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8.52 pm
Mr. Denis MacShane (Rotherham): I joined the Labour party about a quarter of a century ago, and I
remember that the first great disappointment of my youthful membership was the introduction of a Budget by one Roy Jenkins, now a Member of another House, which led straight to Labour's defeat in 1970.
From a political point of view, the Budget presented yesterday by the Chancellor smacks very much of the same Treasury orthodoxy--cautious, candle-ends, steady-as-she-goes manipulation of the nation's finances, which, although the orthodox economists at the Treasury may smile about the fact that they have mastered their man, may lead to considerable political dismay in the Conservative party. We were aware of that yesterday, when the only cheer or smile came when the Chancellor announced that he would lift the vehicle tax on Bentleys and Bugattis. For the rest, it was a poor and dull reception indeed.
As we are discussing Mr. Jenkins and one of his successors, the right hon. and learned Member for Rushcliffe (Mr. Clarke), let me turn to another Conservative philosopher, who once said:
The Paymaster General, a learned graduate of Oxford university--I wish to apologise to him and to my hon. Friend the Member for Edinburgh, Central (Mr. Darling) for the fact that I must leave before the winding-up speeches--will recognise that quotation from Edmund Burke. Would that we had a Burke here today, to flay the creation of a two or even three-nation society, which the Budget will only exacerbate.
Twenty-one new taxes have been imposed since 1992, every one bearing mainly on the poorer members of the community. We are told that the Chancellor's decisions since 1992, reinforced by the Budget, will help to steer the British economy on to a more stable course, yet we are 18th in the world gross domestic product per capita league, having slipped from 13th since 1979.
Inflation here is higher than in the majority of European Union countries, including our main competitor partners. In its latest quarterly report, the Bank of England condemns the decrease in productivity improvements, especially the increase in unit wage costs, and we have the lowest investment witnessed for about 30 years.
That bears down especially hard on my constituents, because I have to see the Budget refracted through the eyes of the people of Rotherham, and not many live in
£200,000 houses there. Not many have handsome investment incomes from savings who will benefit from the tax cuts that the Chancellor has made. On the other hand, 12.5 per cent. of the working population are unemployed--12,000 people altogether. One in five people under the age of 25 in Rotherham are out of work, and are now under a new onslaught as the money is taken from them to put into the pockets of the rich.
Is there any hope from the Budget for my constituents?
It is a Budget that slashes a dagger at the arteries of investment, with £100 million taken away in grants to housing associations. That means that 35,000 fewer houses will be built this year as a result of those costs, and the construction workers and the small building firms of Rotherham will be left to face bankruptcy and despair.
There are cuts of £190 million in the roads programme-- another blow for domestic construction and the civil engineering programme.
The business men of Rotherham and South Yorkshire wrote to the Chancellor last week. They begged him for any tax breaks in the Budget to be targeted at industry through increased capital allowances: no hope there. They welcome the private finance initiative, but find nothing in it for South Yorkshire, especially as those business men say that red tape defeats any efforts that they make to try to get the private finance initiative to work.
There is something very strange in the Red Book--a massive discrepancy, not only in the public sector borrowing requirement, but in other sectors, between what we were told last year and what actually happened. The Chancellor collected £1.1 billion less than he forecast last year in income tax, £700 million less in corporation tax than predicted last year and £1.5 billion less in value added tax than he predicted last year. There is an odd contradiction between the mood music that we constantly hear at DTI and Treasury Question Time about the economy getting stronger--indeed, the Prime Minister said in Prime Minister's questions on Tuesday that incomes were rising--and the fact that we are collecting less and less tax.
One reason may be the fact that tax avoidance remains one of the great growth industries in the British economy. As the hon. Member for Fulham (Mr. Carrington) suggested, tax legislation is the most complex legislation that the House passes. In fact, we have much the most complicated tax legislation in the world. Last year Rupert Murdoch made a profit of £960 million, but paid only
£11 million in tax. What is the Chancellor's response to the fact that £15 billion to £17 billion has been lost in uncollected tax? His response is to fire 6,000 Inland Revenue employees who might be usefully employed gaining money for the state to help to balance the books.
Then we move on to the nightmare of self-assessment. Here I address my remarks to Front-Bench spokesmen of my own party. I do not know how many hon. Members have examined the nine new complicated forms that taxpayers will be expected to fill in under the proposed new self-assessment scheme, which will cover some 9 million taxpayers, but even at the height of the Soviet bureaucracy, the Soviet citizen was never plagued with a requirement to fill in such complicated forms. The Budget does not address the question of what we mean by and want from taxation; it contains neither innovation nor inspiration.
I welcomed the ideas presented by my hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor, in the run-up to the Budget. He recommended a windfall tax--an appropriate suggestion, given the profits declared today by Yorkshire Water--and taking swathes of people at the bottom of the income scale out of the tax band with his 10p proposal. Here was the beginning of serious, innovative thought about our outdated tax regime. After all, the taxation of our people implies a fundamental relationship with Government.
Mr. Tim Smith (Beaconsfield):
Notwithstanding what the hon. Member for Rotherham (Mr. MacShane) has said, I wish to defend the Inland Revenue's record on self-assessment. I believe that it will lead to simplification. It simply is not true to say that every taxpayer will have to fill in nine forms; the average taxpayer will have to fill in the main form and one schedule. I have just received the latest pack of self-assessment forms from the Inland Revenue. The Revenue has simplified the system considerably following consultation, and I think that it has done a pretty good job. In the long run taxpayers should save money, and we should be able to ensure that revenue is collected with fewer staff.
Listening to the speech of the hon. Member for Dunfermline, East (Mr. Brown), I wondered whether he had actually read the Red Book. I suspect that he had not. He complained a great deal about the level of investment, but if he had looked at page 30 he would have seen that manufacturing investment is forecast to increase by more than 10 per cent. this year and in 1996.
Similarly, I wonder whether the hon. Member for Rotherham took the trouble to read the Red Book. He, too, complained about the Government's record on investment. On the same page, the Red Book tells us that business investment is forecast to increase by 9 per cent. in 1996. I should have thought that that was a pretty good record.
The hon. Member for Dunfermline, East also complained about the present state of the labour market. If he had turned to page 39 of the Red Book, he would have discovered that the employer survey measure of the labour market shows an increase of 510,000 jobs since the trough at the end of 1992. The labour force survey shows an even higher figure of 650,000 over the same period. That is a pretty good record. It contrasts sharply with what happened during the recovery after the last recession, when employment did not stop falling for about four years following the trough of the recession. It illustrates the current flexibility in the labour market, which now responds much more quickly to changes in demand.
I do not know whether you saw the hon. Member for Oxford, East (Mr. Smith) on "Newsnight" last night, Madam Deputy Speaker. Jeremy Paxman rightly pressed him on why the Opposition refuse to make up their mind about whether they are in favour of reducing the standard rate of income tax by 1p in the pound. Labour Members are going to abstain: they are neither for nor against the proposal. I was interested to observe that the hon. Member for Sunderland, North (Mr. Etherington) clearly feels pretty uncomfortable about that. His feeling is understandable. The position of the Liberal Democrats is at least honest and straightforward: they will vote against it. What do Opposition Front Benchers think about it? Are they for or against it? How can they possibly abstain? It was no surprise to me that the hon. Member for Oxford, East looked so uncomfortable on the television last night.
This is a responsible, prudent and sensible Budget. I particularly welcome the fact that public spending as a proportion of gross domestic product will soon fall below 40 per cent. There is always an interesting table in the Red Book. This year, it appears on page 139, and it shows the record of public spending over the past 30 years. It shows that, in the recession of the middle 1970s, public spending peaked at about 47 per cent. of GDP. In the recession of the early 1980s, it peaked at around 45 per cent. and in the most recent recession it peaked at around 43 per cent. We have been moving in the right direction over the past 20 years, but we should aim, once we have it below 40 per cent. of GDP, to keep it there.
The Governor of Hong Kong, Chris Patten, was quite right--he has learnt a little from his time in the far east-- to say that there is a correlation between the proportion of public spending as a proportion of national income and economic growth rates. Countries in the far east spend a lower proportion of their GDP and have higher growth rates. That is a good target. We are making good progress towards achieving it and we should stick with it.
What has led to a higher public sector borrowing requirement for the current year and for next year is not the Government's failure to control public spending, which has been kept under effective control, but rather, as the hon. Member for Rotherham said, that revenues have not come in at the anticipated level. In particular, VAT revenues are down by about £4 billion from the amount forecast, and next year's VAT forecast is lower than that for this year. That may be because of a lower level of consumer spending than was forecast. It is hard to know precisely what has contributed to that. It may not be so much VAT as the duties on alcohol and spirits, because a great deal of alcohol is now imported from France. That may have something to do with it, but revenues are down, and that is the explanation.
It is important that we ensure that public sector borrowing continues on a downward path, which is precisely what my right hon. and learned Friend the Chancellor proposes. It will soon be below the Maastricht level of 3 per cent. Significantly, I noticed that my right hon. Friend the Chief Secretary referred in his speech to capital expenditure, which is running at around
£22.5 billion. That is quite a useful yardstick, too. The Government should not borrow more than the amount of capital spending in any particular year. It looks as though the two will coincide next year.
The Budget has also been criticised for not doing anything about investment. The Opposition came up with the tried but failed formula of increasing capital allowances. That did not work last time and it will not work if they ever have the chance to do that again, because it distorts capital spending decisions. What matters much more for investment is a stable economic climate, which is precisely what we have--low interest rates and low inflation.
The PFI has been criticised on the ground that there are not enough schemes to illustrate precisely what can be achieved. I should like to mention two, both of which will benefit my constituency. The first is a massive extension to Wycombe General hospital, which will cost £32 million. The project was proposed by South Buckinghamshire NHS trust and is financed by the Royal Bank of Scotland. I understand that the developer will be Taylor Woodrow. That is a hard and fast example of a project that will benefit NHS patients in my constituency.
Another good example is the widening of the M40 from three to four lanes between Denham and High Wycombe. It is going ahead under a design, build, finance and operate contract. I hope very much that it will start in the middle of next year. It probably could not have been achieved without the PFI. Those two schemes will go ahead in the next 12 months.
Like my hon. Friends, I welcome the fact that education spending is to be increased. The key is to ensure that the
£878 million that my right hon. Friend the Secretary of State for Education and Employment announced finds its way to the schools. I know that it is difficult to ring-fence this money, but we need some examples of how much each school would benefit if its budget were to be increased by 4.5 per cent.
I welcome the fact that the police are to get extra resources, and I understand that an announcement will be made tomorrow. I hope that Thames Valley police will get their share of the additional resources.
"The whole business of the poor is to administer to the idleness, folly and luxury of the rich, and that of the rich, in return, is to find the best methods of increasing the burdens of the poor."
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