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8.18 pm

Mr. Peter Luff (Worcester): Mr. Deputy Speaker, I hope that, in the context of a quotation, even a quotation that I cannot attribute accurately, I may be excused for some unparliamentary language. I think that it was an American President who once observed that a lie is around the world while the truth is getting its boots on. Because of that, it is important that, once again, we reassert the context in which the Finance Bill is set.

The Labour party constantly seeks to denigrate the extent of the country's economic success. We have had economic growth for two and a half successive years. Unemployment has fallen for two years and it is at the lowest rate of any major country in the European Union. We have low inflation--the lowest inflation that I can remember in my lifetime. We have low interest rates and strong exports. Productivity is growing sharply. That is a picture of an economy of which we should be profoundly proud. I certainly have deep pride in it. My local manufacturers are benefiting exceptionally well from the excellent macro-economic climate. Exporters are doing particularly well. I am glad to say that even my retailers are looking more cheerful than they did a year or two ago. The retail sector is not booming, but it is much stronger. We do not want a boom. We want steady, sustained growth. We do not want the boom-bust cycle from the past. How often we are told that by the Labour party. How good it is to see it being achieved in the British economy. It is fair to say that my construction sector is still a little depressed. However, I believe that the stable conditions that we are creating and the steady improvements that we are bringing about will lead to a steady revival in that sector, too.

What my constituents are looking for from this Finance Bill is simple. They want it to maintain the favourable economic conditions that the Government have created, keep interest rates steady and keep the level of sterling steady so that our exporters can continue to succeed. They also want the Government--I make no apology for this--to reduce levels of taxation in the future. The Bill creates the conditions for precisely that.

I do not say for a minute that I welcome the increases in taxation that are implied in the Bill. I accept them as necessary. In the almost three years that I have been a Member of Parliament, I can remember only one occasion on which I have been lobbied for a reduction in public expenditure. This week and last week I have been lobbied for more public expenditure for transport--for railway services--for the health service, for my education services, for my social services, for my fire service, for my police authority and for my local authority housing department. That is a staggering wish list, which I understand, but which has to be funded. It can be paid for only out of taxation.

It is strange that the only representation on taxation that I have received from my county council, which is responsible for many of the areas of expenditure that I have identified and is run by a Liberal-Labour pact, was for a reduction in taxation. Time and again we hear from our political opponents the list of things on which they wish us to spend more money. Time and again they refuse to see that that money has to be found from the taxpayer. There is one political argument that the Conservative party has not yet quite won. It is the argument that there

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is no such thing as Government money. There is only taxpayers' money. That simple lesson still has not been learnt, certainly by my county council.

I sincerely hope that the Finance Bill will set the framework for further economic growth and so enable us to reduce public expenditure as a percentage of the gross national product. In that context, I feel that I must accept in the interim the provisions in the Finance Bill to increase taxation. I am tempted to suggest to my right hon. Friend the Financial Secretary to the Treasury, who was recently a Minister in the Department of the Environment, that one way of getting round the pressure for public expenditure from our local authorities is to remove the capping limits on local authorities. That would enable them to raise taxes locally and discover how unpopular the business of raising taxes is. It might also enable us to differentiate between well-run Conservative authorities and profligate Labour authorities, but that is a debate for another day. What increases in taxation does the Finance Bill contain? It contains an increase in beer duty. As a member of the parliamentary beer club, I can only be well aware of the significant increase in cross-border shopping. I am grateful for the assurances that I have received from my right hon. and hon. Friends in the Treasury about the steps being taken to counter that trend through increased surveillance by Customs and Excise. I hope that in future Budgets, reductions or stability in beer duty will be a major priority. We have seen an increase in the hydrocarbon oil duties. I accept that as part of the price that we must pay to meet our international obligations to reduce carbon dioxide emissions. I urge my right hon. and hon. Friends to remember the effect that steadily increasing hydrocarbon oil duties can have on rural areas. I wonder whether in future Budgets we might consider the possibility of introducing a variable vehicle excise duty instead of simply loading duty on to petrol and diesel prices. We could penalise the larger, more expensive, gas-guzzling cars and give those who own the smaller, more economical and environmentally friendly cars an easier ride when it comes to paying vehicle excise duty. That may be an alternative mechanism to increasing hydrocarbon oil duties.

Tobacco duty has been increased. I accept fully that we must cut consumption. I am not one of those who believe that advertising bans have any part to play in cutting consumption. The evidence is that they do not do that. I accept that the price mechanism is one of the best ways of cutting consumption, but we must keep the level of taxation under careful review. Concern has been expressed that the elasticity of demand among the poorer sections of our community may mean that the signals are less effective and the reductions in consumption are proportionally smaller for every increase in price. I have received a large number of representations from local confectioners, tobacconists and newsagents who are worried about the effect on their trade. We need to consider that carefully in future Budgets.

The principle of broadening the tax base should be supported by hon. Members on both sides of the House. I had my own difficulties with the order that we discussed last week to impose VAT on transport, particularly as it might have affected steam railways. I was grateful to receive a parliamentary answer, which specified in pretty

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clear terms that the Severn Valley railway would be exempt from the provisions. I am glad that the matter was largely resolved. My insurance broker is not terribly thrilled about the insurance premium tax, but I support the principle of broadening the tax base. I hope that it will lead to an overall reduction in the general level of taxes in due course.

When the Government explained their proposal to impose VAT on certain new transport facilities within amusement parks and museums, they justified it as closing a loophole. The Finance Bill does precisely that. I am told that it closes some £1.5 billion worth of loopholes over three years. I am pleased that the Government have declined to close one loophole referred to by the shadow Chancellor. He suggested that vast amounts of money could be raised by closing the alleged loophole in executive share options.

I was in the private sector before I came to the House. I twice benefited from modest executive share option schemes. On both occasions I paid income tax on the exercise of those options. I find it difficult to accept that executive share options are anything other than carefully defined by the Inland Revenue and effectively taxed, as I know to my personal cost. Some loophole.

It is a good thing that the Finance Bill does not seek to deal with executive share options because I believe in the principle of broadening share ownership. I was fascinated to hear the hon. Member for Edinburgh, Leith (Mr. Chisholm), who is just leaving the Chamber to hand his notes to Hansard , admit that he was opposed to the principle of share options. There, we may be getting nearer the truth about the Labour party's position on the issue. It opposes the principle. I believe that share options are a vital part of a vibrant capitalist economy. They should be extended to more and more of the work force. Not only the so-called fat cats in the boardrooms, but a large number of the work force in many British businesses benefit from share options.

I would be pleased if the Labour party moved amendments in Committee on executive share options. It would enable Conservative Members to expose the shabby politics of envy which still dominate so much of the Labour party's thinking and which would be so destructive of incentives in our society and economy.

I welcome clauses 82 to 86, which deal with capital allowances or roll-over relief for shipping. The House will be aware of my interest in shipping. I have been involved in the Chamber of Shipping for many years, both before I came to the House and since I joined it. I am regularly lobbied in my constituency by ratings and officers in the Merchant Navy about the importance of assisting that industry to reinvest and employ British seamen. It is a tribute to the Government and my right hon. and learned Friend the Chancellor that the provision for roll-over relief for shipping is in the Finance Bill. It would be a shame if the Government spoilt the shipping provision for a hap'orth of tar.

I hope that the Government will consider the possibility of extending the shipping provision from three to five years. There would be no cost to the Exchequer in doing so, but it would bring the cycle of the shipping industry more into line with the taxation treatment of the industry and enable more effective investment in shipping to take place than the three- year provision would allow.

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There are two central tests for this Finance Bill. Does it help business and does it boost employment? The answer to both questions is: yes it does. It will certainly maintain the growing confidence of the business community because of the economic conditions that it will support.

I especially welcome the £600 million worth of transitional relief from business rates. I cannot say that I have received many letters of thanks from my business community for that aspect of the Bill, but I can imagine the letters that I would have received had it not been included. The Government are to be congratulated on that. I also welcome the variety of schemes to help small businesses. The hon. Member for Leith described the venture capital trust scheme as "a loophole". I see it as one of those vehicles to encourage investment that he called for and I welcome it. I know that the small business community also welcomes the creation of the scheme as well as other aspects of the Bill--especially the fact that more businesses can move to quarterly payments of their PAYE and national insurance contributions, which will make an enormous difference to their cash flow.

It is no wonder that business welcomed the Budget. The president of the Association of British Chambers of Commerce said:

"Measures to stimulate investment in growing companies are constructive and timely, and broadly in line with what the business community had been seeking. We believe this will lead to growth in the small firms sector. Coupled with the reduction in employers' NICs, we can look forward to continued job creation by small firms". That is a pretty effective vote of confidence for the Budget and its effects on business.

The Finance Bill will also do much for the unemployed. I welcome some of the provisions, including the fact that employers who take on someone who has been unemployed for more than two years will no longer have to pay national insurance contributions for the first year, which will save about £300 per employee and will be a real incentive to employers to take on the long-term unemployed. I welcome the fact that employers' national insurance contributions will be cut by 0.6 per cent. for employees earning less than £205 a week. I also welcome the work trial and workstart schemes, which are both part of the package that my right hon. and learned Friend the Chancellor presented in his Budget and will do much to assist the unemployed.

What is the alternative to this Finance Bill? It is clear that Labour has no coherent alternative proposals for the House, apart from its tried and trusted formula of envy and taxation. We have heard time and again from Labour Members about windfall taxes and excess profit taxes. I robustly dispute the fact that those so-called excess and windfall profits exist to be taxed and it is not good enough merely to dismiss the subject, as the hon. Member for Leith just did. If the Opposition are right, such windfall taxes are by their very nature temporary, one-off gains to the Treasury. They could not be regular or part of a coherent strategy for the effective management of the British economy.

I have already discussed executive share options. The shadow Chancellor tries to convey the impression that there is a pot of gold waiting there. Leaving aside the incentive for the work force and the inherent merit of such

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share option schemes, which his proposals would undermine, the money that he thinks is there would not exist if his proposals were implemented.

Higher personal taxation and income tax are the constant cry from the Labour party. We know from experience that cutting the higher rates of personal taxation does not lead to a net loss in revenue to the Treasury. By encouraging people, providing incentives and enabling some people to return to this country who had left for more favourable taxation climates, cutting the higher rate would not decrease total revenue to the Treasury. In one year, higher personal taxation might produce some extra gain, but in the long term it would be a disaster for the country and for the Exchequer.

The Opposition's alternative to the Finance Bill is not a strategy, but a series of cheap debating points and sound bites. What does the Labour party do when it comes to taking decisions on measures such as the Finance Bill? It opposed all our major revenue-raising proposals and public expenditure savings yet, despite its best endeavours, it has made more and more spending commitments. That is a profoundly dishonest approach to politics. It is dishonest to oppose tax increases and public expenditure cuts, while proposing more commitments, without having a strategy to pay for them, and I worry about it.

Labour Members say that they want to tax the undeserving rich. Who are they and how much money would such a tax raise, even if they existed? It is shades of Lord Healey's famous phrase, "making the pips squeak".

I share concerns about increasing differentials in our society. There is a case for saying that some of the differentials are becoming too wide. One can learn that from events in other countries. There is a strong case for saying that the Iranian revolution had as much to do with concern about differentials as with Islamic fundamentalism. That is why some of the other emerging Islamic democracies, such as Tunisia, are taking robust steps to control excessive differentials.

How does one cope with such differentials, which breed jealousy and can undermine the strength and fabric of our society? One does so not by taxing the rich harder and harder, but by encouraging enterprise and job creation. Unemployment makes people poor and the Conservative strategy for coping with it is robust and intellectually coherent, unlike that of the Labour party. Quick-fix solutions, such as the minimum wage, sound good and ease the conscience. I wish that they would work, but they would not. They would destroy jobs, increase poverty and increase the very differentials that the Opposition claim to be attacking. Job creation is the route to ending differentials and this Bill takes a number of very important steps to help build on the Government's fine record--one of the best records in Europe. On a local note, I am glad that one other measure that the Labour party wants is not in the Bill--some punitive measure for independent schools. Labour Members do not mind terribly what it is. It could be the abolition of charitable status, the imposition of value added tax on fees, or the abolition of the assisted places scheme--anything to try to get at the independent sector. I welcomed Labour's plans to tax independent education at Christmas. I welcomed the plans to abolish the assisted

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places scheme. They are excellent news and will make my task in my constituency much easier, and I am grateful to Labour for that. A Front-Bench Opposition spokesman highlighted the fact only today that one school in my constituency derives more benefit from the assisted places scheme than any other independent school in the west midlands. The Opposition thought that that was terrible news, but I welcomed it. It is marvellous news and it means that that fine school can continue to offer a valuable and different--it is not necessarily better-- education to many people in my constituency who would not otherwise be able to use it.

I welcome it every time the Opposition talk about taxing independent schools. The more they trumpet their hostility to the independent sector, the more I like it. I hope that they will do so in Committee. I hope that they will table amendments to the Bill along those lines, as that would be good news for me and for my party.

I cannot pretend that I like every aspect of the Bill. Unlike Labour Members, no Conservative likes to increase taxes, but the Finance Bill lies at the heart of a strategy for Britain's continuing economic revival. The measures in it will enable the Government to continue to deliver economic success and export-led growth--that miracle or chimera for which we were looking throughout my childhood and my days as an economics student at university. We have actually achieved the chimera of export-led growth at last. The Bill will underpin the achievement of that miracle. The country has chased it for decades and we must not throw it away now. The Bill will not do so and I commend it to the House.

8.38 pm

Mr. Thomas McAvoy (Glasgow, Rutherglen): First, I must associate myself with the remarks that my hon. Friend the Member for Durham, North (Mr. Radice) made about my hon. Friend the Member for Dudley, West (Mr. Pearson). I also congratulate the hon. Member for Bridlington (Mr. Townend) on his tribute to our new hon. Friend. The warmth and sincerity of the hon. Gentleman's tribute were much appreciated by Labour Members. His tribute was generous, sincere and good to hear and I certainly associate myself with the thanks for those remarks.

It would have been much better if some of the Conservative Members who spoke after the hon. Member for Bridlington had been here to hear the candour and honesty with which he accepted the fact that the Budget increased the overall tax burden. It would have done Conservative Members good to hear that, because some of their speeches have not recognised the fact that the Government are increasing the overall tax burden. If there is any doubt about that, let me say that the Chief Secretary honestly admitted it at the Dispatch Box.

Governments should do their best to take the people with them. In so doing, they must exhibit a sense of fairness and try to accommodate people as much as possible. People must not feel that they have been unfairly treated and that the Government are selfish, encourage greediness and do not care about people who are less well off. This Government's actions do not inculcate a sense of fairness and society does not regard them as fair.

I am pleased that the Labour party has said that it will table new clauses to the Bill to give privatised industry regulators new powers to cut prices for millions, where a

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regulator thinks that boardroom perks to the fat cats are excessive. I also support the action in subjecting executive share options to income tax. I agree fully with the full disclosure of top salaries, perks and payments in company boardrooms, including encouraging pension funds to vote at company meetings on those issues.

I also support the demand that private companies declare donations to the Conservative party. Everyone knows that donations can be made to various organisations, which then donate them to the Conservative party. No one would deny that.

I was interested in the comments of the hon. Member for Worcester (Mr. Luff). When I study Conservative Members and the political spectrum within their party--the so-called drys and wets--I sometimes think that the wets are not too bad, until I listen to one of them. They are every bit as vindictive, hard line and intolerant towards people who they think do not meet their standards as the others. There are no such thing as drys and wets in the Tory party. They are all the same--hard-line right wingers.

The hon. Member for Worcester mentioned costing, and Conservative Members often cry, "Labour should cost its policies." I remind Conservative Members of Lord Howe's comments when he was Chancellor of the Exchequer in a Conservative Government. He is always praised as having been a successful Chancellor. He said that only a fool in opposition would cost a programme, because only Governments see the books. I am amazed that Conservative Members ask us to cost what we would do when we are not in full possession of the facts in the books.

One item in the Budget demonstrates the vindictiveness to which I referred: the freezing of the blind person's allowance was a petty action. I know a number of blind people. The Government's reputation for helping the handicapped is bad enough. What a petty, vindictive move it was to freeze the blind person's allowance.

Conservative Members claim that theirs is a tax-cutting party. The so- called "tax bombshell" of which the Tories accused the Labour party at the 1992 election was effective, as many of my constituents have told me that they were afraid of that. I do not know how the Government can look us in the face and say that they did not deceive the public at that election, because the Budget increased the overall tax burden. As my hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm) said, that does not include the mini-Budget, which raised the price of beer by 1p, wine by 5p a bottle, and spirits by 26p a bottle, as well as the price of cigarettes and petrol.

Although that is a more balanced approach to a Budget, it increases the ordinary family's tax burden. I shall not forget the sight of the Chief Secretary at the Dispatch Box defending the Government to the hilt and saying that the Budget would increase the household tax burden by only £2.30. Baroness Thatcher would be shocked to hear a Conservative Minister plead at the Dispatch Box that the Government were raising taxes by only £2.30. What a comedown for the Conservative party.

Mr. Aitken: It is true that, in 1995, taxation for the average family will rise by £2.30 a week. Even after taking that increase into account, 1995 is also the year in which households' real disposable incomes will rise by £5 a week, so the hon. Gentleman should present both sides of the picture fairly. His constituents in Glasgow,

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Rutherglen will have more real disposable income even after the tax increases introduced in the Budget before last.

Mr. McAvoy: Although the Government claim that they have reduced direct taxes--we can all trot out the figures on that--since 1979 the overall tax take from all sources has increased under the Conservative Government. There can be no dispute about that if all indirect taxes are taken into account.

I am aware of the constraints of time and, despite the fact that I have been sitting in the Chamber for five and a half hours, I shall be considerate towards other colleagues.

I often hear Ministers mention the word "prudent". Since 1979, the proceeds of privatisation have amounted to £77 billion, which has been completely wasted on dole money and all sorts of other giveaways to chief executives of privatised industries. The wasted revenue from oil and the money spent on dole payments are an absolute disgrace. When I hear the word "probity", I think of a subject which I mentioned earlier--Health Care International, which is the private hospital on Clydebank. The figures vary, but between £15 million and £30 million of public money-- or, as the hon. Member for Worcester would say, taxpayers' money--was completely wasted in that private hospital project. To compound the matter, we have now heard that the Secretary of State for Scotland is considering giving another £4 million to whichever company takes over that hospital, which has already cost taxpayers billions of pounds. The Chief Secretary was incautious enough to say that that was a misjudgment by the Secretary of State for Scotland. I doubt whether the Secretary of State for Scotland accepts that, and it will be interesting to see his reaction.

If money were freely available and the Government were a success, there would be no problem. I speak only for my constituency, where I am currently fighting the proposed closure of a maternity hospital that is only 15 years old. It is a brand new hospital with top technology, fantastic staff and a great record, but the Greater Glasgow health board proposes to close it. The driving reason behind its proposal is cost.

Like other hon. Members, I do not recognise the rosy picture that Conservative Members paint, nor do I see a recovery coming. Roll on the next general election, when the Conservatives will pay the price.

8.48 pm

Mr. Stephen Timms (Newham, North-East): I am grateful for the opportunity to contribute to this debate. I add my congratulations to those that have already been expressed on both sides of the House to my hon. Friend the Member for Dudley, West (Mr. Pearson) on his thoughtful maiden speech. I must express some surprise at the considerable influence that is apparently wielded among Conservative Back Benchers by the British Amusement Catering Trades Association. I shall be interested to see how that influence is reflected in what happens in Committee.

I should like to consider the fairness of the Government's tax policies-- not just those proposed in the Bill but those pursued throughout the past 15 years. It is time for a radical change of direction. My greatest anxiety is shared by the hon. Member for Worcester (Mr. Luff), who drew attention to the widening chasm between the

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best-off in our society and everyone else. That chasm is due largely to the taxation policies that have been applied in the past 15 years. We cannot allow it to continue to get wider.

In 1979, the percentage of income paid in tax by the best-off 20 per cent. was 38 per cent. whereas the worst-off 20 per cent. paid 31 per cent. of their income in tax. Those proportions have now been more or less reversed, because by 1992--things have gone somewhat further since then--the top 20 per cent. were paying just 34 per cent. of their income in tax whereas the worst-off 20 per cent. were paying 39 per cent. of their income in tax. The worst-off were paying a significantly higher share of their total income in tax. I do not see how that can be defended. The gap is getting wider, because the income of the poorest 10 per cent. is less in real terms than it was in 1979.

According to the Department of Social Security's study of households on below average income, the real income of the bottom tenth in Britain dropped by 17 per cent. between 1979 and 1991-92. The explanation for that and the other changes that have occurred rests with the tax cuts in the 1980s, which benefited the highest earners, while the tax increases of the past few years have hit those on low and middle incomes. The two sets of tax changes have affected different groups--tax cuts affected the best-off whereas tax increases affected the worst-off. That has caused the difficulties. A survey of the tax winners and losers under the Government was published by the Institute for Fiscal Studies in February 1994--perhaps it is the most authoritative source on the subject. It concluded:

"The tax rises which will come into effect in the next two years will reverse many of the tax reductions of the late 1980s. But those who gained from the cuts of the 1990s are not the same people as those who will lose from the increases of the early 1990s.

The total impact . . . will be to make the tax system less progressive. The rich will tend to have gained, the poor to have lost."

The impact on an average family with one average income and two children and a mortgage is such that, in 1979, that family was paying 32.2 per cent. of its earnings in taxes, but following the Budget it will pay 35.6 per cent. That is what is so dreadful, because the tax burden has gone up and the money has overwhelmingly been taken from the least-well-off.

People living in constituencies such as mine have been doubly hit in the past couple of years, because they have paid over the odds in tax increases and have been at the sharp end of the spending cuts. The cut in housing association investment programmes will be a particularly heavy blow to my constituents.

Fifteen years ago, the Conservative party took the view that it could afford to ignore the interests of people living in constituencies like mine and shift more and more of the tax burden on to them. What is now becoming clear, not just to me and my hon. Friends but more widely, is the scale of the damage that has been inflicted on the community in which we live--the one nation of which we are all part, willingly or not.

Much of the problem is due to the shift from direct to indirect taxation. There is a growing school of economic criticism of indirect taxation and few economists now accept that indirect taxation increases have less of a disincentive effect than direct taxation increases. Increases

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in indirect taxation hammer families and the Government must recognise that their effect is deeply damaging. According to the economic trends survey of last year, Britain is unique among the G7 countries because it is the most heavily dependent on indirect taxation as a share of the total tax take.

The effects of such tax changes are particularly grim when set alongside the well-publicised excesses enjoyed by the people at the top of the privatised utilities in particular. It is hard for people to understand how those who were attracted to senior positions in the gas or water industries at salaries of between £60,000 and £80,000 a year now have to be paid three to five times more because that is what they need in order to be kept by those industries. Why were they not paid those sums prior to privatisation? Why did they not move then to jobs that paid those salaries? The reality is that once people have the power to award themselves enormous sums of money, that is exactly what they will do. The market does not enter into it. Those salaries are the result of the straightforward operation of unfettered greed and are not mitigated by the somewhat unctuous justifications that are made by the beneficiaries.

I am glad that the Confederation of British Industry is considering such high salaries, but I must express an element of scepticism when, as we have been told today, an investigation into that subject is to be carried out by someone who is paid more than £750,000 a year. My constituents and I are concerned that the rules are being made either by those who already receive high salaries or for their benefit. That is wrong.

The taxation policies of the past 15 years have been in hock to wealthy people. They have been able to demand tax cuts for themselves at the expense of everyone else. The damage to our communities, the effect in terms of social alienation, division, crime, economic inefficiency and waste, and the growth of dependence on benefits have been immense. We desperately need a new approach that places justice and fairness at the heart of the system in place of avarice; only then will we start to see a healing of the obvious damage all around us today.

8.56 pm

Mr. Barry Field (Isle of Wight): I apologise to you, Mr. Deputy Speaker, and to colleagues on both sides of the House for not being present throughout the debate. I am unfortunately suffering from a nasty bout of' flu which seems to doing the rounds on the Isle of Wight. I should also declare that in the Register of Members' Interests I state that I advise the National Association of Holiday Centres.

The Finance Bills of the past couple of years have followed an amalgamated Budget and have been coupled with the announcement of a control total for public expenditure. I commend my right hon. Friend the Chief Secretary on the way in which he has ensured that public expenditure has fitted in with that control total. Long before I came to the House it always puzzled me how it was possible for every other organisation in Britain to fix its expenditure and its revenue raising, except Her Majesty's Government. If one revolution has befallen the Treasury in recent years that will be to the benefit of all the citizens of our nation and lead to sounder finance in future, it is the amalgamation of expenditure and taxation Budgets and the new control total arrangements.

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I was pleased to note that at long last we are to try to tackle benefit fraud by electronic means. That is long overdue; all of us who represent seaside constituencies know about the "green giro culture". The number of times that girocheques go missing in the lodging house system is a serious problem. There must be a better way of ensuring that public expenditure, where it is necessary, gets through to the individual claimants and is not misused, as has been the case with the existing system.

I am also especially pleased to note that £600 million more is to be spent on the national health service, having been released through efficiency savings in the health service, and that the Government have honoured the election pledge to ensure that there is real growth in health expenditure.

I wish to make specific mention of the first year's full national insurance rebate to employers for taking on anyone who has been unemployed for more than two years, which will be introduced in April 1996. I and Mr. David Guy, then acting chairman of the Isle of Wight training and enterprise council, visited my right hon. Friend the Member for Wirral, West (Mr. Hunt) shortly after he had become Secretary of State for Employment and made that very proposal to him. Although we did not frame the proposal in precisely the details in which it is now set out, we suggested to my right hon. Friend that an opportunity existed to give a financial incentive to employers to take long-term unemployed people off the unemployment register. We presented him with a well worked out scheme. I am sure that the measure was not solely the initiative of the hon. Member for Isle of Wight or David Guy, although he is a respected and knowledgeable local business man, but I am pleased that we played a small part in suggesting it at an early stage. I am also pleased that there will be a back to work bonus, which will be tax free, and I am sure that it will be very worth while in trying to tackle the significant problem that we have as a nation- -the core of long-term unemployment. With regard to vehicle excise duty, and the consultation paper to be issued in relation to its extension to the possession of vehicles rather than only those that are on the highway, it has long been a practice in this country that people sometimes license their vehicles for the summer only, for their runs to the seaside and days out, and lay them up in winter. It has always been the law that, provided that they are not on the Queen's highway, people do not have to purchase a vehicle excise duty licence for their vehicles. I am also amazed to find how many people in this country own a second vehicle, which is not regularly taxed and used on the highway. I have had considerable correspondence from my constituents about that, and I warn my right hon. Friend the Chief Secretary to the Treasury that we are playing with fire on that issue.

It might be much more sensible if we went down the Swiss route and each had our own personal licence plates, which we carried with us from vehicle to vehicle, rather than persisting in the present rather outmoded form of taxation, if I may so describe it, which is incredibly costly to administer and falls into the category of unenforceable legislation along with dog licences and television licences. We have done away with the first of those, and the time is long overdue to reform the remaining two, which are also more honoured in the breach than in the observance. Anyone who doubts that has only to consider the amount of money that the Treasury took in during one of our

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famous petrol energy crises and one had to produce a vehicle logbook with a current licence to obtain one's petrol rationing cards. The Treasury immediately took in a staggering amount of money--I believe that it was nearly £0.5 billion. I stand to be corrected on the exact figure, but it was certainly an extraordinary amount of money.

As we speak, our constituents throughout the United Kingdom are receiving the new rating valuations from the rating officer. I was pleased to note that transitional relief is continuing. I referred to that in correspondence with my right hon. Friend the Chief Secretary to the Treasury long before the revaluation. However, I must tell him that, remarkably, after one of the most bruising recessions that British industry and business have ever experienced, some of the valuations are substantially greater than the previous figures. I hope to meet the Minister's colleague to discuss that matter as I wonder what is going on.

Having had the honour, albeit briefly, to be Chairman of the Select Committee on the Environment, I can say that we look forward to the landfill levy. The Treasury cannot bring itself to call it a levy--it is a landfill tax. As always, the new tax brings with it a danger, and we shall have to keep a wary eye out for fly tipping in the countryside.

I am pleased, both personally and for the venture capital industry, that we have extended reinvestment relief and taken away the nonsense about the percentage of property ownership within the qualifying companies. That is welcome, but the scheme has not had nearly enough publicity. I do not think that people, particularly small business men, understand that they can sell their businesses and not pay one ha'penny of capital gains tax. The message has not got through. Even some accountants do not seem fully to understand the mechanism, which will be extended by the Finance Bill. I hope that my right hon. Friend the Chief Secretary will address that point in due course. We shall also shortly see self-assessment--itself a revolution in taxation in this country.

My final subject, which falls within schedule 3, has already been mentioned --that of amusement machines. That provision fulfils Field's first and second laws of legislation. Field's first law of legislation is that all legislation comes long after the event and long after the concern has passed into the mists of time. The fact that video games have only just penetrated the consciousness of the Treasury exactly fulfils my first law of legislation.

Field's second law of legislation is that all legislation has absolutely the opposite effect of that intended. The taxation of video game machines will ensure that they are driven out of the amusement arcades along our seafronts. They will be replaced by more gaming machines--exactly the concern that people have about amusement arcades and their influence on young people. The effect will thus be the reverse of that intended. I have to declare an interest in that I have a space invader machine in my living room as I was a bit of an addict in my day.

Mr. Roy Thomason (Bromsgrove): Does my hon. Friend agree that the introduction of the proposed taxation system on video machines may not yield the revenue that the Treasury has predicted? Video machines are reputed not to produce sufficient funds to justify their continued existence, which may lead to their removal by many operators and therefore to the yield being substantially less than that anticipated by my right hon. Friend the

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Chief Secretary. Does my hon. Friend think, therefore, that there is a case for reinvestigating that subject to see whether it would be appropriate to ease the taxation to ensure that it is set at a level which is justifiable and yields the expected sums?

Mr. Field: Not only was that intervention timely, but it comes from a former chairman of the Association of District Councils and distinguished leader of Bournemouth council, which was one of the first seaside authorities in the United Kingdom to put specialist meters on the machines in its amusement arcades so that the authority could prove to the Customs and Excise precisely how much money the machines were generating. That was a revolution in the arcade industry at the time and one or two people who were taking a couple of shillings out of the back of the machines thought that it would be their undoing. It illustrates the point that a local authority in the United Kingdom has the information to prove to the Customs and Excise, and therefore the Treasury, just how little some of the machines yield. My hon. Friend makes a pertinent point when he says that the provision may have the opposite effect to that intended.

I conclude by quoting the National Association of Holiday Centres Ltd, which includes Butlin's and similar organisations. It said: "The new tax will have a devastating effect on the industry reducing significantly the number of amusement machines sited in such places as amusement arcades, holiday and caravan parks, indeed putting some out of business. Far from generating the revenue for the Exchequer we believe the overall effect will be to reduce revenues taking into account loss of expected duty and existing VAT from machines sited, loss of corporation tax, PAYE and NI contributions from those companies making redundancies or going out of business and loss of duty on machines imported into this country".

I point out that most of our resorts do not open all year round--they are fairly short-term operations. As knowledgeable as he is, I cannot believe that my right hon. Friend believes that United Kingdom resorts have done so well that they need a tax of this sort in the current economic climate and as they come out of recession. 9.10 pm

Mr. Bill Etherington (Sunderland, North): Like the hon. Member for Isle of Wight (Mr. Field), I apologise for my absence during most of the debate today. Unlike him, my absence was due to attending to other parliamentary duties. I thank the hon. Gentleman for keeping his speech to a reasonable length. I also thank my two hon. Friends the Members for Glasgow, Rutherglen (Mr. McAvoy) and for Newham, North-East (Mr. Timms), who spoke before him, and I thank you, Mr. Deputy Speaker, and the Whips for enabling me to make a short contribution to the debate.

When I spoke in the Budget debate, the Chief Secretary, who is in the Chamber, was kind enough to say that he thought that I had made a good speech, but that it was a little too long. I cannot guarantee the quality of my speech tonight, but I can assure the Minister that he will be well satisfied with the quantity.

I wish to speak, more in sadness than in anger on this occasion, about only one subject: something is missing from the Budget, as it has been missing from the previous

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three. The Government have not addressed the anomaly of charities being unable to redeem value added tax payments. That is a quite serious problem.

Like many other people, I would like to live in a world where charities were not necessary. That would be wonderful, but it is never likely to happen. Indeed, the Government's policies have increased the pressure on charities that are subsidising services which should be provided by the state. Under those circumstances, I expected the Government to show a little more sympathy when considering the needs of charities.

More than £300 million in VAT payments is collected--wrongly, in my view--from charities each year. Charities do not make profits; they provide services. They exist only because people are prepared to give either of their money or of their time. It is wrong that people who take a Christian attitude towards life should find themselves unwitting tax collectors for the Government. That is morally wrong, and I hope that the Government will address that issue in Committee. The services provided by charities are either exempt according to European Union legislation, or they fall outside the scope of VAT; yet we have a ridiculous situation whereby VAT is still being collected. At best, that could be described as a form of robbery. What is worse is that local authorities, health authorities, boards and trusts that provide contracted-out services can receive full recovery of VAT upon their services. Obviously, that is wrong. What applies for local authorities and health authorities should apply for charities, because there are many parallels.

I accept that not all charities are what they seem. I believe that some charities are little more than extensions of certain vested interests. But that is a discussion for another time and place. The vast majority of charities--those which provide services for the disabled, the poor, the old and the disadvantaged--are admirable. As long as they are needed, they should receive preferential treatment, not inferior treatment from the Government. Up to 10 per cent. of what is collected by charities to carry out good works is being lost in VAT that is not recoverable. That is totally unacceptable, particularly at a time when there is no real increase in the amount of money being given to charities, and more pressure is being put upon them because of various constraints on public expenditure and local authorities and the NHS being unable to provide services. I hope that the matter will be examined more seriously. If people eventually decide not to give their time or money to charities, the taxpayer will have to pay much more.

On 11 January, the House debated VAT on historic tramways and railways. I hope that it is muddled thinking on the part of the Government and nothing worse, but they are completely out of step with reality in their attitude towards VAT and those involved in providing charitable services.

Mr. Thomason: Can the hon. Gentleman explain how he would seek to differentiate between the trading activities of charities, which are in direct competition with others who are paying VAT, and the non-trading activities of charities for which he would argue that relief was appropriate?

Mr. Etherington: I am not trying to avoid the question, but I am short of time. I accept that the hon. Gentleman

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raises a fair point. My answer is that I would do that with some difficulty. It is a problem, just as it is difficult to decide what is a bona fide charity on moral grounds rather than on strict legal terms. I cannot say much more than that. I agree that the problem needs to be addressed, but it could be overcome if the will were there.

It was originally the intention to put VAT on private railways, almost all of which are based on a charitable concept. They are not profit-making organisations; they provide a service and keep part of our heritage intact. The national tramway museum at Crich is a national asset and should be paid for by the Government, but it is not. Because of their muddled thinking on VAT, the museum will have to find an extra £35,000 a year. If it were a railway and not a museum, or if it did not provide rides on trams, it would not have that problem.

It is all part of the same muddled thinking. I wish to bring it to the Minister's attention to see whether some of the problems can be put right. We are not talking about vast sums of money. Relief from VAT for charities will not bankrupt the country. After the recent fiasco on VAT, one prominent Minister stated that it required only another 1p on income tax. I admired him for saying that. We are talking about a problem that is nothing like as large, but probably could be dealt with by consequential adjustment.

I hope that the Minister will take on board the two points that I have raised and I thank you once again, Mr. Deputy Speaker, for your tolerance.

9.18 pm

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