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Mr. Barry Legg (Milton Keynes, South-West): The hon. Gentleman may be in danger of misleading the House to some extent about the Treasury and Civil Service Committee's position on the matter. The Committee's report--from which the hon. Gentleman did not dissent--stated that the Committee was "broadly in favour" of the overall stance of the Budget.

Mr. Bruce: I recognise that the Chancellor accepted his responsibility, and sought not deep tax cuts but to ensure that the Budget's overall impact was close to neutral. Nevertheless, he stated that a borrowing requirement of £30 billion would not justify tax cuts. The present position is different from that of a couple of weeks ago, when the Committee produced its report, and it appears that a borrowing deficit of £30 billion may be the outcome this year. That wholly justifies my opinion that the Chancellor may not have been cautious enough.

The hon. Member for Milton Keynes, South-West (Mr. Legg) will have to contain himself as I deal with the education settlement, and I shall make clear exactly what the report says. Liberal Democrat and Labour Members have rightly pointed out that the Government's claim to be providing extra funding for education is simply a deception--it simply is not true. The Committee's report makes it clear that we did not accept the Government's view, and that Opposition Members who made that point were correct. Ministers cannot go on claiming credit for any generosity in education funding, as it does not exist.

The Select Committee report states:

"The increase in spending does not . . . have quite the substance the Chancellor claimed for it . . . There seems little doubt that some local authorities will be unable to pass on any increase in spending, and that some schools may neither perceive nor receive any increase in resources."

That could not be clearer. Education is not receiving the financial support it needs, which in itself justifies the Committee's contention that, if there was any room for manoeuvre in the Budget, the money should have been made available for education and not for tax cuts.

The Select Committee also expressed concern about the working of the Government's private finance initiative, and we are about to produce a report on that subject. This year's Red Book makes it clear that, far from unlocking new private finance to allow higher public investment, the private finance initiative is being used simply as a substitute for previously committed Government spending. That is not an attack on the principle of the private finance initiative, and the Select Committee may be able to inform the House on the matter in a few weeks' or months' time, after we have taken evidence. We can then show whether our scepticism about the real benefits of the initiative is justified.

It is clear from the Government's presentation that the private finance initiative is not unlocking any additional public investment, but is simply being used to help the Government to bring their borrowing under control. In spite of that, the Government have not been successful.

I should like to refer to a number of specific measures that certainly will be raised in Committee. I have made it clear that the 1p reduction in income tax is not justified, and that I shall vote against it. I also wish to pick up on

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the Chief Secretary's ebullient claim about the impact of the reduction in spirits duty of 27p per bottle--the biggest reduction in sprits duty since the war, he said. That is true, but the Chief Secretary failed to tell the House that the Government increased the duty last year by 26p a bottle.

Following the Government's defeat in the VAT vote in the House, the Chancellor--in a fit of pique--forgot his fine words about supporting the industry, and sought to claw back revenue. In doing so, however, the Government lost revenue. They depressed the domestic demand for spirits, to such an extent that less revenue was received following the increase in duty than was received in the previous year when the duty was lower. I hope that the industry will recover and that revenue will return to last year's level, not because I want the Chancellor to secure revenue but because I want to see an increase in the sales of home-consumed whisky, to the benefit of the industry.

I should like to see a consistent strategy from the Government which recognises that the tax regime disadvantages the home-produced spirits industry. Taxation should be based on alcohol content, not on some specious view that spirits are somehow more harmful than wine. I have often said in the House that I find it extraordinary that we choose to tax home-produced spirits--consistently our largest export commodity-- to the advantage of imported wines. That is a crazy approach, which I cannot believe any other country would pursue.

An item of which I was unaware has been raised with me by constituents, and seems to be the result of a strange anomaly. The 17.5 per cent. VAT rate, rather than 8 per cent., is applied to orders of 2,300 litres of central heating fuel, on the grounds that such an order is deemed to be for commercial use. That seems unfair, and I am aware of people who have such a large requirement and are being charged 17.5 per cent. The Government should consider raising the threshold, or take account of council tax banding as proof that a consumer's requirement is domestic. The anomaly seems to be affecting and angering a number of people.

The Government should reconsider their very unfair cut in energy efficiency grants, which has caused a great deal of anger and frustration among those involved in the provision of home insulation. The two major bodies concerned are Neighbourhood Energy Action and Energy Action (Scotland). The Government must acknowledge that they are seen as having deceived the public and the agencies, and to have gone back on clear promises to this House.

After the Government defeat on the motion to increase VAT on fuel to 17.5 per cent., and on a number of occasions since, Ministers gave assurances that the budget for home insulation would continue to be £100 million a year. They have now cut the budget to £69 million a year, despite the fact that, on 23 January last year, the Paymaster General, the right hon. Member for Wells (Mr. Heathcoat-Amory), said that the £100 million a year budget would continue during the next three years.

On 22 May last year, the Minister for Construction, Planning and Energy Efficiency, the hon. Member for West Hertfordshire (Mr. Jones), said that, during 1995-96, some £100 million would be made available for grants, and that a similar sum would be set aside for the next two years. That promise was clear and unequivocal, and agencies have operated on that basis. As a result of the

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complete betrayal of that assurance and the reversal of that policy, many people--particularly elderly people-- who need home insulation will not be able to get it.

It is no good the Government saying that they will make a 25 per cent. grant for people who fall outside the qualification threshold. All the evidence suggests that, unless the grant is about 70 to 75 per cent., the take-up level among those who are just outside the threshold will be very low. The Government know that to be the case, and they have calculated on that basis. I urge the Government yet again to reconsider what they have done, because their policy is neither justified nor fair.

The hon. Member for South Suffolk (Mr. Yeo) talked about the landfill tax, and the benefit of using that revenue to reduce charges on employers. He surely accepts that that was not the policy which applied when VAT was imposed on fuel, but it was one small, offsetting gesture that the Government took on board: they would use some of the revenue to provide home insulation grants for those most in need of them. In those circumstances, it is regrettable that the Government have gone back on that policy.

Mr. Yeo: Is it not the case that, even following the reduction in the projected figures for spending on the home energy efficiency scheme, the spending in the next financial year will still be substantially higher than it was before VAT was introduced on domestic fuel charges?

Mr. Bruce: Of course that is true. The point is that a promise was made, on which agencies based their plans. The agencies now expect that the reversal in policy will reduce the number of people who will receive the benefit of home energy insulation by 200,000, which is one third. That is the point at issue, as well as the fact that it was a link which the Government accepted and have now broken.

A number of developments have hit charities particularly hard, and unfortunately, to date, the Government have not responded to them. The national lottery has clearly hit charities extremely hard, but so has the switch from income tax to VAT. Charities estimate that they will have an extra £350 million of costs as a result of that policy. As a consequence, the reduction in the standard rate of income tax means that more revenue will be lost to charities, because, of course, people who benefit from covenants will get back one penny in the pound less in tax relief than would have been the case. It is estimated that that change in policy will cost charities some £17 million a year.

I hope that the Government will consider, for example, allowing covenants which were signed before the Budget to continue to qualify for a 25 per cent. relief, on the basis that donors could not have taken into account when making their donations the fact that the relief would be less than anticipated. I see the Financial Secretary nodding. I hope that his nod is a sign that the Government will either accept or propose such an amendment.

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