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6.9 pm

Mr. John Greenway (Ryedale): In the past couple of hours, questions about honesty have been bandied about. If there is any justified criticism of the Government whom I have supported for the past five or six years, and continue to support, it is that we have sometimes made conflicting promises, but at the previous general election we promised to keep up the value of old-age pensions and child benefit, and we have done so. That is a proud record, which we should sing more than we do.

No doubt, during the next general election campaign, the argument that took place during the previous general election campaign will be repeated. Anyone taking a dispassionate view of the arguments as to which party is most likely to spend and tax more, would conclude that it is the Labour party.

I find it difficult to stomach hearing speech after speech--as we do from Labour Members week after week in the House--about the level of taxation when everyone knows that, had Labour won the previous general election, taxation would have increased dramatically and we should not have had the economic recovery of the past five years.

The Budget was good because it was like last year's Budget, which was also a good Budget. It had the right key priorities and struck a balance.

What should be the Government's first priority? The last time that I spoke on these matters in the House, just before the previous Budget, I said that Conservative voters, especially, want the Government to do the right thing by our hospitals, the police and our schools. The Government did so and have done so again. As the hon. Member for Sheffield, Attercliffe (Mr. Betts) said, some of the cost of that must be met by council tax payers, but I believe that parents and local communities want schools to be properly resourced and I am sure that they are willing to pay for that as long as local authorities are prudent and sensible in their expenditure plans.

What should be the Government's second priority? The Budget has further reduced public spending as a percentage of gross domestic product. That percentage has not come down as fast as I know that my hon. Friend the Economic Secretary to the Treasury and her colleagues in the Treasury would have liked, and nor has the public sector borrowing requirement, but a Government must take decisions that ensure that front-line services continue to be properly funded while creating a tax structure that encourages enterprise and produces economic results, and we have done so. Things are on a much better footing than I suspect some people, even Labour Members, thought likely a year or two ago.

What should be the Government's third priority? Another reason why I welcome the Budget is that the Government have introduced further changes in the income tax regime, not only to meet obligations on tax allowances and thresholds and to match inflation but to bring nearer a 20p basic tax rate. The most significant statistic about tax--one that we should bring to the public's attention much more forcibly than we do--is that now about a quarter of all taxpayers pay tax at only

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20 per cent. That is especially important for families and households on relatively low incomes, especially those working in the rural economy. In the context of tax promises, I shall be proud to draw to the attention of voters in my constituency the fact that more of them now pay tax at only 20p in the pound. We must continue that process.

Time has shown last year's Budget to be a success. A year from now, we shall look back and see that last week the Chancellor introduced a sensible package to meet all those priorities. We may look forward to a continuing improvement in our economic performance, but we should not lose sight of some comparisons.

Our position relative to Germany has been mentioned. Germany is a strong economy, but at the moment the indicators are moving in the wrong direction, as they are for many other countries on the continent. Last week, the French Government caved in to union power. It may be a bit of a pun to say that many other people will jump on the bandwagon, but many more people in industries in France will seek a retirement age of 55 and pay increases of up to 12 per cent. They will see, as we can see, a deterioration in the economy of that great country.

The comparison between what is happening in this country and what is happening in other member states of the European Union enables the Government to say with conviction that not only are we doing well, but we are doing so against a background in which others are not doing anything like as well as they were. Their economies are moving in the wrong direction in terms of unemployment, output and so on.

I shall briefly discuss some specific changes that were introduced in the Budget and one or two matters that should have been mentioned.

The decision to freeze the uniform business rate for many small businesses is excellent news. We need to establish quickly who will be eligible. The announcement does not enable us to ascertain which businesses in our constituencies will benefit from that welcome decision. I want to be in a position to do so as soon as possible because, in the past four or five years, despite the Government's best efforts in introducing the UBR to protect businesses from local authority spending, many smaller businesses--in the service sector especially--have had to pay a business rate that has increased as a proportion of their costs.

We need a longer-term solution than the freeze that the Chancellor announced last week. That announcement is welcome recognition that there is a problem, especially for small service sector industries, and I want us to take an increasing number of those businesses out of the business rate altogether, or to introduce it in a way that links what they pay to their turnover and profitability instead of to the value of their property. In many rural villages, where property values are again increasing, business rate valuations have no relevance to the ability to pay of the small business.

As for excise duties, the drinks trade has lobbied long and hard about the problems caused by cross-channel shopping. The duty on Scotch whisky has again been reduced, I note, and no doubt the industry welcomes that, but we in the north are concerned about the beer industry. Freezing beer duty is certainly a welcome step, but I believe that the Government must adopt a broader perspective. Freezing duty so as to make it less attractive

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to pop over to Calais with a van and bring back huge consignments of beer is one thing, but there is still no resolution to the proposed merger of Bass and Carlsberg Tetley. If that does not go ahead, the brewing industry in the north of England will face serious structural difficulties.

I shall deal now with the duty on fuel for transport. Although the proposals to help the road transport industry become more environmentally friendly are welcome and imaginative, they remain medium to long-term proposals. Their effects will not be felt immediately, and it will take quite some time for many small haulage contractors to take advantage of them. In the meantime, their costs are set to rise again--costs which they cannot always pass on to the customers whose goods they move around the country.

The increased price of fuel poses a real problem for businesses in rural areas. It is my privilege to represent thousands of square miles of north Yorkshire, where we cannot move goods around in any way except by road. You, Madam Deputy Speaker, will know from your experience of the west country that if duty on road transport fuel continues to rise, in the long run our rural economies, where long distances are involved, are bound to suffer.

On behalf of my hill farmers, I should like to thank the Government for the increase in the hill livestock compensatory allowances for beef cattle. Doubtless we shall have other opportunities to discuss that; but the increase has been extremely well received and was certainly necessary.

I want to mention two disappointing aspects of the Budget as well. The first is that the Chancellor felt unable further to reduce betting tax or pool betting duty. I declare my interest as president of York City football club and as chairman of the all-party racing committee. The football club is very worried about the falling revenues received by the Football Trust and by the Foundation for Sport and the Arts, owing to the significant reduction in pools income and hence the money available to the pools companies. In spite of everyone's best efforts, including efforts by the Government, to bring about an increase in the levy paid to the horse racing industry to promote and sustain the sport, that levy is declining because betting shop turnover is declining and betting shops are closing. About 900 of them have closed in the past year.

If this continues, the law of diminishing returns will apply. I know that Treasury Ministers recognise the problem. The difficulties are, of course, being experienced because of the lottery's success. Now there is to be a midweek draw as well, which will only make matters worse. All this has left the rest of the betting industry and the parts of the sporting world which depend on income from the pools or from the horse racing levy with the feeling that the lottery is being greedy by introducing a second draw. That may or may not be true, but it is clear that we need to sit down and take a careful look at betting tax, the pools betting duty and tax on the lottery. I hope that in the months ahead we shall have a chance to do that with Treasury Ministers. The Treasury has a clear interest in the continuing profitability of horse racing. The yield from the horse racing betting tax in the past 12 months was about £365 million. Taxes and VAT on the racing industry bring the Exchequer considerable revenue.

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My second disappointment was caused by the Chancellor's decision to increase insurance premium tax to 4 per cent. Here I declare a real interest, having worked in the insurance industry for 25 years and holding, as I do, many insurance industry interests. The decision was greeted with mixed feelings. There was disappointment with the increase, but there was also relief that the industry's worst expectation--that the tax might rise to 6 per cent.--was not realised. It seems that our representations to Ministers were not wholly wasted.

The 17.5 per cent. rate for essential warranties and some travel insurance will create additional complications. I do not want to outline how to resolve them this evening--except to say that when IPT was first introduced, the industry found Customs and Excise and Treasury officials extremely co-operative and helpful in finding ways of implementing the intentions practically and sensibly. We should like to make representations this time once the position is somewhat clearer.

The problem arises because it seems that if people buy a policy through one channel, they will be taxed at 4 per cent. but if they buy one through another channel, they will pay tax at 17.5 per cent. That is a recipe for further abuse and chaos, so it needs reconsidering. I can understand why the Chancellor wanted to stop people evading a charge of 17.5 per cent. VAT on purchases by distributing the price paid as between the warranty price and the price for the goods themselves. Such methods are of course helpful to those who sell the goods, but I am not entirely sure that what is proposed will act to prevent only that--there could be other consequences.

There is some truth in the Chancellor's point that there is no real evidence to show that the 2.5 per cent. rate has had an adverse effect on the purchasing of insurance by the public--at any rate on what we call the personal lines: house contents, cars and so on. The fact is, though, that the tax was imposed at a time when rates have been extremely competitive in any case. Now I see no chance of absorbing the extra 1.5 per cent., which will pose a serious difficulty for big corporate risk insurance and for trade and credit insurance. The increase will have some impact on insurance purchasing habits.

Here again we need to sit down with the Treasury and work out a way forward. Had I been Chancellor--fat chance of that--I am not sure whether I would have described this increase as a temptation I could not resist, but it would be wrong of any Treasury Ministers, in this Government or the next--please God we shall have the same team--to think that they could tweak up the tax another 1 or 2 per cent. every year or so, regarding the insurance industry as a milch cow for raising a few hundred million pounds whenever the Budget sums looked a bit tight. I hope that that second temptation to which the Chancellor succumbed will be the last one for insurance premium tax.

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