Mr. Alistair Darling (Edinburgh, Central): I am grateful to my hon. Friend the Member for Sunderland, North (Mr. Etherington) for being brief, and to other hon. Members who have curtailed their remarks so that all those who wished to contribute to the debate were able to do so. My hon. Friend the Member for Sunderland, North made some useful points about charities, to which we will return in Committee.
The Finance Bill should be the cornerstone of the Government's economic and, therefore, political strategy and we are entitled to examine it to see where they are going and to identify their sense of direction and purpose-- if they have one any more. We look in vain, because the debate has told us what the Opposition already suspected--that the Government have only one objective: to win the next election at whatever cost. All their efforts will go into promoting the interests of the Conservative party; the interests of the country will take second place every time. It is a short- term aim from a short-term Government and their policy is what we have now come to expect.
Conservative Members believe still that all they need do is cut the basic rate of income tax and they will win. That will not work. The Conservatives fought the 1992 general election on the specific pledge not to introduce in last November's Budget tax rises equivalent to 7p in the pound--the biggest in Britain's history.
At the last election, the Government promised that they would not have to increase taxes. Until last autumn, the Chancellor told us that whatever he said on a wet night in Dudley did not matter. In December, he got a resounding answer from the people of Dudley. This afternoon, we heard an excellent speech from my hon. Friend the new Member for Dudley, West (Mr. Pearson), who not only paid a generous tribute to his predecessor, Dr. John
Column 666Blackburn, but showed that he has a substantial knowledge of business--a knowledge sadly lacking among a number of Conservative Members. I am glad that my hon. Friend has agreed to serve on the Committee that is to consider the Bill.
As the Prime Minister made clear yesterday, at a Conservative party event hosted at public expense at Downing street, all the Government's efforts are geared to 1996. Even their limited help for the long-term unemployed will not come into play until April 1996, because the Government want a drop in unemployment in the summer of that year--not in the summer of 1995, when the public might forget all about it. The needs of the long-term unemployed take second place to the cynical needs of the Tory electoral cycle. This tired and discredited Government have only one card left to play--cutting the basic rate of income tax by a few pence regardless of the consequences. That will not work either, as my hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm) said.
Let us examine some of the killer facts about which we have heard so much. Where better to start than the Maples report prepared by the deputy chairman of the Tory party. He said that
"the reality is now that the rich are getting richer on the backs of the rest, who are getting poorer."
Reference to that growing division was made by my hon. Friend the Member for Newham, North-East (Mr. Timms). The killer facts about tax are simple and well understood. Killer fact No. 1 is that the British people have been landed with the biggest tax increase in Britain's history, equivalent to 7p in the pound, and that they pay value added tax on domestic fuel for the first time ever. The public will remember that the Conservatives threatened to increase that tax to 17.5 per cent. At the next general election, the public will have every reason to believe that if the Conservatives are returned to power, they will increase VAT again.
It is no use the hon. Member for Bridlington (Mr. Townend)--who is not in his place--moaning, as he does regularly, about the Government's tendency to increase tax and their failure to curtail public spending, because it is at the same level now as 16 years ago. The Tories never have been and are not the party of low tax. They tax for the wrong reason--economic failure.
Killer fact No. 2 is that families pay more of their income in tax than at any time since the Conservatives first came to power in 1979, and they will have to pay more yet again from April.
Killer fact No. 3 is that public spending is the same now as in 1979. The Secretary of State for Wales complained about that two weekends ago, yet he does not seem to realise that he has been supporting a Government who have not kept even that foolish promise made 16 years ago--all that from a Government who said that they would not increase taxes because they had no need to do so.
The gap between the highest and lowest-paid worker is greater than at any time since records began in 1886. Unfairness is a hallmark of Tory tax policy. For all the criticisms that we hear from Conservative Members about a minimum wage, Government policy means that the taxpayer is subsidising bad employers. We pay for that, and there can never be any justification for it. The Government believe that there is no floor below which wages should not be allowed to fall.
Column 667No wonder the Maples report stated:
"There is a feeling of powerlessness and insecurity about jobs, housing, health service, business, family values and crime." If the Tories plan a giveaway Budget in 1995, they will be quite prepared to increase interest rates before that to calm the markets. The markets remember the inflationary effects of the Lawson boom that started in 1988.
The Chancellor, as is his wont, was disarmingly frank during the Budget debates towards the end of last year because he made it clear that decisions on interest rate rises would, among other things, depend on political considerations. There we have it. Despite all the talk of openness, of monetary responsibility and of publishing minutes and so on, at the end of the day, there is only one objective: Tory electoral gain.
The Governor's advice on interest rates will be swept aside--that may please my right hon. Friend the Member for Llanelli (Mr. Davies)--if it stands in the way of the Tory election strategy. The Chancellor has made it clear that he is quite prepared to do that because the Government have no strategy for the country. Their only strategy is self-interest.
The Government have no strategy for investment. Of course the economy is beginning to recover, but as my hon. Friend the Member for Durham, North (Mr. Radice) said, people have yet to feel it. That is because the United Kingdom had the deepest recession of any European country in 1991 and 1992, which is why the UK's growth in the past couple of years has been stronger than it may otherwise have been--not because, somehow, the Conservatives have managed to manage the economy more effectively. It is because we are emerging from the deepest recession that we have experienced.
When one considers the Tory record over 16 years, one sees that we have had the lowest growth rate of any major European country in G7 and we still have the fear of inflation. Those Conservative Members who claim that we live in a climate of low inflation and that somehow it is here to stay do not realise that there is a very real risk that inflation will start to rise as the capacity of the economy is used up because the Government have run down the manufacturing capacity of the economy over the past 15 or 16 years.
Let us look at two more Maples killer facts. Output is now only 2.5 per cent. higher than it was before the recession began. Manufacturing output is still lower than it was at the beginning of 1990. Investment in plant and machinery, a key indicator, is 30 per cent. lower than at the start of 1990.
What do the Government have to offer? In his speech, the Chief Secretary made a lot about tax loopholes and he claimed that the Chancellor was attempting to close some tax loopholes in his Budget. Indeed, the Chancellor closed some tax loopholes, just three weeks after the same Chief Secretary said that there were no tax loopholes to close. The fact is that there are tax loopholes to close if the Government choose to close them.
Let us look at the flagship policy of the Budget--it must have been the flagship policy because it was the only policy which warranted a separate press release on the day of the Budget--which was the proposal to establish venture capital trusts: son of the discredited business expansion scheme, the granny farmers charter. Savings
Column 668should be encouraged because, without them, there will be no money for investment. But, if the Government are going to intervene to use taxpayers' money to encourage saving and investment, they should do it properly and effectively.
Venture capital trusts will provide one of the biggest tax breaks that this country has ever seen. They will enable people, as has been said, to avoid paying tax, yet there is no guarantee that the investment will go where it is needed. Indeed, it is likely--all the experts and advisers say this-- that it will go to the easy options, to the places where the investment would have gone anyway, regardless of any incentive. We the taxpayers will subsidise the granny farmers of this country. The hon. Member for Bridlington called it tax concessions. I do not care whether he calls it concessions or tax breaks; the fact is that we will pay for it.
The Government's profligacy on tax relief beggars belief. Why, for example, did not they try to target that investment? They could have considered corporate venture capital trusts, which might have encouraged private investment and partnership with public money in rebuilding infrastructure or encouraged investment in high technology or in the high-risk areas that the country needs. No mention was made, for example, of regional development, which we think is so important. The Government's first thought was not for investment in the public interest but for those who want to avoid paying tax. We shall table amendments to ensure that investment goes where it is needed--into areas where there is a risk, the very areas in which Britain should be competing. Indeed, the hon. Member for Milton Keynes, South-West (Mr. Legg) mentioned a proposal to taper capital gains tax to encourage long-term attitudes. We suggested that and we support it, yet we see nothing.
What about the Government's private finance initiative? It seems to have run into the sand. Since the initiative was announced in 1992, only £500,000 of private capital has been levered into public sector projects. At the same time, however, Government investment is expected to be £4.5 billion lower than in the past two financial years. In other words, there is a cut in investment. In his Budget statement last autumn, the Chancellor announced reductions in capital expenditure, particularly in housing and road building. Rail investment, about which we have heard so much, has already been cut. The Government do not understand how to use incentives in the public interest, but they have a very sympathetic ear for those who are ready to exploit every incentive for private gain. They continue to turn a blind eye to the activities of a greedy minority of executives who insist on paying themselves more for doing less. The hon. Member for Finchley (Mr. Booth) said that all that was happening in the privatised utilities--in the gas and electricity industries--was that people were bringing themselves up to world standards. When services come up to world standards and prices come down to world standards, those people can begin to consider paying themselves for effort. However, when we consider that the salary of the chairman of North West Water has risen 571 per cent., we wonder how on earth the Government can justify such figures.
We welcome the CBI initiative to set up a working party to encourage better corporate governance. Effective corporate governance might be the best way to resolve the problem. We believe that those who work hard, and the
Column 669companies that grow, should be rewarded for their efforts provided that it is quite clear that they are being rewarded for increased effort and increased productivity. We believe that employees should be rewarded by share options, provided that those share options are earned and not simply given as a super-bonus. Those rewards should be available from the boardroom to the shop floor.
It is typical of this Government that when the Institute of Directors, which is not normally an ally of the Labour party, the CBI and the Labour party call for action, the Government do absolutely nothing. What has happened to the Cabinet sub-committee that was set up to deal with that matter? It has still to report, but perhaps it has been wound up. Lord Hanson said that the dividend study set up by the previous Financial Secretary should be stopped; perhaps Lord Hanson has told the Prime Minister to stop the current exercise as well. Perhaps rather too many Ministers intend to sit in those same boardrooms and claim the bloated salaries and share options that we have seen in the privatised utilities.
The Government have no strategy for growth. Let us consider another killer fact: the United Kingdom's growth record since 1979 is poor. It is lower than any other major European country or G7 country. What are the Government proposing? They do not propose to invest in education. Is it not ridiculous that, when we have 3 million unemployed people, we have skill shortages, which mean that inflationary pay increases are given to some while others go without work?
Cuts in local government spending will undoubtedly mean cuts in education and in the number of teachers in schools. The hon. Member for Bridlington should bear that in mind. We will see savage cuts in local authority spending, of which the Government will wash their hands.
That is no way in which to invest in the future. Without growth, public spending will never be reduced. The fact that we have high unemployment is one reason why Government borrowing has been so substantial.
The Government's competition policy is equally blinkered and confused. Mention has been made of the tax consequences on the brewing and whisky industries, which are major employers and major revenue earners for this country. The illegal importation of drink and the bootleg trade are flourishing, yet the Government have cut the number of people employed in Customs and Excise.
The Government talk about deregulation, but the Bill proposes to extend vehicle excise duty in a way that will strangle businesses in red tape. The proposals for self-assessment of tax, which we welcome in principle, appear to be drowning in volumes of paperwork and confusion. If the proposals simplify matters, then all to the good. However, with confusion and uncertainty will come scope for evasion. People will also make honest mistakes. There seems to be no procedure for resolving those mistakes and misunderstandings. We need simply look at the forms in circulation from the Department of Social Security to see the complications that the Government have managed to create for people.
I hope that the Government will take to heart hon. Members' criticisms about the need to try to simplify future Finance Bills. Much legislation that is now going through Parliament has not been sufficiently scrutinised simply because of the volume of it and the lack of time available.
Column 670The Government have no realistic strategy for the country. They should know that we cannot compete in this world on low wages and low skills. We can compete on excellence and on goods that offer added value. The financial services industry pays well and it competes around the globe, as do the car manufacturing and electronics industries. Inward investors are looking for motivated and skilled work forces. We will not have them by driving down wages and depending heavily on casual labour. To succeed, we need a highly motivated and highly skilled work force.
The Government have no policy for maintaining the social fabric of this country. They are keen to lecture others on their behaviour and they are keen to lament falling standards, yet they turn a blind eye to the consequences of their policies over the past 16 years. We believe that economic efficiency and social justice go hand in hand. We all live in the same society--what happens to our neighbour matters in social and economic terms--yet, in the past two weeks, the Secretaries of State for Social Security, for Employment and for Wales, all of whom increasingly appear to see this country from a different planet, have been repeating their message that, in order to succeed, expectations must be suppressed, standards must fall and society and the idea of it must be denigrated. They say that people are no different from any other commodity at the disposal of the market.
It is no wonder, therefore, that most people see the Government as out of touch with reality and their own experience of life. We see that in the Government's attitude to helping those who have lost their jobs and who cannot pay their mortgages. They do not seem to realise the cost of insuring mortgage repayments and the fact that, increasingly, insurers will either not insure people or will demand premiums that are out of the reach of ordinary people.
We see the same blinkered attitude with the proposal to use the tenant as the battering ram against high rents. It will take more than a small reduction in the basic rate of tax to win back support for the Government. People are uncertain and fearful; they fear for their jobs. Everyone knows someone who has lost his or her job and who has little prospect of finding another. We have a new generation of young people who have never known a long-term, steady job in their lives. Sadly, it appears that, under the Government, they never will.
We see a new phenomenon of people in middle management who have been laid off in their 40s and who are unlikely ever again to find a full-time job. We know the consequences of that not just in social tension but in economic terms and what it will mean in terms of pension contributions and support that might be necessary in future. People fear for their jobs. They see full-time jobs become part-time jobs, or even no job at all. They fear for their pensions and security in their old age. They fear for their children and for their education. Increasingly, people fear for their safety at home. Nearly everyone now knows somebody who has been a victim of crime. People see Cabinet Ministers who regard the country as a test bed for ever more unpleasant and fanciful ideology. They see a country that is increasingly run by a rotten state of quangos stuffed with Tory nominees. They do not trust the Government. They do not believe anything that the Government say and, deep down, the Government and their supporters now know that. The Government have no sense of direction. They have no
Column 671purpose in remaining in office. They live for the moment, and they have run out of steam. The Finance Bill shows that, and it deserves to be rejected.
The Financial Secretary to the Treasury (Sir George Young): Much has already been written and spoken about this year's Finance Bill. Perhaps the most cryptic comment was that of a tax partner reported in The Daily Telegraph of 7 January, who commented:
"the Bill is too long but also too short."
Another tax partner was even blunter:
"I opened the Bill, blinked, and shut it. Then I looked again and saw clause 3 which was about alcoholic ingredients relief. Clause 4 was about denatured alcohol. At that point I decided what was needed and disappeared."
Hon. Members have added their own comments in today's debate, and I shall try to deal with some of them, but the debate has also been useful in highlighting specific issues on which I am sure that the Standing Committee will want to focus.
The hon. Member for Oxford, East (Mr. Smith) started by saying that the Bill was damaging and divisive, but his speech did not sustain that remark. He mentioned two issues and I want to deal with both. The first was the blind person's allowance, but what he did not mention was that it was doubled in 1990-91 from £540 to £1,080 and then further increased to £1,200 in 1994-95.
Before the hon. Gentleman presses us to far on that allowance, he might like to reflect on the fact that it is of no benefit to blind people whose incomes are not high enough. It is also somewhat restrictive in that it does not help the partially sighted. There may be better ways to help the blind and partially sighted than focusing exclusively on the blind person's allowance. It is more conventional to use the social security system to help people with that sort of disability.
The hon. Gentleman's second point was on the impact of the deep discount provisions in clauses 76 and 77. He conceded that there were good grounds for closing the loophole, but he was worried about the impact on housing associations. I have received and am carefully considering representations from housing associations whose borrowing is a very small percentage of the borrowing that will be affected by the clauses.
I agree with what the hon. Gentleman said about the importance of simplifying the tax system; indeed, that has been a theme throughout the debate and I shall say a word or two about that in a moment. He was wrong in what he said about those who did not want to go the whole distance with self-assessment. They have the option of not calculating the liability and instead completing their tax returns broadly as they do at the moment.
My hon. Friend the Member for Stamford and Spalding (Mr. Davies) again spoke about the complexity of legislation. One significant development in that area is the formation of a high-level committee--the tax law review committee--by the Institute for Fiscal Studies. That committee brings together a wide range of talent, with members drawn from industry, commerce, academia, the judiciary and retired civil servants, under the presidency of Lord Howe but with the hon. Member for Edinburgh, Central (Mr. Darling) also a member.
Column 672The committee has set itself an initial programme of three projects all going to the very structural foundations of the present tax code. Perhaps of most relevance to our debate is its project to rewrite part of the existing code in shorter, simpler, more user -friendly terms. That is designed to test whether it would be feasible to recast all or most of the current tax code in that way. The Government are following that work with close interest and the Inland Revenue is giving the committee its full, active and enthusiastic support.
I do not think that there are any easy answers. It has taken more than 100 years to build up the existing body of tax law and any wide-ranging rewrite will be a major task. However, I hope that there is real potential for some worthwhile changes in the way that tax provisions are formulated.
The right hon. Member for Llanelli (Mr. Davies) made a rather nostalgic speech. He spoke of the good old days of fine tuning, domestic credit expansion and monetarism. He needs to reflect on the outcome of those policies, especially those that ended in 1979, compared with the policies that were so commendably described by the Select Committee in its report published a few days ago.
Sir George Young: Another point on which the right hon. Gentleman was not quite accurate was when he said that my right hon. and learned Friend the Chancellor had handed over control to the Governor of the Bank of England. He has not--my right hon. and learned Friend makes the decisions. However, it is now a much more open process than previously and the Governor has some discretion on timing. My hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) and others of my hon. Friends referred to capital gains tax and pressed the case for reform. With a Budget that is broadly neutral there would be difficulties in making a major radical change in CGT. My hon. Friends should remember that CGT performs an essential role in preventing tax avoidance. Without it, or even with it at a very low rate, there would be a strong incentive for artificial schemes to convert income into capital gains. The CGT rate is 40 per cent., in line with the higher rate of income tax. There is no significant anomaly in that.
The hon. Member for Gordon (Mr. Bruce) said that the tax level was too high, but he made no real suggestion on how he would make significant cuts in public expenditure. He can examine the Government's hospitality expenditure, but there are no major savings to be made there. He said that he would vote against the Government because of--in his words--their failed economic policies. Does the hon. Gentleman recognise the following words? It is stated that "the economy is now recovering strongly. Inflation is at its lowest level since the 1960s, and relatively stable. The PSBR is falling and there has been a substantial improvement in the current account. GDP has been growing above its trend rate for over a year, and is forecast to continue to do so for some time without exerting upward pressure on prices. Registered unemployment has been falling since the winter of 1992-93."
Column 673The quote is from the third report of the Select Committee on the Treasury and Civil Service. The hon. Gentleman added his name to that report. It is difficult to understand how he sustains the argument that a week ago it was all so good but somehow today it is all so bad.
My hon. Friend the Member for Wyre Forest (Mr. Coombs) paid tribute to the small business measures in the Bill. He rightly made the point that the shape of the recovery is different from that of other recoveries in that it is investment and export led.
We then had the maiden speech of the hon. Member for Dudley, West (Mr. Pearson). He paid a generous tribute to John Blackburn which was well received by hon. Members on both sides of the House. He described the changing demographic and industrial nature of his constituency. A few years ago, I worked with the hon. Gentleman on the urban trust, which helped to fund small, worthwhile projects in inner cities.
It was clear from the hon. Gentleman's speech that he retains an interest in the promotion of small businesses. I do not want to cause him any difficulties on the occasion of his maiden speech, but the tone of his description of venture capital trusts was significantly different from that of his hon. Friend the Member for Edinburgh, Central. The hon. Member for Dudley, West said that he welcomed the purpose behind the establishment of VCTs. One would not expect him in his maiden speech to launch a frontal attack on his Front-Bench spokesman, but he has some useful ideas on the role of tax incentives in promoting business and partnerships. We would welcome him if he were to serve on the Committee that considers the Bill.
Mr. Darling: The right hon. Gentleman is being a little bit unfair to my hon. Friend the Member for Dudley, West (Mr. Pearson). All of us welcome the idea of encouraging investment and of saving. Our complaint about the VCT device is that it simply provides a tax break and that it will not channel investment where it is needed.
Sir George Young: I hope to say more about venture capital trusts in a moment, but the Labour party is making a big mistake in launching its frontal attack on VCTs, which offer the potential to help growing businesses and to create more jobs. Everyone who has considered the issue agrees that a funding problem exists for small businesses that want to get out of the nursery. VCTs are the result of much consultation. They have been broadly welcomed. The Labour party is ill advised to come out against them at this early stage. My hon. Friend the Member for Bridlington (Mr. Townend) said that public expenditure was too high and that the Bill was too long. He will recognise that, in the past two public expenditure rounds, the Chief Secretary to the Treasury and my right hon. and learned Friend the Chancellor have taken some £42 billion off planned public expenditure. On shorter Finance Bills, a moment ago I mentioned the possibility of simplifying the legislation.
The hon. Member for Durham, North (Mr. Radice), who is not in his place at the moment, gave us a lecture on how and when to cut taxes. As the Labour party voted against nearly all the tax cuts in the 1980s, I am not sure that that is a subject on which it can give lectures. We treat the advice with some caution.
Column 674My hon. Friend the Member for Hastings and Rye (Mrs. Lait), a Member representing a coastal region, spoke about cross- border shopping. As she knows, cross-border shopping is closely monitored. More than 250 customs staff are on single market duties, the majority acting against smuggling. The Government will continue to work with their European Union partners towards closer approximation of duties. The forthcoming review of EU-wide excise duties will give us the first opportunity.
Sir George Young: No. I do not think that my hon. Friend has been here during the debate and, out of courtesy to hon. Members who have asked specific questions, I should like to make some progress. My hon. Friend the Member for Hastings and Rye made the point that venture capital trusts should be focused on smaller companies. She will know that we have put a £1 million limit on subscriptions to achieve that objective.
A number of hon. Members, mainly Opposition Members, asked about work incentives. They said that there was nothing in the Bill to create jobs, but there is--the venture capital trusts. The major work incentive proposals, however, are working social security proposals. That is why they are not in the Finance Bill.
The hon. Member for Darlington (Mr. Milburn) asked why measures to help the long-term unemployed were not introduced sooner, but his concerns were overstated. The 0.6 per cent. cut in employers' national insurance rates for the low-paid starts this April. The extra £10 per week for family credit claimants who work full time starts in July. Together, those two major measures are worth £340 million in 1995-96. Extra provisions are also being made in 1995-96 for more work trials, new workstart pilots, more jobmatch pilots and the national extension of other schemes. The cost of the one-year holiday in national insurance contributions is £45 million. That is relatively small compared with the other measures. It is not the case that we have held back the more expensive measures; they were delayed because primary legislation was needed.
Mr. John Townend: Will my right hon. Friend deal with the point raised by my hon. Friend the Member for Wyre Forest (Mr. Coombs) and me about the problem of increasing the licence fees on amusements and the removal of the vehicle licence concession for farmers?
Sir George Young: On the first point, my hon. Friend the Paymaster General has agreed to meet, in the near future, trade associations that are worried about those proposals. The committal motion provides an opportunity to debate in more detail on the Floor of the House the vehicle excise duty measure.
The hon. Member for Darlington wrongly implied that the better-off were making a lower contribution to the income tax burden. He is wrong. The top 10 per cent. are now paying 44 per cent. of the overall tax take compared to some 35 per cent. in 1979.
My hon. Friend the Member for Finchley (Mr. Booth) spoke about absolute poverty. He was right so to do. If he looks at the fortunes of those in the bottom decile in terms of car ownership, access to a telephone, access to decently heated houses and ownership of video recorders, he will see that they enjoy a higher standard of living now than
Column 675in 1979. That is the point that really matters. I should like to write to my hon. Friend about black tobacco when I have consulted my right hon. and hon. Friends.
Much of the debate has focused on tax. Opposition Members have quoted some rather selective figures. Real personal disposable income is expected to rise by 1.5 per cent. next year; that should mean that, on average, households will be about £5 a week better off after taking account of both tax and inflation. Real household disposable income per head has risen by almost half since 1979. The real take-home pay of a one-earner couple on average earnings with two children has risen by more than £80 a week since 1978-79. One point has not come out so far in the debate. The difference between us and the Labour party is that our instinct is to cut taxes and we will make cuts when they can be afforded. We know, and everyone outside knows, that the Opposition are, by nature, high spenders and high taxers. They are also high borrowers. They borrowed on average almost 7 per cent. of national income a year when they were in office. Since 1979, borrowing has averaged 2 per cent. Borrowing undermines confidence. It is simply a means of deferring taxation.
The Government believe in a more principled approach. We take tough decisions to increase taxes when it is necessary to sustain growth and help reduce unemployment. The Labour party preferred to increase borrowing, which disguised rather than dealt with the problem and stored up difficulties for the future. Of course, the Labour party voted against almost every Conservative tax cut in the 1980s. It presided over a top rate of tax of 98 per cent. It has no credibility on the tax issue. It is in no position to challenge the Government. I wish to say a few more words about venture capital trusts. Some firms with high growth potential are sometimes unable to access normal sources of finance such as the stock market or the clearing banks. They have special characteristics which the financial system is unable or unwilling to accommodate; hence, there is a funding gap which the industrial finance initiative has identified. It has also been recognised by most serious commentators on the United Kingdom scene.
Our approach, through venture capital trusts--encouraging investment in risk capital--is a better approach than the idea of regional development agencies using public funds and run by civil servants, which was the Labour party's response. The proposals for venture capital trusts in the Bill are the result of painstaking consultations that have taken place during the past year. It is fair to say that the balanced package that we proposed has been widely welcomed by the venture capital industry.
The measures will undoubtedly encourage the setting up of new businesses and new investment in expanding smaller firms. They will bring investment in private companies within the grasp of ordinary investors. There is a high risk in that area, however. It is a higher risk than investment in brand-name, quoted companies. Potential investors in venture capital trusts will need to be aware of those considerations. The proposed tax reliefs are designed to reflect the risks, not to afford a scam for higher rate taxpayers. I have tried to describe the scheme and why the Government propose it. It is a serious response to a serious problem and the Labour party is misguided in its attempt to oppose it.
Column 676The right hon. Member for Chesterfield (Mr. Benn) gave the game away on the "Today" programme last Thursday. Speaking with candour, if not with tact, he said of the Labour party:
"Nobody really knows what our policies are."
That concern was shared by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). Writing in The Observer on Sunday, he said:
"The Labour leadership has to decide if it is going to welcome serious argument and shepherd it towards a constructive conclusion, or simply stall --promising as little as possible for as long as possible."
It is clear from today's debate which option the Labour party has chosen. Today is the eighth day in two months when we have debated the economy and on each occasion we Conservatives have asked the same questions: would a Labour Government spend more or less than a Conservative Government; would a Labour Government tax more or less than a Conservative Government; and, would a Labour Government borrow more or less than a Conservative Government? Would their inflation target be higher or lower than ours? We are no wiser than we were at the beginning of the debate, two months ago.
I read in The Guardian last Thursday that the Leader of the Opposition told the shadow Cabinet last week:
"All public spending and tax questions must be referred to the shadow Chancellor's office."
I must tell members of the Opposition Front-Bench team who are thinking of submitting their questions for an answer that the system simply does not work. One does not get any answers. We are standing, respectfully, at the head of the queue with our questions. The questions that we ask are not difficult. They do not require a detailed look at the books before they can be answered. They are questions of broad principle that any aspiring Government ought to be able to answer. As the leader of the Labour party said when he emerged from his fraternal meeting with Members of the European Parliament last week:
"It is important to be frank with people."
Indeed; and in no area is it more important than in economic policy.
We would understand it if the Opposition said, "We can't give you the details, but here is the strategy. This is what we believe in. We'll fill in the policies later." We would accept that, but they have done exactly the opposite. They have given us a lot of little details--for example, they would reduce the maximum pay-out of the national lottery and introduce a levy on cinema tickets--but they have no strategy. There is a total vacuum, within which the policies float around. They are all dressed up and have nowhere to go.
It is no good referring to the shadow Budget, because it was not a Budget at all. It did not say how much should be spent or how much should be raised in taxation. It was a random collection of uncosted ideas, which fell foul of the Trades Descriptions Act 1968 by being called a Budget. As a result, there is confusion and suspicion about Labour's plans.
Mr. Bevins wrote:
"The Observer has now been told by a senior party source that at the very least Labour would promise to keep taxes lower than Mr. Clarke's Red Book projections."
Is that true? Opposition Members would like to know, as would we. If it were true, it would represent, in Mr. Bevins's words,
Column 677"a clear break from Labour tradition, which has always defended the need for strong tax revenues to finance the welfare state." If the Labour party wants to underbid us on taxes, it must underbid us on spending. That would be not so much a clear break from Labour's tradition as its total burial.
Labour's economic policy is one of grudge and fudge. It is no substitute for well-thought-out, relevant, effective policies that bring hope and help to the unemployed, foster an enterprise culture, attack the burdens on small businesses, bring public finances back to balance and build on and sustain recovery. Such policies are included in the Bill, which I urge the House to support.
Question put , That the Bill be now read a Second time:-- The House divided : Ayes 318, Noes 277.
Division No. 38] [9.59 pm
Column 677Ainsworth, Peter (East Surrey)
Aitken, Rt Hon Jonathan
Alison, Rt Hon Michael (Selby)
Allason, Rupert (Torbay)
Arnold, Jacques (Gravesham)
Arnold, Sir Thomas (Hazel Grv)
Atkinson, David (Bour'mouth E)
Atkinson, Peter (Hexham)
Baker, Rt Hon Kenneth (Mole V)
Baker, Nicholas (North Dorset)
Banks, Matthew (Southport)
Banks, Robert (Harrogate)
Beresford, Sir Paul
Biffen, Rt Hon John
Bonsor, Sir Nicholas
Bottomley, Peter (Eltham)
Bottomley, Rt Hon Virginia
Boyson, Rt Hon Sir Rhodes
Bright, Sir Graham
Brooke, Rt Hon Peter
Brown, M (Brigg & Cl'thorpes)
Browning, Mrs Angela
Bruce, Ian (Dorset)
Carlisle, John (Luton North)
Carlisle, Sir Kenneth (Lincoln)
Channon, Rt Hon Paul
Clark, Dr Michael (Rochford)