay. Many people cannot afford their mortgage payments now and the Government want to add a mythical insurance, which people may not even be able to get. They seem completely to ignore the fact that their policy is likely to result in bigger debts and more homelessness. Even people with current loans will find that for the first two months during which they get income support they will receive no help with mortgage interest. The four months during which half of it will be paid will then begin. That is incredible when, as of June 1994, there were 485, 000 households in Britain with mortgage arrears of three months or more.

Many people are already unable to pay interest on their mortgages having fallen on hard times. That is causing them the utmost distress but also leads to huge numbers of repossessions--200,000 properties were repossessed between 1991 and 1993--which necessitates more public spending because those people become homeless. Many finish up in bed-and-breakfast accommodation at huge public expense. The Government's policy is not only heartless but stupid.

The social rented sector--I hate that term but we know what it means--has shrunk by more than 1 million homes since 1981. The central problem is not fecklessness or even profiteering by private landlords--landlords would not be able to profiteer if there were not such a housing shortage presided over by the Government. The effects of the shrinking social rented sector are evident from a letter from my borough council. It states:

"The key factors locally in Preston are that there are 2,300 applicants registered on the council's waiting list . . . 181 homeless families in temporary accommodation for periods up to eight months . . . it would cost an estimated £170 million to bring all the private sector housing stock up to full modern standards of repair and facilities and £90 million for the council's own stock . . . and there has been a cut of 60 per cent. in real terms in the council's borrowing approvals for housing over the last 10 years."

The Government have presided over all that. The council now expects that the Budget

"will lead to a reduction in spending on improvements to existing council stock, higher council rents and further reductions in renovation grants in the private sector and in area-based improvements in such renewal areas."

That is no way to run a country.

Our fellow citizens live in such poverty that it is just as well that the curious conventions of the House allow the Prime Minister himself, the Chancellor of the Exchequer and their immediate colleagues to "congratulate Her Majesty's Government" because one thing is certain--the population in general will not.

8.32 pm

Sir Teddy Taylor (Southend, East): I wish to draw attention to a simple fact, not to make a political point. During this debate, I asked the Labour party's Front Bench spokesmen and two Back Benchers a simple question: if there were ever a Labour Government, would they abolish the 17.5 per cent. rate of value added tax? Unfortunately, I have not yet received a clear yes.

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The hon. Member for Renfrew, West and Inverclyde (Mr. Graham), in a delightful speech, argued strongly about how filthy Tory policies are and how splendid the Labour party's are, and I am sure that he believes that. However, I am going to Renfrew town hall on Sunday to make a point that I shall make now. It is time that the House woke up to the fact that we are kidding the people of Britain if we pretend that a change of Government will dramatically change what can be done about VAT. It is a horrible message, but we must tell people that this now pathetic Parliament can do hardly anything about VAT or many other things.

The hon. Member for Renfrew, West and Inverclyde talked about some of his poor friends whom he mentioned by name. He referred particularly to a lady who was having to pay more for her water, but what power do the Government have to reduce the VAT? The hon. Gentleman also talked about telephones; I am sure that many people, including his delightful Rose, are worried about paying this horrible VAT on their telephone bills. However, what the blazes could a Scottish Nationalist Government, a Labour Government or a real Conservative Government do about such matters? As the hon. Gentleman knows, the answer is nothing. That is not a matter for debate; it is a fact.

As we know, the freedom of our country to decide our taxation disappeared back when it all started in 1987 when Madame Scrivener proposed that there should be no provision for a zero rate. There was some flexibility but a series of decisions meant that Britain had to tax most of its goods at a basic rate within a certain band and a minority of its goods at the lower rate. Special provisions for gas and electricity meant that we could levy the lower rate but I am confused about one issue, which I hope that the Government will clarify.

It seems that gas and electricity are the only items on which we could reduce the 17.5 per cent. rate if the Government changed their mind or if there were a change of Government. However, I am led to believe that we could not reduce the rate on some items of fuel and power, such as fuel oil, coal, peat and coke. Furthermore, if the European Community decided that there had been a distortion of the rules of competition among the various forms of fuel it could take legal action. We are in a terrible mess.

I hope that hon. Members will appreciate the fact that, although the Tories and the present Government are blamed for levying VAT on certain items, we did not decide to do so. For example, I remember a great hoo-ha about the imposition of VAT on the construction of buildings; and there was a huge upsurge in complaints about VAT on sewerage and water services, but we did not take the relevant decisions. They were taken by something called the European Court of Justice and we had to comply. The same applies to fuel and power other than domestic fuel.

I wish that we would wake up to the fact that, no matter which party is in power, we are landed with a foul tax which is nasty for the poor, offensive and causes great hardship. As we know, the sad fact is that the people who suffer from the manipulation of VAT are those on low and medium incomes. The Government are kind and always try hard to help people, but it does not matter how hard they try.

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Any extra money given to pensioners is taken into account in their housing benefit and, of course, some pensioners also pay tax. Let us assume that I had a very wealthy mother, which I do not, and that she received an increase in her pension--she would have to pay tax on it. The unpleasant fact is that, if one has saved nothing, one could now be better off.

Given that the Government's powers have almost disappeared, that democracy is almost dead and that there is virtually nothing we can do in this instance, would not it be sensible for the Chancellor to wait until he was forced to do something about VAT? Everyone knows that VAT on fuel and power is horribly unpopular, and understandably so. People have no choice about it. The imposition of VAT will not affect people like me because Members of Parliament have lots of money, but those with little money will not be able to get involved in savings schemes and the installation of various pieces of equipment.

During a debate on 12 April 1993, I made a little speech pointing out that VAT on fuel and power was filthy and that it was unkind to everyone. However, because the Government were in a horrific mess, having a deficit of £50 billion, one was inclined to say that anything was better than nothing. Because of the Government's magnificent attitude and because we fell out of the exchange rate mechanism, things are better and we now have more scope and opportunity, so I wonder whether it is wise to go ahead with the second tranche of VAT on fuel and power.

I believe that, as the Government are unpopular because of VAT decisions many of which have been nothing to do with us, it might be wise and prudent for us to say that we shall wait until we are told what to do, rather than take the initiative to put more taxes on fuel and power ourselves. I hope that people will wake up to the fact that on most of those VAT issues our freedom of action is basically nil. I also hope that the Government will agree on reflection that there may be a case for putting off the second stage of VAT on fuel and power. It is very unpopular and it appears very unfair.

Things have changed somewhat since the previous debate. It is a mistake for the Government to go on paying so much money to the EC to be wasted on fraud and mismanagement, and then to make a proposal that will hit people so hard. My feeling is that in those circumstances it is best to express no opinion--and that is what I shall do tonight. None the less, the measure is a mistake. Unfortunately, the Labour party is playing games and trying to pretend that things would be infinitely better if it were in power. It would be better if Labour Members woke up to the fact that our powers are extremely limited. Therefore, if there is a vote I shall not vote for an extension of VAT on fuel and power; on the other hand, in loyalty to the views that I hold, and as the Labour party is playing silly political games and pretending that it would have powers that it would not, I shall certainly not vote with Labour Members.

8.40 pm

Mrs. Margaret Ewing (Moray): Tempting though it is to take up the issues raised by the hon. Member for Southend, East (Sir T. Taylor) in the context of the

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various European Community directives on VAT and the qualifications placed on exemptions, reductions, derogations and so on, the hon. Gentleman will understand that, because of pressure of time and the fact that many Opposition Members have been here for the debate and wish to register their own opinions about the vote facing us, I cannot. I simply say to him that he is not the sole expert nor the fount of all wisdom on European directives and legislation. Many debates could no doubt arise from what he has said.

It may surprise Ministers that I shall start with a small congratulation to the Government on the Budget--I may add that that is the only congratulation that I shall offer them. I am glad to see that they have followed my advice in early-day motion 950, dated 24 March this year, to allow flexible arrangements on annuities. I welcome that measure in the Budget, but perhaps one of the Treasury Ministers will tell me why it is subject to an upper age limit of 75. That limit is regarded as arbitrary, and I believe that it should be removed. It would be nice to hear an answer on that point. The second aspect of the Budget that I shall mention concerns the excise levels on DERV and fuel. Excise paid by the owners of vehicles in the United Kingdom is now the highest in the European Union, and fuel accounts for 21 per cent. of the operating costs of Scottish businesses. That is especially disastrous for my area and for many other rural constituencies.

In Moray we export fish, food, whisky and timber, and the additional cost is one that my local businesses cannot sustain. It will harm the local economy. Over the weekend various organisations representing business interests and people who work in local businesses made clear to me their anger at facing yet again the prospect of additional fuel costs, which make such a crucial difference in remote areas.

In Scotland we already have petrol differentials; petrol is more expensive there. In rural areas cars are not a luxury; they are a necessity for employment. I add a special word on behalf of the disabled, for whom access to a car is especially important. We greatly resent the fact that we are again having additional costs added for the use of our vehicles.

Because of the exigencies of time I may not be able to get through all the points that I wish to make to the Chancellor and the Government. My main argument is, of course, about VAT on fuel. Since the mid-1970s I have spoken in the House on the issue of fuel poverty, yet it still exists. In an energy-rich country such as Scotland it is appalling that fuel poverty continues, as indeed it does throughout the United Kingdom.

The vote tonight on VAT on fuel will be critical. The issue is one of life and death to many of our people. During a recent debate in Scotland I was told that the Conservatives were driving a nail into their coffin north of the border by going ahead with the second tranche of VAT on domestic fuel. I do not give a tuppenny scone for the future of the Conservative party in Scotland or anywhere else in the United Kingdom, nor for the future of the Conservative Government. But I care deeply about the well-being and the lives of the people whom I have been asked to represent, and about the thousands and thousands of people on low incomes--people who are disabled, pensioners and young families--all of whom are being severely affected by that Government policy.

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I have met representatives of the disabled and the elderly in my constituency, and I can tell the Chancellor that their anger about the measure cannot be contained. They are shivering, but they are also shaking with temper. They read articles in the Sunday press about the Chancellor relishing his curry in a Pimlico restaurant, with his pint and his cigars, while they are frightened to order a bag of coal or to switch on their gas or electric fires.

Today the Secretary of State for the Environment, aided and abetted by the right hon. Member for Norfolk, South (Mr. MacGregor), told us that VAT on fuel is a wonderful environmental tax, being imposed in the interests of green policy. Does that mean the 569,876 cold, damp and mouldy houses in Scotland? Is that the environment that we are talking about? Are we talking about the environment of our elderly, and of the disabled and other vulnerable people--the people who have watched £90 billion worth of revenues from North sea oil and gas flow to Westminster, while they still feel cold in 1994?

An article by Dorothy Grace Elder that appeared in Scotland on Sunday reflects the views of people in Scotland:

"From the team which brought you The Sleaze, now comes The Freeze, with almost 4,000 funerals and no weddings.

It is wrong to call the Budget `boring'; VAT on fuel isn't boring--unless you count an additional 800 elderly Scots being bored to the point of death. Additional? That is because we already have around 3,000 cold- related deaths every year; the worst winter death rate in Europe within a country which has the greatest fuel bonanza in Europe".

Earlier speeches in the debate revealed that there is a dispute about excess winter deaths. Yet the Prime Minister himself, as long ago as 1986, admitted that there were excess winter deaths and that the figure was much higher in the United Kingdom than in the United States of America or in Sweden.

The Energy Action Group in Scotland has produced scientific statistics about excessive winter deaths in Scotland. To discover how many excess winter deaths there are we must compare the number of deaths per 10,000 of population in the first quarter of the year, from January to March, with those in the third quarter, from July to September. Studies for England and Wales show an average excess winter mortality of 20 per cent. The comparable figure for Scotland between 1977 and 1990 is 27 per cent.

The Energy Action Group's report also shows that countries such as Sweden, Denmark, Norway and Finland, which have more severe climatic conditions than ours, have far fewer excess winter deaths. It is argued that the problem of winter deaths will not be exacerbated by the imposition of VAT on domestic fuel. The reality is that it will be exacerbated. The Government should talk to social workers or people involved in voluntary organisations. They should go into a pensioner's house where only one room is heated, where it is too cold to go to the toilet and where it is too cold to go to bed at night. People live, eat and breathe in the one room that they think they can afford to heat. That problem will be exacerbated. People had the insult of seeing that the chief executive of British Gas had been given a 75 per cent. pay increase. That is ludicrous. We see headlines saying that the 75 per cent. rise for the gas chief is too little and that he should have more. Yet people are literally freezing to death in our country.

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I received today a letter from the Charities Tax Reform Group which has complimented my party on the fact that it has mentioned charities in its amendment. The group has pointed out that the burden of VAT on fuel will add £13 million to the bill of charities. The group says that that may be small change in public expenditure terms, but that it could mean the difference between closing a residential home or leaving it open.

The Cancer Relief Macmillan Fund, to which we are all indebted, pays one third of its grant to people with cancer to help them meet the higher fuel costs they incur as a result of their illness. Residential care providers are required by law to maintain temperatures at a specific level. Reducing consumption is, therefore, difficult. In fact, I would say that it is well- nigh impossible. I ask the Chancellor of the Exchequer to take up the invitation that was issued to him on 1 December by a pensioner in Dingwall, in the constituency of Ross, Cromarty and Skye. I know that the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) will not mind my quoting this. This lady says:

"I'm just a pensioner and my electricity bill was over £200 last winter, so heaven knows what it'll be in years to come . . . I'd really like Kenneth Clarke to come and live in my house for a week in mid-winter so that he could see reality."

The reality is that people are frightened. They are living with fuel poverty. Whatever compensation deal the Government may argue about, it is not adequate to deal with the realities of the temperatures that we consistently experience in the north of Scotland.

Anyone who believes in social justice should be with us in the Lobby tonight, opposing the Government and giving us the opportunity to eradicate fuel poverty in our society. I ask Conservative Members this question. Will they be able to live with their consciences tomorrow?

8.52 pm

Mr. Andrew F. Bennett (Denton and Reddish): I am pleased to follow the hon. Member for Moray (Mrs. Ewing) and to echo her views. I want to deliver two messages. My constituents are bitterly disappointed that the Prime Minister has broken one promise and they anticipate being bitterly disappointed when he breaks a second. The Prime Minister promised that he would not put VAT on fuel. He also promised that the Government would deliver their commitment to the Rio reductions in emissions, especially carbon dioxide emissions. From the evidence of the Budget, the Government will renege on that commitment as well.

To hear the rant by the President of the Board of Trade, one would have thought that this country could have difficulties if we did not go ahead with this increase in VAT. I do not believe a word of what he said because the evidence is all there. The right hon. Gentleman, however, insists that the increase is necessary. I suggest to the Government that there is no problem this year in avoiding the increase. Almost all my constituents would far prefer to see no increase in VAT next year instead of having the tax cuts at which the Chancellor is hinting.

What really concerns me is that there is no economic justification for VAT. The only thing that the Government have ever claimed is that there is a green argument for VAT on fuel. All the evidence I have shows that the green argument is equal nonsense. The Government said that to meet the Rio commitments, they had to reduce carbon

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dioxide emissions by 10 million tonnes. The claim is that by putting VAT up, 15 per cent. of that target will be produced. I have done a little bit of checking in my constituency to find out what people on average and above average incomes are doing about VAT on fuel. All of them are just accepting the VAT as another Government tax. It is not changing behaviour in any way. It is not persuading those people to use less fuel or to make their homes

energy-efficient. I made further checks. There is no increase in the number of people trying to get wall insulation and no increase in the number of people ordering loft insulation or taking other similar measures. People who have the chance to borrow money to invest in energy efficiency measures are taking no action at all.

The hard-up in my constituency--the elderly and those with children--cannot afford to spend money on energy efficiency schemes. They are making their contribution to the Rio targets by going without and by suffering. One can see pensioners talking to each other about how they can move from a luncheon club to somewhere else, such as a library, so that they can use someone else's heat rather than having to heat their homes during the winter. For those with children, it is almost impossible to move around to use other people's heat. There is real hardship. Those people cannot improve their dwellings. Many of them are in rented property and they cannot persuade their landlords to take energy efficiency measures, whether they are in the public or the private sector.

The Government have said, "Ah well, we have got the home energy saving scheme." Last week, many hon. Members were out publicising that scheme. It is a very worthwhile scheme; how much extra did the Government put in? They put in £10 million. What does that actually mean? In Stockport, there is now a waiting list of more than six weeks to get the work done. If that pittance in the Budget was allocated across the whole country, six extra homes could have the energy saving schemes installed. If the Government really have a commitment to the Rio targets, they must come up with real money for energy saving. If they do not, they are not only betraying pensioners and young children, but betraying our commitment to the global strategy to stop global warming and to ensure that we look after our planet.

I now turn to the Energy Saving Trust; Lord Moore is supposed to be in charge of it. The Government say that it is intended to provide 35 per cent. of the achievement of the Rio targets. It has set up a whole series of schemes for energy saving so that we can achieve our Rio targets, ensure that people have better, warmer homes and stop the problems of damp and other problems. There is no money for the schemes. The gas regulator said that there would be no money from British Gas. The Government are now looking for £1 billion to finance the Energy Saving Trust and its targets. The trust is not mentioned at all in the Budget.

I am bitterly disappointed that on VAT, the Government will hit the poorest in our country. They are totally failing in their commitment to Rio. That is a disgrace. I certainly hope that the Government are defeated tonight.

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8.57 pm

Mr. William McKelvey (Kilmarnock and Loudoun): I have two issues to raise on the question of fuel and I shall do so as briefly as I can. I thank the hon. Member for Moray (Mrs. Ewing) and my hon. Friend the Member for Denton and Reddish (Mr. Bennett) for their brevity. I shall try to match their brevity, but I do not know whether I can match their excellence.

One of the most important fuels that we have in Scotland is, of course, Scotch whisky. The Chancellor missed a marvellous opportunity to redress the imbalance of taxation, levied not only on Scotch whisky, but on spirits in general. He should have done something to harmonise taxes on spirits, wines and beers and, especially, he should have given a message to our continental friends because our products are being discriminated against to our detriment. While this country is being flooded by cheap booze from the continent, it can only be to the detriment of the Chancellor's coffers, because, as he is bound to see, the amount of cheap booze now entering the country is considerable.

The Lamont legacy in certain areas of the Budget was referred to earlier. The one Lamont trait that I appreciated was that he had a glass of Highland Park as he announced his Budget. I am not sure what the present Chancellor was drinking, but it looked like whisky. Mr. Kenneth Clarke indicated assent .

Mr. McKelvey: I do not know the product brand name, but, whatever it was, it was certainly a couple of million quid to the company and the industry and long may it continue.

The other serious issue, has, of course, already been described by my colleagues: VAT on fuel. At the outset, I echo the comments of the Braemar coal merchant, Mr. Alan Clark, who was quoted in today's edition of The Guardian . He said:

"VAT was supposed to be for luxuries".

He then asked:

"Since when was fuel a luxury?"

The answer, of course, is that fuel has been a luxury since the years of economic mismanagement and rash income tax promises to their supporters have led the Government to shift the burden of taxation on to those least able to shoulder it. The hon. Member for Moray and my hon. Friend the Member for Denton and Reddish outlined exactly the difficulties that people will suffer in their areas.

My comments should alert the House to the fact that I am implacably opposed to any VAT on fuel. As one of my hon. Friends said earlier, if we were to take office and I were the leader of my party, I would say here and now that we would rescind, wherever we could under the European legislation, imposition of VAT on fuel.

Even the best compensation packages designed to help the sections of the community who are most disadvantaged by the introduction of 17.5 per cent. VAT will be bound to leave out many thousands of vulnerable adults and children--those who do not qualify because of their age or because they have a few pence too much. In assessing income, 5p too much can knock somebody off income support and therefore devalue the opportunity of compensation.

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The VAT on fuel compensation scheme is not, however, one of the best compensation packages by any measure of judgment. Indeed, it is appalling. First, it treats the British Isles as an amorphous mass and one cannot do that. It deals in averages, which take no account whatever of regional variations. The eligible pensioner or family in John o'Groats receives exactly the same as the eligible pensioner or family in Lands End, but their climates could not be more different. I shall use figures which have been extracted from the Ministry. Over 10 years, the hon. Member for Moray has tenaciously tried to extract figures from it. I gave up 10 years ago. I asked the then Secretary of Scotland about compensation for colder climates in Scotland and I was told blandly from the Dispatch Box that there was no difference between the climate in Scotland and the climate in England, which showed how few visits he had made to Scotland. By the Department of the Environment's own reckoning, it costs 41 per cent. more to heat a typical semi in Aberdeen than it does in Bristol and it costs 66 per cent. more in Braemar, yet every pensioner in Bristol is entitled to the same compensation and will receive the same as every pensioner in Kilmarnock, Aberdeen, John o'Groats and Braemar. The princely sum of £52 per annum has been calculated by the Treasury as adequate compensation for 17.5 per cent. VAT on fuel for those who qualify.

Age Concern produced some interesting tables which showed that the compensation package benefits only those with fuel bills below £300, which takes into account £80 standing charges. I doubt very much if there is a pensioner in Bristol, let alone Braemar, who boast bills so low over the year. Again, today's article in The Guardian said that a retired nurse in Braemar, with a two-roomed flat, pays £700 a year on heating. Another villager, a former Tory voter, pays £1,100 a year to heat his five-roomed house. I know that those figures are not too dissimilar to those paid by pensioners and families in my constituency.

The Right to Warmth campaign demonstrates that a couple on income support with two children will pay, on average, an extra £135 per annum. Again, that is an average which must be taken into account to get the picture of the problems which will face young families in Scotland on income support. When people cannot pay to keep warm, their health suffers. These figures suggest that almost no one benefits from this meagre compensation. Scottish pensioners and families on income support will suffer disproportionately. A new report "Ice Cold" from Age Concern shows than an estimated 3 million--one third of all pensioners--live in indoor temperatures at or below 16 deg. Celsius, 61 deg. Fahrenheit, in the winter. Contrast that with the advice of the Department of the Environment that the elderly and the sick should have an indoor temperature of 21 deg. Celsius, which is 70 deg. Fahrenheit. The same advice is given by the Institute of Housing and the Institute of Architects and Surveyors. It is sound advice, but it falls on the deaf ears of those who cannot afford to heat their homes accordingly.

It should be remembered that shops and offices are obliged to close if the indoor temperature drops to 16 deg. centigrade. The House might share my view that the elderly, the poor and the sick are already at considerable risk. A survey conducted by Age Concern found that 95 per cent. of pensioners interviewed expected to cut back on heating if VAT increased again.

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Deaths as a result of hypothermia increased by 20 per cent. in Scotland last year. I am not producing fictitious figures or figures that are designed to scaremonger. These are real figures. The numbers of winter-time deaths among the elderly in this country provide a stark comparison with the figures of our continental neighbours. Given our record, can any sane people, including Members of this place, justify the imposition of VAT on fuel? For that matter, can any sane person or conscientious Member afford not to vote with us, the Opposition, to save elderly people from their fate?

I see that the hon. Member for Lancaster (Dame Elaine Kellett-Bowman) is shaking her head. Perhaps her conscience bothers her, or perhaps she thinks that the figures to which I have referred were drawn from the air. As I have said, they are real figures. People will die of hypothermia in Scotland and elsewhere. The hon. Lady need not shake her head because I have stated a fact. My assertion is backed by Government figures.

Dame Elaine Kellett-Bowman: Will the hon. Gentleman give way?

Mr. McKelvey: No, I shall not. The hon. Lady has not been in her place for more than five minutes. I have been in the Chamber since 3 o'clock.

Should we not be considering ways of reducing hypothermia deaths, especially undertaking additional insulation work to give extra help to those who live in the coldest and remotest parts of Britain? It is every citizen's right, irrespective of his income, to have proper housing that is windproof, waterproof and adequately heated. That is a basic right that surely even Conservatives would have to accept. There is no reason for those who have pontificated on the horrors of the imposition of more VAT on fuel to be in the House to abstain in person. That is nonsensical. Equally, hon. Members should not keep away from the House this evening. Conservative Members should add their votes to those of Opposition Members to defeat the increased burden of an obnoxious and unwanted tax.

9.7 pm

Mr. Andrew Smith (Oxford, East): The Opposition's charge against the Budget is that it is out of touch with the needs of the country and disregards the views of the British people. We needed a Budget for investment, jobs and fairness, and instead we have a Budget that does next to nothing for investment. The Government have acted too late and done too little to increase employment. They have confirmed the greatest tax rise in history, which perpetuates the injustice of imposing value added tax on fuel. It is significant that, with the exception of the right hon. Member for Norfolk, South (Mr. MacGregor), no Conservative Member has sought to justify the increase in VAT on fuel on its merits, or on any merits that Conservative Members suppose that it has.

The Government's argument seems to be that they can bring national finances into order only by measures such as increasing VAT, which is manifestly unfair. We say that sound finances, a strong economy and fairness must go hand in hand.

The hon. Member for Chingford (Mr. Duncan Smith) sought to give us a history lesson on the past 15 years. He would have done well to remember, as would his hon. Friends, that when the Conservatives secured their route

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to power in 1979, they did so because they were seen as helping people to get on and to make the most of their chances, and helping Britain make the most of its potential. As my hon. Friend the Member for Renfrew, West and Inverclyde (Mr. Graham) so ably argued, all the Conservatives' claims have been betrayed. Living standards have fallen since the general election, as the latest edition of "Economic Trends" shows, with a fall in personal disposable income. What is more, the Chancellor of the Exchequer and the Prime Minister seem not to understand how far they are seen now as holding people back and holding Britain back, where we are urging that people should have the chance to get on.

In his characteristically well-argued speech, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) spelt out how, to secure prosperity, Britain needs investment in business, in infrastructure and in people. As he said, everyone in Britain should be alarmed at the very low present level of investment. Not only is it at a very low level, but it has actually fallen in the past two quarters. Not only is it still lower in real terms than the level that the Conservatives inherited 15 years ago, but the real net capital stock available to British manufacturers is barely higher now than in 1979.

British firms must attempt to compete with 30 per cent. less investment per worker than in Germany and France and 65 per cent. less investment per worker than in Japan. In those circumstances, is not it staggering that the Chancellor did so very little in the Budget to stimulate investment? While, of course, growth in current output is one stimulus, on its own it may well not be enough. We all note that the Red Book forecast is for private investment to grow next year by 11 per cent. Let us hope that that forecast is right, but such a figure is notoriously difficult to predict. It would be a triumph of hope over experience not to imagine that the now likely prospect of rising interest rates will not have an impact on that.

Mr. Fabricant: Does the hon. Gentleman believe--and he will probably say no, so I would like him to justify his negative response--that if the Opposition amendment was successful tonight, interest rates would rise still further?

Mr. Smith: It would be interesting to know whether, on the basis of my answer, the hon. Gentleman is seriously considering changing his mind to honour what he said to his constituents. However, if our amendment is successful, of course the Chancellor will make a statement. We have set out the measures, which I shall spell out in greater detail later, to raise the revenue. There is no reason why interest rates should rise tomorrow. We shall wait and see whether, on the basis of the discussions that the Chancellor has had with the Governor of the Bank of England, interest rates will rise anyway. We believe that the Chancellor should have done more to stimulate investment in industry and that he should have acted on the representations that he received from the seven largest manufacturing associations. We noted with interest the suggestion of the right hon. Member for Norfolk, South about tapered capital gains taxation for longer- term holdings. We also believe that that is worth considering.

The new venture capital tax in the Budget will not address the shortcomings to which I referred. My hon. Friend the Member for St. Helens, North (Mr. Evans) was

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right to say that that scheme is much more likely to create another tax loophole than to generate investment in the high-tech, high value added businesses that Britain needs. Similarly, the extended tax reliefs for the enterprise investment scheme remove the restrictions on investment in land and buildings and are thereby likely to open up the way for it to operate as a business expansion scheme mark 2, encouraging investment in low-risk, low value added schemes rather than in the high-risk, high value added schemes that Britain needs. We believe that the Chancellor is out of touch with the need for business investment. We must ask why he allowed the industrial finance initiative, launched by the former Financial Secretary, to run into the sand. We have all heard about the letter from Lord Hanson. If that is not the only reason why the Chancellor backed off, he should give us the real reason, because we were promised much more extensive statements in this Budget than anything that has been forthcoming on the private finance initiative.

We argue that the Government are out of touch with the public on housing and the need for housing investment. With 160,000 families recorded as homeless last year; with 1.5 million homes deemed unfit for human habitation; with 59,000 homes repossessed; and with more than 1 million home owners trapped in negative equity, the public will be outraged that this Budget will make housing problems worse, not better.

According to the National Federation of Housing Associations, the 10 per cent. real cut in housing expenditure next year will mean that the number of housing association rented homes being built will be reduced by more than 10,000, the lowest level since world war 2. At the same time, council rents are being forced up by the squeeze on local authority budgets, by 6 per cent. on average next year, which is three times the rate of inflation. We say that those cuts, too, will damage people's chances of getting on and will make Britain a poorer place.

The Chancellor's measures on long-term unemployment represent a belated recognition of a crisis on which we have been campaigning for years. Like my hon. Friend the Member for St. Helens, North, I was amazed at the breathtaking claim in the Chancellor's Budget speech, when he said:

"We must combine greater prosperity for the majority of our people with measures to prevent the emergence of a deprived underclass, excluded from the opportunity to work and dependent on welfare."

I repeat:

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

Where have the Chancellor and his right hon. and hon. Friends been for the past 15 years? Nothing demonstrates more clearly how out of touch he and the Government are with the reality facing people throughout the country.

Let the Chancellor tell us, too, why his proposed national insurance rebate scheme will bring help only in April 1996. We say that the long-term unemployed need help now, and the Government should provide that help now.

Of the many measures in the Budget that hold people back, none is more mean or unjust than the little measure to phase out means-tested allowances for over 26-year-olds who are studying. As the hon. Member for Chingford said, in a modern competitive economy, people need to re-educate and retrain throughout their working

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lives. How can it be right then to take away one component of the student support system which is specifically designed to help older people returning to education and training? On average, that measure will take £1,000 from students who would otherwise have expected that help, and it will hit especially hard older students who are either ineligible for or find it difficult to obtain support from the Student Loans Company.

Of all the measures in this Budget of missed opportunities, as hon. Members have said, nothing will be more widely resented than or as well remembered as the Chancellor's decision to persevere with the increase in VAT on fuel. Many of my hon. Friends, such as my hon. Friends the Members for St. Helens, North, for Renfrew, West and Inverclyde, for Preston (Mrs. Wise), and for Kilmarnock and Loudoun (Mr. McKelvey), and the hon. Member for Truro (Mr. Taylor)-- [Interruption.] I include the hon. Member for Moray (Mrs. Ewing); I apologise. Hon. Members of all parties put forward powerful arguments on why the increase is wrong. It hits family budgets hard and gratuitously, especially the budgets of the elderly, the disabled and the housebound. It will add an average of £2.30 a week to fuel bills. As my hon. Friend the Member for Denton and Reddish (Mr. Bennett) pointed out, that has everything to do with the financial mess that the Government got themselves into, and nothing whatever to do with Rio or the environment.

The VAT compensation that the Chancellor announced added nothing to what he offered last year. It will come as cold comfort to pensioners that the Secretary of State for Social Security now tells us that he is to insert a note into pension books explaining why the extra cash that they will receive this year is just 25p for a single pensioner and 30p for a couple over and above the inflation uprating. If I know pensioners at all, they will look at that note in their pension books every week and they will be enraged at what the Government have done to them. It will be a reminder every week that they cannot trust the Government ever again.

Contrary to what the right hon. Member for Worthing (Sir T. Higgins) and the hon. Member for Chingford said about largesse having been given to pensioners, based on the official family expenditure survey figures, even after compensation has been paid, including the compensation buried in the inflation uprating, the average pensioner couple will be £42 a year worse off. As many hon. Members have pointed out, the picture will be much worse for those who need to stay at home for longer periods, for those who need more heat and for those who live in colder parts of Britain.

Sir Terence Higgins: Is not it the case that more than 44 per cent. of the proceeds of VAT on fuel will be given in compensation?

Mr. Smith: The average pensioner facing an average fuel bill will still be worse off, and those facing higher bills will suffer even more. Many hon. Members have said that the increase is wrong in principle and wrong in practice and that it is a total breach of faith with the electorate for the Government to forge on regardless. People will not forget that. As the hon. Member for Mid-Staffordshire (Mr. Fabricant) said, the Conservative party will pay a very high price at the polls--not only in Dudley, but in future polls--if the Government persist with the VAT increase.

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