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Western nations have become used to material prosperity, high personal living standards and a standard of public services of which our grandparents would scarcely have dared to dream. In the face of competition from the far east and Latin America, if we are not careful we shall find the expectations with which we have grown up undercut by a very harsh economic reality.

The second great force for change is technology, which affects not only the manufacturing sector but also service provision. There are constant reports of redundancies in banks and building societies. Big employers in my constituency, such as Equitable Life, grapple daily with the fact that machines can do jobs more efficiently and with fewer mistakes than people can.

Those pressures will not go away. The test of our economic policy must be whether, in the face of that turbulence, the policies announced by the Chancellor of the Exchequer will help British companies to sell their goods and services to customers in this nation and throughout the world. In the end, that is the only way to ensure sustained growth and secure jobs. It is the only way to provide high personal living standards and the wealth to spend on the schools, hospitals and railways that hon. Members on both sides of the House and thousands of our constituents want.

The Government must look wider than the Budget in addressing those problems. We do not have to accept entirely the analysis of an historian like Correlli Barnett to appreciate that the British economy has deep- rooted problems which must be tackled through a range of policies, and not solely by the economic levers available to a Chancellor of the Exchequer. I am convinced that our hopes of creating wealth and increasing living standards critically depend upon policies of sound money, low inflation and controls on Government borrowing and spending. Those economic measures alone will not be sufficient to achieve our aims, but they are necessary elements of our continued future prosperity.

That is why, whatever quibble I may have with the particulars of the Chancellor's package, he has my wholehearted backing for his top priority of getting public finances in order and keeping them in order--even if my colleagues and I must accept the necessity of following policies which in more propitious circumstances we would have preferred not to see enacted.

What I find depressing about Labour Members' speeches is that they fail to grasp the scale of the present problems confronting our country and to advocate persuasive, economically literate solutions to those problems. Unemployment in my constituency is still far too high, but it is falling. Manufacturing industry, particularly exporting businesses, has done well. In a depressed domestic market, the Hoselock company has thrived in overseas markets, winning new customers and bringing profits to this country.

Retailers, particularly small independent retailers, and construction businesses are also finding life very tough. The alternative strategies advocated by our critics produce specious, attractive-sounding measures which in practice would damage those sectors of the economy that they say they wish to assist. That can be seen most of all in their demands for spending. Usually, those demands are hidden because of the Labour Front- Bench team's efforts to keep them under some sort of control at least for a couple of years.

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The pressures for additional spending and borrowing are there all the time, as we heard from the hon. Member for Motherwell, North (Dr. Reid), who mentioned the need to allow local authorities to spend more than their capital receipts. During the last general election campaign, even Labour party Treasury spokesmen admitted that such a policy change would inevitably bring about an increase in public borrowing. In today's circumstances, that would increase the present upward pressure on interest rates. Such pressure is potentially damaging for the retail and construction sectors, which are already the slowest to benefit from the economic recovery.

Despite the advocacy of the hon. Member for Londonderry, East (Mr. Ross), I am not persuaded of the need for further--

Mr. Wray: Does the hon. Gentleman agree that, under the Public Health Act 1897, local authorities have a responsibility to bring their houses up to a tolerable standard so that they can house people? How are we to clear the homeless queues if the Government will not allow those authorities to spend their capital receipts?

Mr. Lidington: The hon. Gentleman would benefit from studying the Conservative manifesto commitment on housing and the record. During the past two years, through our grants to housing associations, we have secured a greater increase in social rented housing provision than we thought possible at the last general election. That is the practical policy for securing better housing standards that the Conservative Government are pursuing.

The hon. Member for Londonderry, East said that an increase in income tax would be preferable to increases in direct taxation. I am not persuaded by his argument, for two reasons. First, the disincentives are obvious-- especially for people with earnings around the tax thresholds--and we want to encourage people to take on work rather than rely on benefits. Secondly, in the longer term the labour market is moving towards more self- employment. More people will have a portfolio of occupations, rather than one job with one employer for 30 years. In those circumstances, it is even possible that income tax will become a less predictable and reliable source of revenue for the Treasury and Government spending. For those reasons, the Chancellor was right to avoid further increases in direct taxation last week. On tobacco and petrol, I share the view of my hon. Friend the Member for Ribble Valley (Mr. Evans). It would be desirable for the European Union to phase out the indefensible subsidies for tobacco growing in southern Europe as quickly as possible.

I was less persuaded by the arguments of my hon. Friend the Member for Hastings and Rye (Mrs. Lait). As a non-smoker with 800 constituents who depend on the tobacco industry for their jobs, I take the view that smoking, to which I have never been attracted, is an activity that should be allowed to consenting adults in the privacy of their own homes. I therefore find myself unable to agree with my hon. Friend's ideas.

On road transport, I must mention to my hon. Friend the Chief Secretary the representations that I have received about excise duty and the changes in classification. I have received strong representations from farmers and the owners of small breakdown and road recovery businesses, saying that the way in which the changes have been framed bites hard on their businesses.

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I hope that Ministers will be prepared to consider that matter again when the Finance Bill comes before Parliament.

On the principle that the increase in petrol duty forms part of a sensible strategy to restrain car use, I have no quarrel with the Government. It causes difficulty to individuals, but if we are honest about the need to restrain private car use and if we are in adult politics, that is surely one of the measures that we must employ. 9.3 pm

Mr. Thomas Graham (Renfrew, West and Inverclyde): I have listened to a number of speeches tonight, and it is sad that none of them has touched on a real aspect of local government which the people of Scotland need desperately. For the past three days, I have spent my time in the turmoil of flooded homes. Nothing has come from the Chancellor today, except further cuts in public expenditure--the public expenditure that the people of Scotland so desperately need. I was in an elderly woman's home today. It was a beautiful home, but it had been absolutely wrecked and ruined by flood damage. The raging torrent of a river had burst through into her house and devastated her lifelong possessions. She was devastated, and she asked me what I could do to help her. I said that I would raise the matter in Parliament tonight and ask the Government to release money so that the Chancellor of the Exchequer could take the decision to allocate funds to that desperate emergency situation.

I have mentioned many occasions when certain things have hurt me, and have made me feel sorry for my constituents. There are hundreds upon hundreds of people in Scotland tonight--some 800 families--who do not know what Christmas will bring to them. They will not get Santa Claus coming through the door with a big bag of presents, because they saw their presents floating out of the door the other night. Yet the Government stand idly by and say that they can do nothing. They say that there are emergency powers, and that the Bellwin formula states that the Government pay 85 per cent. while the district council pays the other 15 per cent.

If the Government are to make further cuts in public expenditure, how will local government deal with an emergency such as the flooding? I plead with the Chancellor to release money tonight to deal with the flood disaster in Scotland and to assure my people--the people of Scotland--that they can live in comfort and face the new year with the same decency that Ministers will enjoy. Ministers know that they can go back to a warm home. They are well provided for, because Ministers have plenty of money. My constituents tonight do not know what will happen to them. They expect the Government to govern, and to look after the people, but the present Government abandon them.

I had a go at the Chancellor for reducing the price of champagne by 19p-- that is literally mind-boggling--and increasing the price of whisky by 26p. A lot of the people affected by the flood work in the whisky industry, so they might be facing not just flood damage but further unemployment as a result of the measures that the Chancellor has taken. In France, of course, people will be over the moon, because they will be getting the jobs.

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I am quite sure that the Champagne Charlies in London will be well looked after. The Chancellor looks after his friends in the City and makes sure that they can bevvy champagne until it bubbles out of their earholes. But they keep punishing the workers and they create huge unemployment in Scotland and the rest of Britain.

I know Scotland well, but I also know England well. The rural communities in both countries are now to be punished by the increase in the price of petrol and diesel. The Government do not seem to think about that, despite the fact that they have destroyed rural bus services and are now destroying rural train services.

After nearly 16 years in power--the Chief Secretary should hang his head in shame--the Government have made the country nearly bankrupt, and they have destroyed businesses by the million.

Mr. Wray: The Government are bankrupt.

Mr. Graham: My hon. Friend is right. We are now approaching Christmas, but what a bleak Christmas it will be for millions of our people and for the pensioners facing the 8 per cent. VAT on fuel. The other night- -after pressure from Opposition Members and one or two abstentions--the Government had to drop the proposal to increase the VAT to 17.5 per cent. I was delighted that Members of the House combined to achieve that, but many hon. Members seem not to realise that the people we look after and represent--the elderly, the disabled, the unemployed and the low paid-- demand that the 8 per cent. VAT on fuel should also be dropped. They want a sensible Budget which does not hurt the poor and which starts to take something off the immensely rich whom the Tory Government have created.

The Government have created a division so enormous that it is like the man in the moon. One individual has won £17.5 million in the lottery while hundreds of my constituents face a bleak and horrifying Christmas because the Prime Minister does not know whether to be Mr. Scrooge or Mr. Misery. He should take the opportunity to support the Opposition today and to become Santa Claus and give folk some hope for the future.

The best hope that we have is to burn 16 candles to mark the 16 years and ensure that there is a general election. I should be happy to burn all those candles and to see the end of the Government. I hope that 1995 will indeed see the end of this miserable--aye, very, very, miserable-- Government.

9.10 pm

Mr. Andrew Smith (Oxford, East): My hon. Friend the Member for Renfrew, West and Inverclyde (Mr. Graham) could, unfortunately, speak but briefly, but he more than compensated for that with the passion with which he pleaded for the sake of his constituents. Those constituents must be extremely proud of him for the way in which he has spoken up for Scotland, which has been affected so awfully by floods. Let us hope that his pleas have been heard by the Government.

The debate started with an extraordinary admission--perhaps it should not be surprising--from the Chancellor, who refused to give any guarantee to my hon. Friend the Member for Dunfermline, East (Mr. Brown) that he would

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not extend VAT further. He was pressed on that several times, but he absolutely refused to give that guarantee. All hon. Members will have heard his refusal.

He then offered us the assurance that VAT would not be extended without primary legislation. That promise lasted all of four minutes, because we were then confronted with the resolution on VAT on transport, now before the House, in which the right hon. and learned Gentleman proposes to do just that. The Opposition were unconvinced by the Chancellor's assurance, and we will press our amendment to a vote. That amendment would greatly improve the House's control over the Government's addiction to extending VAT.

One simple question has not been answered by the Government. If the measures before us are right, why were they not included in the original Budget? The Chancellor and the Prime Minister could have spared us a lot of bother by getting it right the first time. We could put that question round the other way. Before the hon. Member for Croydon, South (Mr. Ottaway) predicted a massive Conservative defeat at the Dudley, West by-election-- his prediction is certainly accurate--he said that he believed that his hon. Friends preferred the original version of the Budget. Judging from the way in which they voted on Tuesday, it is clear that that majority preferred the original version--something that we will have cause to remind their electorate of between now and the next general election.

We must ask why the Prime Minister did not force the original Budget through, as he could have done, by making it a vote of confidence. Three possible explanations can be offered, each of which is profoundly damaging for the Government. The first is the cock-up theory, according to which those on the Government Treasury Bench were so incompetent that they thought all along that they had the vote on VAT in the bag. They did not believe that they had to use the confidence threat even when defeat stared them in the face. They saw the danger too late and put the Chancellor up to the tawdry and ultimately self-defeating farce of Tuesday's winding-up speech when he brandished £100 million worth of baubles at his Back Benchers 10 minutes before the vote like some second-rate department store Santa Claus. That is no way to carry on with the nation's finances or to run a Government. The House will not forget the pathetic spectacle of the Chancellor casting around for prearranged interventions. He tried to appear clever, but it made him look all the more foolish when his cobbled-together last minute deal came thoroughly unstuck.

The second theory is that the Prime Minister feared that to make VAT a vote of confidence would not be enough to secure victory. If that is correct, his confidence in the Conservative party's will and ability to govern is beginning to match that of the country. I suppose one could say that, unlike the Chancellor, the Prime Minister did not underestimate the vindictiveness of some of his Back Benchers.

The third plausible and interesting theory is that, when the Prime Minister said that the vote on VAT would not be a vote of confidence, he was signalling that he could live with defeat on that. Having been turned over on it in Cabinet, he would let the House turn over the Chancellor. In view of all the talk about the Chancellor being strong

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and taking the lead over Europe, perhaps the Prime Minister thought that it was high time he had his come-uppance.

Whatever the reason, that was a humiliating defeat for the Government in general and for the Chancellor in particular. He was unable to deliver his side on what he had described only a week before as essential to the strategy of achieving economic recovery. The Government got into the mess because they simply did not listen. They thought that they could break their promises with impunity and that what people outside said did not matter.

The hon. Member for Chislehurst (Mr. Sims) said that the Chancellor's policy was defensible but poorly presented. I half agree with him: it was an indefensible policy poorly presented. One of the lessons of the past couple of weeks is that we must listen to what constituents say. I trust that Conservative Members will have heard at Christmas bazaars and senior citizens' dos what we have heard, but only a handful of them take any notice.

In his opening speech the Chancellor said that we are having a few too many Budget debates. I wonder whether he has had a bit more exposure over the past couple of weeks than is good for him and the Government. I was given a charming child's eye view of the Budget by a Conservative councillor who shall remain nameless. His small daughter came into the kitchen and said, "Mummy, mummy, there is something wrong with the television. The same man is on all the channels and I can't get rid of him." I think that the answer was, "Don't worry dear, we are working on it."

People say that it is great news that the 17.5 per cent. VAT on fuel was defeated. However, it is typical of the Government that when they are forced to stop hitting the average punter with one tax increase they hit him with six others. I shall deal with some of those increases. The Chancellor speaks of an extra 1p on a pint of beer, but that is not what the customer will have to pay. By the time profit, VAT and higher transport costs resulting from the increase in diesel fuel are added, it is more likely to be 3p per pint of bitter. For higher strength beers and lagers, the increase may be as high as 5p.

Others have quoted what the Chancellor said in the first of his Budget speeches in the autumn, but it bears repetition. He said: "one of the most widely publicised other effects of the single market has been the increase in legitimate cross-border shopping in alcohol and tobacco, and in smuggling. Both of these have inevitably meant some loss of duty to Exchequer, pressures on the British drinks industry and some damage to British business. No Chancellor can remain unmoved in the face of this".-- [ Official Report , 29 November 1994; Vol. 250, c. 1095-96.]

He listened to the concerns of the industries, but, true to form for the present Government, it did not last. His listening was truly a nine-day wonder. Now he is back to putting up tax on beer. Let us make no mistake about it--it will be a jobs killer.

While there is room for argument over the magnitude of the effects, no one disputes that the present and growing extent of cross-channel shopping-- both legal and illegal--is having a serious impact on the British drinks industry and in particular on distribution, off-licences, supermarkets and pubs where, in total, thousands of jobs may be at risk.

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Let me repeat the challenge put earlier by my hon. Friend the Member for Dunfermline, East. Will the Chief Secretary in his reply say how many jobs will be lost as a consequence of the Chancellor putting up the duty on beer? Faced with that threat, Opposition Members believe--as the Chancellor said he did two weeks ago--that now is not the time to be putting up duty on beer and widening the differential with France, and we shall vote against that increase tonight.

Many of the same arguments that have been spelt out by my hon. Friends apply to spirits, particularly to whisky, which is so important to jobs in Scotland. We shall also vote against that increase. The hon. Member for Chislehurst (Mr. Sims) argued against the increases as being damaging to jobs and undermining Britain's negotiating position within the European Union. Although he is not in his place, perhaps he will consider voting in line with the arguments he put forward.

With the further increases in petrol duty, the Chancellor is hitting many individuals and families of modest means harder than they reasonably could have expected. Presumably, the whole point of indicating last year that road fuel duties would increase on average by 5 per cent. in real terms was to give people some warning, but on top of the 2 p per litre in his main Budget two weeks ago, the further 1p will increase petrol costs by 10 per cent., which will hit many people very hard--the Automobile Association estimates, by £51 a year.

The hon. Member for Londonderry, East (Mr. Ross) spoke with feeling about the effects of that on his rural constituents and about the particular effects of the increase in duty on heavy fuel, which is used for electricity generation in Northern Ireland.

I shall say something about tobacco. The Chancellor's proposed increase of 6p on a packet of cigarettes on top of the 10p he announced in the Budget is not a change we intend to vote against this evening, recognising the importance of tobacco taxation in helping to cut smoking and the consequent benefits to health, but there are limits to how far the Chancellor can go in hitting smokers.

As my hon. Friend the Member for Workington (Mr. Campbell-Savours) spelt out, smuggling is increasing at an alarming rate. The hon. Member for Ribble Valley (Mr. Evans), drawing on his own commercial experience, protested at the possible loss of front-line customs officers. With smuggling increasing at such a rate, what are the Government doing cutting 500 front-line customs officers? It is absolutely disgraceful.

The hon. Member for Ribble Valley must have been as pained as we were to hear the hon. Member for Hastings and Rye (Mrs. Lait) praising the entrepreneurial instincts of smugglers. Her approach to solving the problem seemed to be to condemn a little less, research as little as possible and do nothing at all. It was a very unpersuasive argument. We are debating a serious issue which the Chancellor recognised, to the extent that he did not increase the duty on hand rolling tobacco, which is particularly prone to smuggling.

I shall now touch on the important issue of equity in relation to tobacco taxation. Given the social distribution of smokers, banging tax on cigarettes is one of the most regressive forms of taxation. A study was carried out earlier this year--we would all do well to take note of

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it--for the Policy Studies Institute, by Alan Marsh and Stephen McKay, funded by the Health Education Authority. It showed just how severe the effects now are. Looking at low-income families with children, it found that nearly three quarters, for example, of council tenants receiving means-tested benefits smoke, spending, on average, more than 14 per cent. of their net disposable income, or £1 in every £7 on tobacco.

We must remember when we vote these increases in the House that giving up smoking, laudable, important and good for us though it is, is certainly not easy. We must remember, too, the particular difficulties for the people who are addicted to tobacco and who are under all the pressures that struggling along in poverty brings. The effect of the Budget will be to take an extra £2 a week out of the already meagre budget of the poorest families. There will come a point at which the poverty effect on children of such families will begin to exceed even the ill health effect of their parents' smoking.

Mr. Graham: My hon. Friend will realise that there are people in my constituency tonight who, because of poverty, because of their very low income, cannot afford to insure their houses, and their houses are now damaged. We will have to pay a fortune to try to put these folk on the right path. That is what poverty inflicts.

Mr. Smith: My hon. Friend speaks with deep knowledge of his constituency. As well as their insurance premiums, which are likely to go up, those people will also have to pay the insurance premium tax as well.

I hope that the Chief Secretary will agree that, with such a big tax increase and with such seriously regressive effects, the Government should act to ensure that help is given to people on low incomes to give up smoking and that the Government should act now to ban tobacco advertising.

Although some hon. Members argued that the mini-Budget measures might be less unfair than the original Budget measures, they are, as my hon. Friend the Member for Warwickshire, North (Mr. O'Brien) pointed out, still unfair.

As the Government's political credibility was on the line and, indeed, was so very fragile, we can understand why the £1 billion had to be found. But there were fairer and better alternative ways in which to raise the money, which the Labour party spelt out--for example, tightening up on executive share options, not going ahead with the venture capital trusts, ending the enterprise investment scheme, ending tax relief on private medical insurance and raising a levy on the windfall profits of the privatised utilities, as spelt out by my hon. Friend the Member for Dunfermline, East earlier. Those measures would have been much fairer and would have added next to nothing to the retail prices index, whereas the Chancellor's measures in both the mini-budget and the original Budget put it up. As my hon. Friend the Member for Motherwell, North (Dr. Reid) said in his effective contribution, the Labour party would put in place employment measures now to get people back to work and to cut the cost of keeping people unemployed, whereas the national insurance rebate comes comes into effect for the long-term unemployed only in April 1996, when they will have been unemployed for so very much longer.

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What of the Chief Secretary? Opening the Budget debate, he dismissed our VAT amendment as an "opportunistic wheeze."

"True Conservatives,"

he said,

"will not, I believe, cast their votes in the House to support Labour's procedural dirty tricks"--[ Official Report , 30 November 1994; Vol. 250, c. 1238.]

It is a fine irony, is it not, that our victory and the victory of the people of this country has forced him to eat those words and come back to the House to lay in front of us measures to put in place the very proposals about which he was so dismissive just a week ago? We must ask him whether he agrees with the Chancellor's refusal to give any guarantee not to extend VAT in future to food, children's clothes, transport and books. Will he give a guarantee not to extend VAT? The fact is that Labour spoke for Britain in defeating the VAT increase last week. What is more, together with everyone in the House and the country who supported us, we struck a blow for fairness in taxation. However much it can be argued that the measures we are now discussing improve on the Chancellor's original Budget, they still hit middle and lower-income Britain.

It should be remembered that people are still experiencing the biggest tax increase in British history. At a time when living standards are already falling and real personal disposable incomes are lower than they were, on average, at the last general election, taxes are rising by an average of £800 this year. Conservative Members' constituents will not forget that, however much the Chancellor attempts to bribe them next year.

Mortgage payments are rising; rents are rising; car tax and insurance are rising; holiday insurance, holiday flights, petrol, beer and spirits are all rising. Only the price of champagne is coming down. What an indictment of the Government: they are hitting people with taxes left, right and centre, but cutting the cost of champagne.

One way or another, ordinary families are being hit, while at the same time the Chancellor is unveiling new tax avoidance devices for the super-rich. It is all part of the price that people are being forced to pay for Conservative broken promises--for the Government's unerring instinct for unfairness, and their economic incompetence. With this Budget, people have further proof of why they can never trust the Government on tax again. Labour's message to the people is clear and unequivocal: "We are on your side." As with the whole VAT campaign, we do not just talk about it; we act to change things. The Government are wrong to underestimate the British people's instinct for fairness and their longing for competence. The people know that they will get neither fairness or competence from this Government, with their "wet night in Dudley" broken promises. It is to the Labour party that the people look for good government; to the Labour party that they look for fairness; to the Labour party that they look for economic policies that work.

This week, the people of Dudley, West will have an opportunity to show the way forward for Britain with Labour. They will show the way forward for Britain with Labour, and they will show the way out for this failed and unfair Conservative Government.

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9.32 pm

The Chief Secretary to the Treasury (Mr. Jonathan Aitken): Far from eating any words, as the shadow Chief Secretary hopes, I am proud to stand by what I said last week. It is clear that the Opposition are still in a mood of opportunism and wheezing. My right hon. and learned Friend the Chancellor and I both regret the necessity for today's debate and are sorry that the package of measures introduced to remedy the hole that was blown in the public finances--

Mr. Andrew Smith rose --

Mr. Aitken: No, I shall not give way. Opportunistic wheeze No. 1 will not succeed.

This is very much a package of second choices, but just as the Government have accepted the will of the House--

Mr. Smith rose --

Mr. Aitken: Very well, I shall give way.

Mr. Smith: Is the Chief Secretary confirming that his first choice is still to impose VAT on fuel at 17.5 per cent?

Mr. Aitken: No; the Government have accepted the will of the House. Opposition Members would be wise to understand, however, that there is no such thing as a free rebellion on a Budget measure. That is the fundamental reason why the package contains second-choice measures that the Government would have preferred not to introduce, and it is why we have considerable sympathy with hon. Members on both sides of the House who have advanced arguments about aspects of the package. Other Ministers also originally sympathised with some of those arguments.

Mr. David Shaw (Dover): Talking of sympathy, will my right hon. Friend confirm that he and I--as Members of Parliament representing port constituencies--are very concerned about the impact of the rises in alcohol and tobacco duties? Will he also confirm that he and his colleagues will instruct Customs and Excise to ensure that, at every opportunity, anyone who seeks to evade alcohol or tobacco duty is prosecuted and that prosecutions are pursued fully in the courts?

Mr. Aitken: I certainly confirm that vigorous measures are being taken by Her Majesty's Customs, about which I shall say something a little later.

As I have said, we have accepted the will of the House. I am, however, slightly in the mood of the Irishman who in the famous story was giving directions to a stranger. He ends by saying, "But if I were you, I would not have started from here." Perhaps it would have been best if we had not started from where we now find ourselves, but we have-- [Interruption.] --and so I shall respond to the various remarks of hon. Members on both sides of the House.

It has been a curiously muted debate, but one would not think so with the sudden chorus of noise that has suddenly manifested itself. The Opposition Benches were until recently notable for the absence of Opposition Members, and consequently their silence. The hon. Member for Londonderry, East (Mr. Ross) got it right when he quoted Kipling's "Recessional", saying

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that it had been a question of whether the "tumult and the shouting" had died away and the "Captains and the Kings" had departed.

Most Labour Back-Bench Members departed for most of the afternoon, and it was a pretty soporific debate. The first soporific note was made in an intervention--not even a speech--by the right hon. Member for Ashton-under- Lyne (Mr. Sheldon), who seemed not to want the £1 billion or £1.5 billion replaced. He seemed to think that it was not necessary to do so.

The right hon. Gentleman's intervention reminded me of the story of an American senator who--

Mr. Sheldon: Will the Minister give way?

Mr. Aitken: Very well.

Mr. Sheldon: I was making the point that the Chancellor seems to be addicted to fine tuning. As soon as he sees £800 million, he wants to correct it. He could have done it in February. He could have done it in February after he had received further information during the passage of the Finance Bill. He could have done it at his leisure with a greater understanding of what was happening in the economy.

Mr. Aitken: I understood the point the first time round. The right hon. Gentleman's solution would have been to do nothing for a while, to be patient, to wait and to snooze. That would have meant that the uncertainty created by the hole that was blown in the Budget arithmetic would not have been replaced by the certainty of the markets and by the sound and sensible measures that my right hon. and learned Friend the Chancellor introduced.

A great deal of concentration during the debate was focused on the drinks industry. The topic was introduced first by the hon. Member for Gordon (Mr. Bruce), who made an eloquent plea for the Scotch whisky industry, and it was echoed by my hon. Friend the Member for Chislehurst (Mr. Sims). I was somewhat underwhelmed by the hon. Gentleman's plea. He had written to my right hon. and learned Friend the Chancellor on 7 December suggesting various ways in which he could put back the lost revenue following the defeat on the levying of additional VAT on fuel. He did not suggest letting off the Scotch whisky industry. In the eighth paragraph he suggested cuts in the drinking duty, or that they should be put back. He wrote one thing on 7 December and reversed it on the 15th. It is typical Liberal policy to say one thing on one pavement and another thing on another pavement.

Mr. Malcolm Bruce: The Chief Secretary is misreading and misrepresenting my letter. I was saying that he should have reversed the cut in champagne duty, which was introduced in the first Budget. That the Chancellor has chosen not to do.

Mr. Aitken: The hon. Gentleman is quoting from a letter that he has not written. I have his letter. There is no mention of champagne and no mention of Scotch whisky. It reads:

"The Chancellor should review the cuts"--

that is what the hon. Gentleman called them--

"in the drinking industry."

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Several of my hon. Friends have referred in some detail to the problems that are faced by the drinks industry, not only as a result of added taxes but because of cross-border shopping and smuggling. I represent a constituency that includes many people who work in and around the two large channel ports of Dover and Ramsgate. I am under no illusion--nor are my hon. Friends, including my hon. Friend the Member for Hastings and Rye (Mrs. Lait)--about the severity of the effects of legal cross-border shopping and illegal smuggling rackets. The effects bear severely on many shops, pubs, wine markets and other businesses where livelihoods depend on alcohol and tobacco sales. It is no great consolation for a small business man to be told that the loss of revenue to the taxpayer is lower than expected, but that happens to be true. The latest available figures to December 1993 suggest that a full year revenue loss estimated to be £250 million was running at only £200 million. There was a split of £130 million in taxes on alcohol and £70 million on tobacco. A loss of £65 million is estimated to be due to smuggling.

I do not underestimate the severity of the problem. I subscribe to the anecdotal evidence, but I have to deal with the factual and numerate evidence. Let us view the national picture. Revenue receipts from tobacco and alcohol sales--£6.5 billion for tobacco and £5 billion for alcohol--are up significantly, despite the losses from smuggling and cross- border shopping. The paradox is that the local publican, wine merchant and tobacconist are being hurt by the smugglers and cross-border shoppers--as are the vineyards to which my hon. Friend the Member for Hastings and Rye referred--even though national revenues are not so adversely affected.

Mr. John Townend: Will my right hon. Friend give way?

Mr. Aitken: No. I am sorry, but I have to press on because of the time.

The Government sympathise very much with those traders and that is why my right hon. and learned Friend's original Budget contained no proposals to increase duties on alcohol and provided for only small increases in duties on tobacco. We were forced, however, with great reluctance to impose the measures. I regret it, and my right hon. and learned Friend the Chancellor regrets it. We hope that perhaps one or two Opposition Members will start to regret it, too. We hope that all their scaremongering speeches about hypothermia deaths are recognised as falsehoods that cost jobs and cause business closures in the drinks and tobacconist sectors.

I should pick up on the point about solutions to the problem which were mentioned at various stages of the debate.

Mr. Alex Salmond (Banff and Buchan) rose --

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