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9.46 pm
The Paymaster General (Mr. David Heathcoat- Amory): In his speech yesterday, my right hon. and learned Friend the Chancellor set out a Budget for this country's earners and savers, and a Budget that will spend more money on priority services while cutting the cost of government. It is quite clear from today's debate that that is strongly supported by my hon. Friends. It is clear too that the Opposition are in a muddle.
The Opposition are anxious to pose as the taxpayer's friend, and they have announced that they will not oppose the tax cuts--that was the one question answered by the hon. Member for Dunfermline, East (Mr. Brown)--but they will not support them either. They will abstain--at least, most of them will do so. The hon. Member for Sunderland, North (Mr. Etherington), who is in his place, hinted that he would
vote against the tax cuts. Old Labour has some principles left, but new Labour will heroically abstain on the central issues of the Budget. Very new Labour may come round to support the tax cuts; the lurch to the right in the Labour party is not over yet.
The confusion and muddle on the Opposition Benches has a simple cause. When a party such as Labour abandons all its traditions, dumps its baggage and disowns its past beliefs and becomes motivated solely by the desire for office, nothing keeps it together. That is why the Opposition's response to the Budget has been so shallow and opportunistic, and why the shadow Chancellor seemed genuinely incapable of answering simple points put to him by my hon. Friends. What was his inflation target? He did not have one. What was the cost of his 10p lower rate tax proposals? He did not know. Would he support our 20p savings rate?
He would not say. Would he abolish the insurance premium tax, which he has opposed? He had no idea. Yet Labour claims to be the party of government in waiting.
The contrast between that policy vacuum and the Budget laid out by my right hon. and learned Friend the Chancellor of the Exchequer could not be clearer. We have balanced our tax-cutting proposals with similar cuts in public expenditure, while preserving areas such as health and education.
I agree with my hon. Friend the Member for Brighton, Kemptown (Sir A. Bowden) that the extra money for education must go through to the classroom. He clearly has a similar local education authority to mine and that of my right hon. Friend the Member for Bridgwater (Mr. King)--too much of the money sticks to the local authority and never gets to the classroom.
We have increased priority expenditure by a further drive on waste and on fraud in social security expenditure and by delivering year-on-year cuts in the expenditure of Whitehall Departments. That has been driven through by my right hon. Friend the Chief Secretary to the Treasury and I am pleased that the policy had the strong support of my hon. Friend the Member for Bridlington (Mr. Townend) and others.
The civil service is now more than 30 per cent. smaller than it was in 1979. In the next three years, the cost will fall by a further £2 billion in real terms. As the Government are the largest service industry in the country, it is right on economic grounds alone that they should also be the most efficient. The relentless drive for efficiency over that part of the economy that the Government control is without doubt one reason why the performance of the British economy generally has been so much better in recent years than in the 1970s.
Even employment, which cropped up again and again in the debate, is showing signs of a successful recovery. Unemployment is lower than in Germany, France or Italy, and we have the highest proportion of people in work of any major European economy. Of course, there are regional variations and I listened carefully to what my hon. Friend the Member for South-East Cornwall (Mr. Hicks) said, even though the bulk of his remarks about the distribution of the funding formula were perhaps more accurately directed at my right hon.
Friend the Secretary of State for the Environment. He will be listening and has already listened to representations from the west country and other regions.
There were persistent calls for more Government investment--an echo that we heard in the past from the Opposition. They still believe that unemployment can be solved and investment increased simply by spending more Government money. If they should have learnt anything from the sad experiences of the 1970s, it is that a thriving economy is created not by the Government but by a successful private sector.
I shall take one example--the small companies rate of corporation tax was 42p in the pound when Labour left office in 1979, but we have reduced it to 24p in the pound. We have nearly halved the tax rate on those successful companies. That does far more for growth, investment and employment than any of the spending schemes dreamt up on the Opposition Benches.
The hon. Member for Coventry, South-East (Mr. Cunningham) asked what the Government had done for industry, but I say that industry and business generally now have a choice. They will get something from Labour and, indeed, from the Liberal Democrats-- the social chapter of the treaty of Rome. The Leader of the Opposition did not seem to understand it when he spoke to the Confederation of British Industry recently, but the fact is that the provisions of the social chapter--its red tape and regulations--could be imposed on us by majority voting. It is no good him saying that he would pick and choose and take only those bits that he liked. That is what Labour offers--the social chapter, and imposed on us if necessary. The choice is between that and what we offer.
We have delivered in this Budget alone a further income tax cut, a cut to the small companies rate of corporation tax, further relief from capital gains tax for those who are retiring, lower inheritance tax and a cut in national insurance contributions--funded from a tax on landfill waste--which alone will be worth £500 million off that tax on employment. We have also given more generous transitional relief for business rates. That is how to promote growth, investment and jobs.
As regards taxation, there was not only muddle on the Labour Front Bench but a persistently expressed resentment on the Labour Back Benches that there should be tax cuts at all in the Budget. That was true not only of the Labour party but of the Liberals. It was revealing yesterday that the right hon. Member for Yeovil (Mr. Ashdown) described income tax cuts as a bribe. Conservative Members do not think that it is a bribe when people keep more of what they earn and save; it is their money. It shows how illiberal and statist the Liberals have become that they think that money belongs to the Government to be dished out as they like.
We are on target for our 20p basic rate and the Budget achieves that for savers. They will pay tax at a basic rate of 20p from April next year. We have also achieved our target for the quarter of all taxpayers who will now pay tax on their income at only 20p in the lower rate band. The penny off the basic rate cuts marginal rates for 18 million people, who have no hope of anything similar from the Opposition.
What did we get from the Opposition? As my hon. Friend the Member for Blackpool, South (Mr. Hawkins) said, Labour's tax and spending plans do not add up. Right through this debate and the debate on the Queen's Speech, we had calls for more public expenditure. Earlier today, in the social security statement, the hon. Member for Islington, South and Finsbury (Mr. Smith), who leads for the Opposition, spent £1 billion in a few minutes in responding to my right hon. Friend the Secretary of State for Social Security.
The socialist wing of the Labour party clearly believes--and always has believed--in high and rising public expenditure. That is an article of faith. I do not agree with it, but I have some respect for views constantly held and consistently argued. I have no respect for the new Labour pretence that it can all be done without putting up taxes.
I read the shadow Budget of the hon. Member for Dunfermline, East. There was nothing in it about levels of borrowing, expenditure or interest rates and the only thing about taxation was the new 10p in the pound rate for the lower band. It was, of course, not costed--there was nothing so awkward as having to find the money for it.
Mr. Darling:
Will the Minister give way?
Mr. Heathcoat-Amory:
If the hon. Gentleman will forgive me, I still have some points to answer and only three minutes in which to do so.
As a preface to the shadow Budget, the hon. Member for Dunfermline, East said:
The hon. Member for Gordon (Mr. Bruce) is not in his place. He gave notice that he would not be and I will have to send him a message through the Official Report that he is not exempt from a similar criticism. His shadow Budget, his so-called costed programme, for nearly £6 billion of extra expenditure was going to be paid for by "tax changes"--they are called not tax increases but tax changes--of £1.1 billion. Another item was "tax reform" of £990 million. There are no details about the reforms or the tax changes. If one reads "tax increases" for "tax reforms", one begins to realise that the words "openness" and "honesty" take on bizarre meanings in the mouths of Opposition spokesmen.
The central fact is that government is not like that: we are about having to take hard decisions and make difficult choices. We have not flinched from that and the economic indicators are now pointing in the right direction. Inflation is low, growth is up, unemployment is down, borrowing is declining, investment is increasing and taxes have been cut. That may be bad news for the Labour party, but it is certainly very good news for Britain--and there is more to come. As we move towards the introduction of the Finance Bill later in the year, we shall, we hope, find out more about the Opposition's non-proposals.
"I want to see openness and honesty in tax."
He could have started by applying those precepts to his own Budget.
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