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Mr. Kenneth Clarke: Such a speech does not help the general public understand economic policy in the slightest. As the right hon. Gentleman is carrying on with his three-card trick, can we identify the individual cards? He knows that we shall go into the election with a total tax burden that is no higher than it was in 1991-92, before the previous election. When he comments on 1992, he should remember that 1992 contained two financial

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years--1991-92 and 1992-93. He is falling about and shifting from one to the other, depending on which comparison and point he wants to make.

The tax burden is the same overall as it was before the previous election. It is no higher, and it is not true for the right hon. Gentleman to say that it is. The burden actually includes all the increases in tobacco duty--I am still waiting to hear whether he objects to them. Is he complaining about them? Will he say that the tax burden is the same as it was before the previous election, as that is the truth?

Mr. Brown: The Chancellor seems obsessed with tobacco. I do not suppose--whichever way one looks at it--that I can smoke him out on those matters. But I must tell him that tobacco is not included in our list of 22 tax rises. He is now telling us that the only reason the tax burden is the same as it was in 1992 is because of tobacco. That is astonishing. Had it not been for tobacco, we could have forgotten VAT, national insurance, the married couple's allowance, mortgage tax relief and insurance tax. It is all a result of tobacco.

I can remind the Chancellor and the House of one of his forecasts in which people will believe. In an unguarded moment in Washington in October, the Chancellor said that the public "would be deeply suspicious" of any tax cuts. Why did he say that? He said that because:

"They remember we promised tax cuts last time and weren't able to deliver them."

His judgment on that issue has been proved to be absolutely right, and the public are right to be suspicious.

The Chancellor seems to want to wish away the Conservative manifesto for the previous election.

Mr. Clarke: I should not allow myself to be provoked by this nonsense. The right hon. Gentleman knows perfectly well that I gave an explanation in Washington of why I would make only tax cuts that could be afforded by prudent policies. Will he express an opinion on whether the tax cuts that I made yesterday can be afforded by prudent policies? Last year, he could not make up his mind. He did not vote either way, and abstained. Can we talk about the Budget? Will he take up the phrase that I used in Washington and tell me whether the tax cuts that I announced yesterday can or cannot be afforded as a result of prudent policies? Which way will he vote? Will he vote?

Mr. Brown: I will come to that in a minute, as I will to the Chancellor's new-found interest in tax loopholes as a way of raising money. I remind him of one of the tax cuts that Labour believes should have been made, and which I think he will regret not having made--that of VAT on fuel. That is what a Labour Government will do.

I have here the manifesto on which the Conservative party fought the previous election, and the one for which the dwindling band of Back Benchers now supporting the Treasury team will have to account when they come to the election. I venture to suggest that the Conservatives got only one word wrong in most of the statements that it contains. The manifesto stated that the Conservatives would maintain mortgage tax relief, when what they meant to say was that they would not maintain mortgage tax relief. On page 8, the manifesto states:

"We will abolish Stamp Duty on share transactions".

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What they might have said was that they would not abolish stamp duty on share options. The manifesto said that the Conservatives would continue to reduce taxes, when it might have said that they would not continue to reduce taxes.

The Conservative campaign during the summer was that Labour says one thing and does another, but that is the truth about the Conservatives. They say one thing in their manifesto, and they do another in government. In every library in Britain, the 1992 Conservative manifesto should be re-catalogued today as a work of political fiction and put alongside the other work of Jeffrey Archer and his friends.

Mr. Geoffrey Robinson (Coventry, North-West): Will my right hon. Friend confirm that, far from delivering tax reductions year on year, the Conservatives have in fact delivered the biggest tax increase since the second world war?

Mr. Brown: We have had the biggest tax increase in our peacetime history, and that is why Conservative Members are so fearful of facing the electorate. They will not be able to defend themselves, because they made tax the central issue at the last general election, as they did at the three previous elections. The electorate are entitled to judge the Conservatives on their central promise.

What of the other promises in the Conservatives' 1992 manifesto? They promised to balance the Budget--again, a broken promise. Yesterday might have been an attempt to eradicate the Conservative party's reputation for high borrowing, but let us remember how it all started. In 1988, the Prime Minister--the then Chief Secretary--said that the Government would balance the Budget every year. Then, as Prime Minister, he said that they would balance the Budget on average over the cycle. He then said that they would balance it in one year in the cycle; then, that they would move towards balance during the cycle. Yesterday, we heard the truth--the Government will balance the Budget. It is in the Red Book. But when? They will balance the Budget in the next century. The Conservative party is not the party of balanced Budgets--it is the party that has doubled the national debt. The Conservative party is the party of the unbalanced Budget.

We must look at exactly what happened in 1992, to explain why we are right to be suspicious of every figure in the Red Book. The Government said in 1992 that borrowing would be £32 billion in the year to follow; it was £45 billion. They said that in the year after it would be £25 billion; it turned out to be £36 billion. They said that it would be £19 billion in the third year; it turned out to be £32 billion. This year, it was supposed to be £6 billion, and it has turned out to be £26.5 billion. The Government were out by £66 billion. That is why the national debt has doubled.

The Government misled the electorate in 1992 about the true state of public finances. The electorate must not be misled again, because all that we have this time are promises about good behaviour in the future. Are we not entitled to judge the Government by their record rather than their promises?

Now the Chancellor tells us that he will balance the Budget, not primarily by growth or by spending cuts, but by what he has discovered in the past few days: loopholes.

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That is where his new figures come from. I remember his previous references to tax loopholes: he said that they would be as good as brass washers. He made a thing of it in all his speeches, and he said in the House that loopholes did not exist and that we were proposing the economics of "Alice in Wonderland". The Chancellor said that our proposals to close loopholes were

"not serious options for revenue raising. This Government have never been a friend to the tax avoidance industry."--[Official Report, 8 December 1994; Vol. 251, c. 474.]

Now, two years later, the Chancellor admits that the Government have been a friend of that industry all along. He said in 1994 that he had done work to study tax loopholes and had rejected them; but he now accepts as worthy of further investigation the very loopholes that we identified and that he scorned: the abuses in leasing arrangements, in controlled foreign companies, in offshore trusts, in special dividends, and in share buy-back schemes.

Yesterday, the Chancellor said that

"big, sophisticated companies seem to pay so little tax"

and spoke of

"companies being 'economical with their tax'."--[Official Report, 26 November 1996; Vol. 286, c. 163.]

How has it taken the Government 17 years to find out what we have been telling them all along? If he had devoted his energies to pursuing tax avoidance rather than to knocking down our case, the Chancellor would have raised money far beyond what he proposes to raise in future years.

The Chancellor denied that there were loopholes until the day before the Budget, and now he sees them as his economic salvation. How much money has he lost the country in the past few years by his failure to act? First, the Government let the loopholes happen; then, despite warnings, they ignored them; then they derided anyone who wanted to close them; and now the Chancellor finds, as he tries to reduce the borrowing requirement on the eve of a general election, that they are his last hope of salvation. The Chancellor's statement yesterday was an admission that he had lost the country millions. If only the Government had taken our word, they would not have had to impose VAT on fuel.

If the Chancellor has taken our advice on loopholes, it is about time that he also took our advice on the windfall tax on the utilities. The Conservative party in the past few weeks has become the friend of the privatised utilities, running debates for them in the House of Commons, as if it were a sponsored Conservative party. I gather that on Monday night the chairman of United Utilities--North West Water as was--invited Members of Parliament to a drinks party to celebrate on the eve of the Budget the fact that the Conservative party would not impose a windfall tax. The Conservatives should take the advice of the chairman of the 1922 Committee, who said last year that they should impose a windfall tax on the utilities.

Promises have also been broken on spending. Despite all the promises about settlements above inflation, year on year, the figures show that the Department of Health budget for the second year is falling. Can the Chief Secretary deny that capital expenditure on the health service is being cut by 10 per cent? Can he deny that, of all the projects for the private finance initiative that were to be announced month by month, only one contract has been signed, and that it was signed on the day of the

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Budget? What are we to make of Ministers who go round promising hospitals in marginal seats and never deliver them? Unless they take action now, they will be building castles in the air, not hospitals on the ground.

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