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5.4 pm
Mr. John Redwood (Wokingham): I wish to praise the kids in the Treasury. I believe that they have done us a great service today. They have certainly done no service to the shadow Chancellor. He obviously dropped his speech on the Floor. We shall never know whether the one that he dropped would have been any better than the one that we heard.
The kids in the Treasury have sprung a trap for the shadow Chancellor. I hope that their friends, the teenage scribblers, have been watching and listening, because they will be able to write a great deal of fun tomorrow about that dreadful performance by the Opposition spokesman.
I see quite a lot of the comment in the leaked paper as being in that honourable British civil service tradition of preparing for the unlikely or the implausible. I remember that the British civil service spent much time and energy preparing for a Liberal-led coalition in 1986. The Liberals were preparing for Government at the time and, in the civil service, Liberal options were being run through the computer to discover what things would look like, were they to appear as the Government.
Then, in 1991, the British civil service prepared actively for the potential success of that other lost cause--a Labour Government in 1992, led by Neil Kinnock. In that spirit, the kids in the Treasury have been studying Opposition policies again in part in the leaked document. Today the House should consider two of those, which have been partially highlighted, very charmingly, by the shadow Chancellor.
The first policy is that of charging motorists more so that the roads may be privatised. The Opposition look stunned, but of course Labour and Liberal politicians say that motorists should pay more. They say that they want congestion taxes and road pricing. They say that they want to push people off the roads into the trains, or on to the buses on some of the roads that they do not want to build. That is their avowed policy. The document shows that the civil service is preparing, and considering whether there is any money in that idea.
Conservative Members prefer active policies to promote competition and choice in public transport, so that more people will want to go by public transport. I trust that the Government will make it clear, in the reply to the debate, that they are still saying no to motorway tolls and tariffs on existing roads, because we have already bought those roads. We should not have to pay twice for them.
The second policy that the civil service is rightly examining is a policy that the Labour party must be studying today, in its 16 to 18-year-old review. We know that the shadow Chancellor wants to take child benefit away from 16 to 18-year-olds. If that is the comprehensive review that Labour Members have promised the public that it is, presumably they are also considering taking away the free sixth form place. I trust that our Government will make it crystal clear that we are in favour of the free sixth form place.
The Labour party is deeply worried about that, because it says that the elite, who get the sixth form place at school for the A-level course, may be exploiting those who do not stay on at school and take the A-level course, and they are considering the idea of training taxes and student loans and other ways of financing those who will not stay on at school. Perhaps they are considering taking away the free place as well.
Towards the end of 1992, things were not good in the British economy. We had 3 million people out of work. There had been massive job losses and factory closures. The Chancellor of the Exchequer had to say to the nation that, if we stayed in the exchange rate mechanism, interest rates might have to be lifted to 15 per cent. That was a sad time. I am delighted that we came out of the exchange rate mechanism, and I am delighted that it is the Government's policy not to go back in. But I remember the Opposition in those days fully supporting that policy. They were at one with us on being in the exchange rate mechanism. I do not remember them praising our exit or praising the policies that we adopted after we came out of the ERM. Indeed, the Opposition have never supported the policies of the past four years which have created this excellent economic recovery.
I therefore hope that shadow spokesmen will take the opportunity to say that they were wrong to back the policy, and that they do not want our country to go back into the ERM and suffer the consequences.
Mr. MacShane:
I believe the right hon. Gentleman was a member of the Government at the time. Why did he not have the courage of his convictions then, instead of waiting until he could stab his leader in the back last year?
Mr. Redwood:
It is the leader of the Conservative party who has clearly stated that we are not going back into the ERM. If the hon. Gentleman looks at the record, he will clearly see that I described why I thought the exchange rate mechanism was wrong before we entered it--I put that on the public record. As a loyal member of the Government, I kept my reservations for private debate inside Government; but I can assure the hon. Gentleman that I was not shy there of saying why I thought we needed lower interest rates and why I welcomed our departure from the ERM.
Mr. Bruce Grocott (The Wrekin):
The right hon. Gentleman will recall saying eloquently during his leadership bid of just over a year ago, "No change, no chance," in respect of Government economic policy. Does he now think the policy has changed, or is it still his view that the Government have no chance?
Mr. Redwood:
The Opposition have to ask questions like that because they are so ashamed of their policies. I can assure the hon. Gentleman that I did say, "No change, no chance." I thought that right then and I think it right today. There have been some welcome changes. I welcomed the Chancellor's Budget of last year, which produced tax cuts and some spending cuts. I shall be going on to urge him to do a little more in that direction--just so that the Opposition feel really unhappy about the prospects of a tax-cutting Government fuelling a decent economic recovery based on Conservative policies.
Mr. Michael Connarty (Falkirk, East)
rose--
Mr. Redwood:
I know that the hon. Gentleman is eager, but I have been enjoying answering the previous question.
Mr. Connarty:
Before the right hon. Gentleman's mind strays from his statement about the ERM, will he say whether he thinks that the Government should never go back into it?
Mr. Redwood:
No, I do not think it would ever be right to go back into the exchange rate mechanism. My right hon. Friend the Prime Minister has clearly ruled it out. I just wish that the Opposition, four years on, would learn from our experience of the ERM and would come out against it too. But we are not particularly worried about what the Opposition think. We have work to get on with in the Conservative Administration in support of the Conservative Government.
The summer forecast says that next year general Government expenditure will rise by £13.5 billion, or 4.4 per cent. It says that there will be an additional £2 billion of spending compared with the Red Book forecast at the time of the last Budget. I urge the Cabinet and my right hon. and learned Friend the Chancellor to think again about these very large increases. It is possible to have a first-class education service, defence, law and order policies and a health service, and to ensure that they get reasonable increases next year while lowering these forecast increases. Before the summer forecast, I proposed £6 billion less increased expenditure; having seen the forecast, I now think that £7 billion less is necessary, given the extra increase in general expenditure proposed in that forecast. [Interruption.] Opposition Members seem to be keen to know where the money should come from, in general and specifically--so I shall tell them.
In general terms, the contingency fund could be halved from £5 billion to £2.5 billion, just as it has been this year. I believe that the inflation forecast that the Government are using is too high, so they could reduce the forecast requirement to meet increases in prices and wages by £2.5 billion. That is what can be done with a low inflation policy--lots of benefits flow from it. We do not need a 4.4 per cent. increase in expenditure if inflation is about 2 per cent. and if wages rise by only 3 per cent.
I should like more money to be switched from grant to private finance in areas such as housing and urban regeneration. The Department of the Environment is a reasonably sized Department with a big budget. I think it would be quite possible to switch £500 million out of grant and into private finance for the housing associations and the Housing Corporation. The cost of halving the rate of grant could easily be recouped by raising the money in the City of London. Furthermore, I should like £200 million to be shifted in a similar way within the single regeneration budget; and I would like the urban development corporations, now under starter's orders to wind up their business, to accelerate the disposal of their assets. I should like the regional government offices in England to be scrapped, with a saving of about 1,000 officials and a great deal of real estate. I should like much of the 10 million sq ft of empty office space around the country--especially in London--in Government ownership or leased by the Government to be returned to more productive use so that the money could be received by the Treasury or a rental income could be enjoyed.
I see the right hon. Member for Dunfermline, East (Mr. Brown) looking worried. He knows that these are good ideas which could really cut expenditure and lower taxation. I see him in active discussions with his hon. Friend the Member for Oxford, East (Mr. Smith), who is supposed to know something about public spending. I hear that there is one spending pledge that the shadow Chancellor must make--for a better telephone service in House of Commons offices. I hear that he is reluctant to receive calls from the hon. Member for Hartlepool (Mr. Mandelson), and that he is desperate for one of those telephone systems that will warn him when his hon. Friend has rung him up.
The Labour party is after a deeply over-governed Britain. It wants more government from Brussels, more regional government, more government from Whitehall, many more quangos and more government from shire hall and town hall. The Labour party occasionally says that it thinks we have too many quangos. Why then do Labour Members propose a massive expansion of quango-land? Why do they want regional development agencies? Why are they after a new quango to settle a minimum wage? Why are they after a whole rash of bodies to intervene and to invest around the country--when we are at last putting together a series of policies that make this country the fastest growing economy in western Europe and one of the big international challengers in the emerging global market?
Of course, every extra bit of government brings with it the need for extra taxation. We already have on the record the Labour party's requirement for a tartan tax, a training tax, a utilities tax and a London tax--four new taxes which the Labour party suggests on top of those that we already have. I agree that we have too many taxes already and that they are still too high, which is why I urge my right hon. and learned Friend to bring in another good Conservative Budget that cuts those taxes and even removes some of them altogether.
I welcomed the Prime Minister's statement last summer that he wanted capital gains tax and inheritance tax removed as soon as possible. I urge the Chancellor to look particularly at capital gains tax, which brings in only about
£900 million these days. Surely it is possible to capture quite a lot of that revenue by taxing short-term gains and very large gains made by companies while exempting many more people from CGT. I see that the Chancellor smiles at that, but with a budget of £320 billion, and with revenue having slipped by £4.4 billion in the past few months, £900 million is not a large sum, although it is an important sum. In any case, not all of it would be lost. Some of the revenue would be retained in the way that I have outlined, and the Treasury would receive more in the end because there would be many more transactions in the economy that would fall prey to various taxes already in position. I am sure that the Chancellor would wish to help the Prime Minister fulfil his excellent pledge.
In the 1980s, the Conservatives showed that cutting tax rates brings in more revenue.
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