---

8.15 pm

Mr. Michael Spicer (South Worcestershire): I begin with two specific questions arising from the Gracious Speech that trouble me and on which I genuinely seek guidance and information. Will my hon. Friend the Minister be good enough to arrange for his appropriate colleague to write to me about them?

The first question concerns the phrase:

"to allow grant-maintained schools to borrow on the commercial market." Does that set some new precedent for borrowing by public sector undertakings? Will they still be subject to Treasury permission or are we breaking new ground? I was under the misapprehension, perhaps, that public undertakings were allowed to borrow in the best markets already, so I should like some clarification on what exactly is new about that statement.

The second detailed point concerns the phrase:

"to promote the smooth running of construction contracts."

I understand that that could involve penalties for late payments by contractors to sub-contractors. If so, does it not open up the whole issue, which has been the subject of past consultation and which I gather will be the subject of future consultation, of statutory provisions affecting firms that pay sub-contractors' bills late? Will not that open up the whole issue before the Government's future survey on the matter? What precedent, if any, has been established? Will it apply only to the construction industry and, if so, why? I should be grateful for some detailed response to that.

When the history of our times is written, surely only two matters will stand out in the year ahead as having real political significance--the Budget, as has been said several times already in the debate, and the matters surrounding the intergovernmental conference in Rome next year.

The Budget should have three objectives. First, it should ensure that the present halt in the economy, as measured by the most recent manufacturing output figures and by the leading indicators of the Central Statistical Office and the unemployment figures published tonight, is reversed.

The second objective is the need to ensure that the amount of GDP that the Government take falls below its present debilitating level of 42 per cent. In that context, I warmly welcome the phrase in the Gracious Speech that reads:

"The share of national income taken by the public sector will be reduced." That seems to be extremely good recognition of that second objective.

15 Nov 1995 : Column 90

The third objective should be to ensure that whatever fiscal measures are taken, they do not further distort the economy. This all adds up to an across-the-board reduction in taxes and interest rates--the crucial emphasis should be on across the board. I realise, however, that that position is not shared by a number of my hon. Friends. They argue, for instance, that special measures are required to stimulate housing or, more particularly, home ownership or, even more particularly, first-time buyers. I do not agree. If there is an overall and continued revival of the economy, the housing market will revive with it if there is genuinely unsatisfied demand for houses.

Speaking as a former Housing Minister, I am not totally convinced that there is massive unsatisfied demand for housing. Just before the House was prorogued, I received a written answer from the Minister with responsibility for housing, which showed that there are 845,000 vacant dwellings, 737,000 of which are in the private sector. I understand that some will be unsuitable for habitation, because they are either in poor condition or badly located. I also know, however, that many of them are empty because we still discriminate against private letting. Proportionally, we have the fewest such lettings in the western world. When I was Minister for Housing I tried to do something about that. Baroness Thatcher was generous enough to accept that in her book, but went on to say that she did not much like my suggestions because they detracted from her laudable emphasis on home ownership.

The quicker that we remove the distortions in the private housing sector, the better. The housing Bill foreshadowed in the Queen's Speech, to which the hon. Member for Burnley (Mr. Pike) referred, provides such an opportunity. I would abolish all discriminatory arrangements for home ownership and state intervention in the rented sector. I would completely open up the private rented sector, while retaining heavy criminal penalties against landlords who exploit tenants.

Exploitation of any kind is wrong and should be stopped. One of the things that the Government do not shout from the rooftops enough is that they have been extremely tough in attaching the criminal law to landlord and tenant legislation. They may have to use the proposed housing Bill to extend those provisions to include banning extortionate service charges by the managers of leasehold properties.

It is worth giving three qualifications regarding exploitation. First, it is not only private landlords who charge tenants excessive management fees-- Labour-controlled local authorities, such as Ealing, also do so. Secondly, much exploitation is of the landlord by the tenant who knows how to use the courts to his or her advantage. That is even true of shorthold tenancies where, by clever use of the courts, six-month tenancies are often turned into 12-month periods, with the landlord often earning no rent in the last six months. For that reason, there may be a case for shortening the minimum shorthold period from six to three months.

The crucial point is that much exploitation occurs when there is a shortage of supply. If renting were made more attractive and more rented properties were available, tenants faced with, for example, excessive service charges would simply move elsewhere, which would act as a deterrent to bad landlords. Exploitation is one symptom of a distorted rented housing market. That is why it is so important for roll-over relief to apply to property to let as much as to any other business.

15 Nov 1995 : Column 91

On the theme of loosening up the market, I would certainly abolish the Housing Corporation and all aid to housing associations. The Spicer Budget would give all the money saved directly to those who needed it through housing benefits, which would be managed in the manner that my right hon. Friend the Secretary of State for Social Security is rightly proposing. In other words--in response to some of the mockery from Opposition Members--I would give the money to those genuinely in need of help with housing, rather than spending it on bricks and mortar, which benefits the deserving and the undeserving alike. I suspect that, after 50 years of resenting such attempts to focus money on those who really need it, the Labour party is beginning to change its mind. Some of the mockery may die on the lips of some Opposition Members fairly soon when the Labour party, after all these years, at last begins to realise that, if one is going to help poor people, one should do so directly. That is my view and the perfect instrument is housing benefit, rather than by spreading money across the board through the Housing Corporation and housing associations.

I hope that the Chancellor of the Exchequer will firmly resist calls further to discriminate, intervene and distort the housing market because it would not help to create the dynamic and flexible economy that he is seeking.

Similar points could be made against some of the arguments of my hon. Friends about preserving special tax treatment for executive share options. The policy should be one of reducing the general level of taxation rather than preserving, let alone extending, the number of exemptions to tax. In the case of share options, there may be a reasonable way through, if the policy is to tax at the point at which shares are sold rather than, as proposed, that at which the option to buy is exerted.

Clearly, one issue is whether executive share options are to be treated as income or capital. The way around that problem would be to abolish all tax distinctions between capital gains and income. That would certainly bring down the rate of capital gains for those on low incomes. Rather than introducing more exemptions, I would reduce to 15 per cent. the entry point for income tax.

Above all, the Budget and the Queen's Speech need to be seen as part of a strategy for encouraging enterprise, risk and work, as opposed to being capable of interpretation as any sort of one-off sweetener to the electorate. That would badly backfire and, quite mistakenly, would threaten to bring into disrepute the whole concept and purpose of low personal taxation.

The second question is that of Europe and I do not want to detain the House for long on that matter. In practice, the die is cast for the year ahead. I am not confident that, for the time being, much will be done to reverse what Lord Denning has called

"the tidal flood of European law".

The treaty of Maastricht is in place and the process of establishing the appropriate institution for monetary union now gathers pace under the protection of law. Whatever anyone says, the law of Europe is that a single currency must be established by 1 January 1999. In that context, the sooner that the Government and the Conservative party give a firm commitment to maintaining the opt-out on the single currency, the better.

15 Nov 1995 : Column 92

Moves by the Commission and others to create a federal defence, immigration and foreign policy must clearly be resisted. The Queen's Speech refers to the Western European Union and to strengthening it, but I trust that that is not to be undertaken at the expense of the North Atlantic Treaty Organisation.

Above all, I hope that the Government will build on the increasing anxiety in Europe about the premature destruction of national democracies in favour of an undemocratic super-state. The objective now must be to build on the momentum in Europe aimed at substantive revisions to the treaty of Rome so that the European Court of Justice, the Parliament and the Commission are once again brought under the control of national Parliaments.

This is, of course, a momentous task in whose fulfilment the British Government will undoubtedly have to play a leading part. Nothing less than revision of the treaty of Rome will do if we are serious in our intent of maintaining a Europe of closely associated, freely trading nation states.

I suspect that the credibility of such a policy now largely hangs on attitudes in Germany, whose economy is the size of those of Britain and France put together. There is no doubt that there is growing anxiety in Germany about the future of the deutschmark. What is less clear is whether it is accepted there that, as Germany did not opt out of the single currency laid down by the treaty of Maastricht, whatever German politicians may say, Germany has no option but to go ahead with joining a single currency--unless, that is, Germany secures the appropriate amendments to the treaty of Rome. If she were to do that she would, of course, have to accept the rejection of the concept of acquis communautaire, which goes to the heart of the present development of the European Union. Increasingly, there are those in the Bundestag who want to amend the treaty but realise the full implications of such an amendment.

There is certainly not a cat in hell's chance of all that being supported by a Labour Government, were such a thing ever to happen. They would press on as fast as possible with the process of creating a centralised, socialised state of Europe. That is as good a reason as any for supporting the Gracious Speech--almost whatever it says--and I do.

---