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Income Tax
4. Mr. John Marshall: To ask the Chancellor of the Exchequer what representations he has received about the 20p income tax band. [4859]
The Financial Secretary to the Treasury (Mr. Michael Jack): We listened to many representations on this and many other subjects in the run-up to the Budget.
Mr. Marshall: I thank my hon. Friend for that answer and I thank my right hon. and learned Friend for widening
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the 20p income tax band so that one in four taxpayers now pay a standard rate of tax of 20p in the pound compared with the 33p in the pound that they paid in 1979. That is real progress. Would it have taken place if we had followed the spending policies of the Labour party, which is never undersold when it comes to making promises?
Mr. Jack: My hon. Friend has put his finger on a very important point, because the last Labour Government disguised their position on tax by overborrowing to the tune of another 10p on the basic rate of tax. Our basic rate has come down by 10p--from 33p down to 23p-- and now, for a quarter of all taxpayers, as my hon. Friend says, the 20p band is their basic rate of tax.
Mr. Olner: In spite of all the rhetoric that we have heard over the past two days, the fact is that the Tory Government have put up taxes in this Budget and they are higher than ever before. When will the Government come clean and tell the British people that the Conservatives are the tax-raising party in this country?
Mr. Jack: The hon. Gentleman is always a pleasant man in the House, so I say this to him quietly: does he not remember the 83p rate of tax or, indeed, the 33p basic rate when the Labour party was last in power? His question is another cover-up for the embarrassment that he and his right hon. and hon. Friends feel for the fact that this Budget has delivered, in rising living standards, some £370 a year extra to the average family on average earnings. That is £7 a week. That is £20 a week since the previous election and £100 a week since 1979.
Building Societies
5. Mr. French: To ask the Chancellor of the Exchequer what discussions he has had with building societies about the future of mutual status. [4860]
The Economic Secretary to the Treasury (Mrs. Angela Knight): Since I published the last draft of the Building Societies Bill in March, I have held frequent discussions with a great many building societies on a number of issues. I have also spoken to the Building Societies Association on several occasions.
Mr. French: Does my hon. Friend share my concern that, notwithstanding the strong representations made over the past month, some building societies that are currently converting seem determined to ride roughshod over the perfectly legitimate bonus expectations of particular categories of customer, especially second named account holders who are disabled? Does she agree that it is highly desirable for pressure to be put on such societies to change their attitude to the problem?
On a wider front, does my hon. Friend agree that those societies should be required not merely to explain why they are demutualising, but to justify the particular formula that they have chosen to adopt? Part of that should involve an independent assessment of a society's overall assets, so that the members' legitimate interests can be established.
Mrs. Knight:
The Building Societies Act 1986 requires societies to provide members with all material
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As for the issue of disabled people and other groups, within certain constraints the existing Building Societies Act allows societies to devise a variety of schemes involving, for instance, making a pay-out to each member, making a pay-out for each account and making a pay-out for each name on the account through the first named members. It is for the building societies themselves to decide which scheme they feel is most appropriate--and, of course, for the members to decide.
6. Mr. Nicholas Winterton:
To ask the Chancellor of the Exchequer if he will make a statement on capital allowances. [4861]
Mr. Jack:
Our view is that the capital allowance system should be neutral so that it does not distort business decisions.
Mr. Winterton:
I congratulate the Government on achieving sustainable growth with low inflation and low interest rates, but does my hon. Friend share my concern about the level of investment in industry? Although investment has increased, it has perhaps increased from an all-time low base. Does my hon. Friend agree that capital allowances are the most effective way of targeting fiscal incentives at successful companies? Will the Treasury review its current position?
Mr. Jack:
I know my hon. Friend to be a passionate supporter of manufacturing industry in particular: he takes a keen interest in these matters. I believe that the best way in which to assist his cause and, indeed, that of the country is to have a successfully growing economy, and my right hon. and learned Friend the Chancellor has projected growth of 3½ per cent. in his Budget. We expect investment in industry, which has already risen by 6 per cent. this year, to rise by 10 per cent. next year. We do, of course, give capital allowances to industry, but the pay-off that they have for the current system is certainly Europe's most competitive main corporation tax regime.
Mr. Sheldon:
In his Budget statement, the Chancellor of the Exchequer announced in principle that capital allowances should bear a relation to the life of the asset. That is something with which we should all agree, but it does not happen in the case of a number of high-tech projects. Will the Financial Secretary look into the position again, to ensure that every incentive is given to manufacturing industry when it invests in high-tech projects and that that relationship between the life of the asset and capital allowances is converted into some sort of reality?
Mr. Jack:
The right hon. Gentleman will be aware that the Budget made no changes to the very generous tax reliefs in the context of scientific research allowances. That is particularly valuable to high-tech investment. As for long life assets, I am delighted to have the right hon. Gentleman's support.
Mr. David Shaw:
Will my hon. Friend confirm that the changes to depreciation for tax purposes in respect
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Mr. Jack:
My hon. Friend is extremely astute. He is a darned sight more astute than many of the Opposition Members who have been pontificating on economic matters in the past 24 hours. His calculation rightly reflects the heavy investment to which the utilities are committed. We have made changes to bring the tax treatment of allowances on long life assets into line with accountancy practice. That affects all sections of industry.
Mr. Mike O'Brien:
Will the Minister confirm that, although the Chancellor delivered the Budget with all the flair and panache of a second-hand car salesman selling a dodgy motor, what we saw when we looked under the bonnet was a tax-raising Budget? The Government have raised taxes for individuals 22 times in recent years. That has contributed to the pressure on all businesses, which has been added to by the Government's policies on capital allowances, and by the failure of their economic strategy. This is not a Government for business; they are a Government who undermine business.
Madam Speaker:
Order. As far as I know, the Opposition Front-Bench spokesman did not ask a question, but I am sure that the Minister is capable of dealing with that.
Mr. Jack:
I was shocked to find that the hon. Gentleman had finished. He sounds like a worn-out record. The Chancellor's Budget was good for business. The hon. Gentleman must have been asleep, or he would have heard the announcement in the Budget of measures that will address the concerns of small businesses about the uniform business rate. He would also have learnt that the economy will grow at 3½ per cent. next year, which is good for business. He would also have heard that investment in industry will rise by 10 per cent., and that our prospects for sales overseas have improved. All that and many more good things were what business wanted. The chairman of ICI welcomed the Budget, as did GKN and many business leaders.
7. Mr. Whittingdale:
To ask the Chancellor of the Exchequer what assessment he has made of the effects on the public finances of the Government's privatisation programme. [4862]
Mr. Waldegrave:
Total receipts from the privatisation programme from May 1979 to March 1996 were £81 billion at 1995-96 prices. That has helped the Government
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Mr. Whittingdale:
Has my right hon. Friend seen the recent survey, which shows that, between 1980 and 1982, the nationalised industries cost the taxpayer £300 million every year, and that between 1987 and 1995 those same industries contributed £4.8 billion to the Exchequer every year, excluding privatisation receipts? Did not the Labour party oppose every single privatisation? Even now, it would destroy that success by political interference through the regulator, and by the imposition of a windfall tax.
Mr. Waldegrave:
My hon. Friend is right. I have seen the tax figures to which he referred, and they certainly show that those industries make a large net contribution to the Exchequer. I should like to draw another dimension to my hon. Friend's attention. Without privatisation proceeds, and other things being equal, our debt stock would now be higher by about £100 billion. That includes extra debt interest totalling £37 billion since 1979, which is 5 per cent. of GDP. They would have been the figures if we had not privatised those industries, although the principal reasons for privatisation were the huge supply-side gains and the gains to the consumers.
Mr. Pearson:
As it is impossible to identify in the Red Book the level of asset sales built into the Budget, will the Minister confirm what assets will be sold in the next financial year? Will he publish a table to make it clear, so that we can all see how the Government are selling off the country's assets?
Mr. Waldegrave:
I am glad to hear that the hon. Gentleman is still in old Labour mode on privatisation--I suspect that that applies to the whole of his party. The level of asset sales in any particular year that is coming depends on achieving the proper price for those assets. It is unwise to give too much detail in advance of sales. That has always been the custom in the House.
Mr. Legg:
I congratulate my right hon. and learned Friend the Chancellor on his statement in the Budget that the student loan book is to be privatised. In line with my right hon. and learned Friend's assurances to the House in his statement on Monday, will my right hon. Friend the Chief Secretary confirm that the Maastricht convergence criteria will not be fudged and that the estimated £3 billion proceeds from that sale--which is equivalent to almost 0.5 per cent. of gross domestic product--will not count towards achieving our 3 per cent. Maastricht deficit criteria?
Mr. Waldegrave:
In privatising the student loan book--a sensible thing to do--it was not in our mind to achieve any particular level of anything. We are following the sensible policy of transferring risk to the private sector and getting the Government out of a business that they should not be in--ownership of a large loan business. It is sensible to do so.
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