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4.51 pm
Mr. Robert Sheldon (Ashton-under-Lyne): We have listened to an exceptional speech. I fully agree with the right hon. Member for Wirral, West (Mr. Hunt) that the one-nation idea is not the prerogative of one side of the House or the other. It should belong to us all. Some people feel that what has happened in the past--I do not know for how many years--has been an abberation that must be put right. I was one of the three Labour Members who had the privilege of having their name inscribed on a silver platter given to Ian Macleod's widow. Although we had our great differences, we were accorded that sort of respect because we were all trying to do the best for this country's people, and that must be the task.
When my right hon. Friend the Leader of the Opposition and my hon. Friend the Member for Oxford, East (Mr. Smith) talk about the need for this one nation, they are pointing out the differences that have emerged and that need to be put right by the Conservative party, but it is its problem and we will be considering that problem with great interest.
My first comment on the Finance Bill involves the limited number of economic debates that we now have. We have debates on the Queen's Speech, the Budget and the Finance Bill and then a desert through to July. It cannot be right that the central issues involving the running of our country should be the subject of so few economic debates. Under normal circumstances, the next debate will not take place for another six months, which is clearly inadequate.
We now have a regular two-volume issue of the Bill. I remember my horror when I saw the first two-volume issue come out, but the Government are pledged to reduce the burdens on industry and to simplify the taxation system's operation. I know the aims of that, but, despite their assurance, I am not convinced. As the simplification is likely to lead to more complicated transitional arrangements, I suspect that it will not be too long before we have a three-volume edition of the Finance Bill.
The simplification was mentioned in Accountancy Age by the hon. Member for Beaconsfield (Mr. Smith). He was right when he pointed out the need for such simplification, but it will not be an easy task to achieve, as he probably recognises. In my many years in the House, I
have heard similar promises about taxation simplification, but I have seen Finance Bills go from strength to strength, increasing in size as they go along.
Baroness Thatcher's speech gives the opportunity to assess her impact on the economy. I do not want to dwell on the poll tax. Many hon. Members on the Government Benches share in the humiliation of its introduction. It will serve as a text book on how to overcome the dangers of an over-mighty Prime Minister and a cowed House of Commons. What is more lasting than the billions of pounds lost in that venture is the serious decline in local government.
As a consequence of so much local government finance coming from central Government, decisions are not being made in the places where they should be made. I believe in local government and in the initiatives that many people can introduce in their community's interests. I was politi cally involved in some small way when Manchester city council decided to retain the airport in Manchester. It was a big decision. Large commitments of money were involved over a long period, but the example of the creation of the Manchester ship canal was put forward, and it was felt that the successors of the city councillors who were involved in that should at least to be able to do the same thing.
Against great Government hostility, those successors went ahead and built Manchester airport, which is of enormous value to the region's citizens and to the communications of the whole of the north-west. They could do that then, but not now, which is wrong. There were people with local knowledge, people of standing and of ability, who would have come to the House but decided not to as they felt that their centre of operations was in their local community, which is what made that community great, impressive and powerful. The trouble is that such people are not likely to undertake that sort of work because of the limited opportunities that they have.
On the size of the Finance Bill, the interesting thing is the number of new taxes that we now have from this Government. We have had the air travel tax, amended in this Finance Bill--one of the consequences of simplification is the amendments that will be made in due course: any changes will be the subject of alterations over the years to come--the insurance tax, and now we have the landfill tax, with its 29 clauses and pages and pages of schedules. The boast of Lord Lawson, then Chancellor of the Exchequer, about the number of taxes that he had abolished will not, therefore, be emulated by the present Chancellor of the Exchequer--that is clear now--unless he listens to the Prime Minister, who wishes to abolish capital gains tax and inheritance tax, but that would be a disaster.
The justification for capital taxes such as capital gains tax and inheritance tax was that capital was a sure source of income. It was differentiated from earned income because that was less sure: people could lose their jobs. The value of capital and the income from that capital would remain, and that was the justification, over many years, for the difference between earned and unearned income. Unearned income deriving from capital was more secure and certain; earned income could just be lost rapidly.
In the post-war years, that aspect changed. With full employment, unearned income was scarcely enough to maintain the value of the capital because of inflation levels, which eroded capital, and the value of capital as a
source of income declined. However, we had full employment so the value of earned income rose by comparison. But the position has changed again. We now have high unemployment levels, great fears of redundancy and low inflation so the position has reverted to what it historically was: capital produces much greater certainty in relation to income. Unearned income should be treated in the same way as it historically had been until the Government came into office. That is one of the aspects that we need to take into account.
Mr. Tim Smith:
Is the right hon. Gentleman telling the House that he favours, therefore, the reintroduction of the investment income surcharge?
Mr. Sheldon:
The investment income surcharge was the right sort of reaction. How we deal with the consequences of the changes in the value of capital under the next Government remains to be seen. An important aspect of the matter is that the value of capital has changed; it went one way and now it has gone another.
In terms of inheritance tax, I can see the case for moderate levels of taxation of capital. Those who have created wealth want to pass it on to their successors and I understand that. To a certain extent, I can see the case for those who want to accumulate wealth and to pass it on to their families. I understand people who work hard to accumulate wealth for themselves and I understand people who work hard to accumulate wealth so that they can pass it on to their successors. What I do not see is why we should relieve from taxation those who are the beneficiaries of that wealth, to which they have contributed nothing. A person who makes wealth needs to be treated with some respect because of the wealth created, but the person who receives that wealth as a beneficiary--as an inheritor--should not be regarded in quite the same way. There is a need for such people to pay some taxes. We can argue about whether they should pay more than they have in the past, but we should certainly not remove the existing level of taxation. That is clearly wrong.
Another issue is the cost nowadays of earning a living. We never used to take such costs into account. Apart from a small allowance for tools, which was a trivial amount, the costs of earning a living were always excluded from income tax assessments. Nowadays, the costs of earning a living are great. Transport costs are one example. In my constituency, there are people who travel 30 or 40 miles to Leeds or Bradford; people never did that before. Transport costs are not allowed against tax at all although people cannot get the kind of work that they used to be able to get.
Fifty, 60 or 70 years ago--not all that long ago-- people walked down the road to the mill. People wore ordinary working clothes and took a jam butty or whatever for lunch. People do not do any of that now; things have changed. There is great expense in earning a living today and that needs to be taken into account. Earned income is not the same as unearned income. Unearned income does not cost people anything, but earned income does and we shall have to find some way in which to deal with that.
The central feature of Lady Thatcher's period in office was not the changes she made. What was exceptional about the period was the rise in the exploitation of North sea oil. Anything else was a disclaimer. In the past, Governments took unwise courses, but the balance of
payments constraint always limited the extent to which they could proceed with a particular folly. In 1956, we had the folly of Suez, which was brought to an end by balance of payments constraints. We had Maudling's dash for growth in 1963-64, which was brought to an end by a balance of payments crisis. It might have succeeded otherwise and have been one of the great moves of the post-war years. It could not, however, succeed because of the balance of payments problem. We saw the rise in OPEC--Organisation of the Petroleum Exporting Countries--prices which would have been a much smaller problem if we had not had the difficulty of a balance of payments crisis. All those efforts--some of them useful, some of them not--were brought to heel by the constraint of the balance of payments.
In the 1980s, for the very first time since the 1914-18 war--perhaps since the beginning of the century--we had a balance of payments that was no constraint. The question was what we would do with that enormous advantage. With one bound, we were free. What did we do with that freedom? We destroyed much of our manufacturing industry. There were $2.40 to the pound and there was a 17 per cent. interest rate.
Like many hon. Members, my firmly held views are reinforced by my constituency experiences; they are burnt deeply into me. From 1979 to 1981, my constituency lost one third of its industry. Good firms which had every justification to succeed were lost. If they had been in Germany or Japan, they would have continued. Few of them were low-tech; most were medium-tech and one or two were high-tech. They could not survive in that period. Engineering was a prominent industry in my area, but good firms went.
I am pleased that our amendment refers first to the need for manufacturing industry and that my hon. Friend the Member for Oxford, East referred to that first in his valuable speech, which I much enjoyed. I might have been prepared to tolerate a massive Finance Bill if it had included much in the way of comfort for manufacturing industry, but I see nothing of real merit. I have argued for manufacturing industry since I came into the House and the situation is now becoming even more urgent.
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