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7.25 pm

Mr. Bill Etherington (Sunderland, North): The hon. Member for Colne Valley (Mr. Riddick) has proved to me beyond any doubt that we are no more likely to get brevity from Conservative Members than succinctness--both are unobtainable.

I admit that I suffered the misfortune of being ill on the day of the Budget speech. I am not sure whether that was a misfortune or a bit of good fortune. As I listened to the speech on the radio, although I was depressed to begin with, it made me feel even more depressed. In line with all Chancellors' speeches since 1979, it followed the common pattern. To make it appear presentable, the Chancellor took money away from the less well-off and gave it to the better-off. Every Tory Chancellor since 1979 has consistently done that. The facts and figures are available, and eventually it will be proved beyond all doubt to the general population, who will vote accordingly whenever the election is held. I have no doubt about that.

A reduction of 1p in income tax means that the person earning £100,000 a year has 10 times the advantage of the person earning £10,000 a year. That 1p must be paid for. It is interesting to examine some of the smaller measures in the Chancellor's Budget that did not catch the headlines. Instead of going up by the rate of inflation, the threshold for inheritance tax went up by 7.5 per cent. No doubt that will help to continue the trend that has led to a reduction in inheritance tax claims from 49,000 in 1979 to only 14,000 now. We are losing revenue from people who do not really need the money. I accept that the people who are dying do not gain an advantage--whatever the rate of inheritance tax--because it is the people who follow them who are expected to pay.

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A similar tale applies to capital gains tax. Conservative Members would like that to be abolished. Capital gains tax takes from the better-off for the benefit of the worse-off. Conservative Members are vehemently opposed to that, because they have shown time and again that they do not believe that anything should be done for the poorer members of society. It is interesting to note that, in 1989, £2.3 billion was raised in capital gains tax from 150,000 people. That has now been reduced to £900 million from 90,000 people. That is another valuable contribution lost.

I also take note that the Chancellor has reduced by approximately 2 per cent. employers' liability for national insurance payments. It would be interesting to know the actual percentage now paid by employers into the national insurance scheme. It was originally envisaged that they would pay a little more than employees. I am not aware that the current figures have been published. Since 1979, employees' contributions to the scheme have increased by more than 50 per cent. That is probably one of the 22 hidden taxes that the hon. Member for Colne Valley mentioned.

I should like to refer to tobacco tax. I have no interest to declare: I have no great feelings one way or the other. I accept that it would be better if people could be persuaded to smoke less. Although tobacco tax went up last year, there has been an increase in tobacco smuggling and in the number of young people and children who smoke. The argument that increasing tobacco tax deters people from smoking does not seem to be borne out. There seems to be no research on the subject: an increase in the tax is just a knee-jerk reaction. If the Government are really concerned about people's health and want to reduce smoking, why do they not consider decent health education? I do not see much sign of that. They could also consider the way that the industry advertises because that might do more good in the long term.

Another matter in which I am involved is the fluoridation of water. There is no proof that it does any good, but it takes people's minds from the real issue, which is the importance of parents properly instructing their children to look after their teeth. That is the real answer. In terms of deterrence, a tobacco tax is about as much use as is fluoride for improving dental conditions.

I did not think that I could say about a Conservative Budget that there is one measure in it that I welcome, and that is the proposed phasing out of tax-free profit-related pay. First, all disposable income should be properly and fairly taxed regardless of source. Secondly, employers have ruthlessly used that measure to ensure that their employees are paid less. Although employees benefit from profit-related pay, the population in general suffer. The removal of the scam is welcome. The airport departure tax has been increased, but I shall certainly be willing to pay my share when the Government depart in April or May. The sooner the better.

Possibly the worst aspect of the Budget ties in with what I have said so far about the Government's paranoic hatred of the less well-off. Single-parents are being targeted for vicious treatment. Their income will be reduced by about £6.40 a week, over the next two years. I do not suppose that that strikes the Government as particularly noteworthy, but I shall try to show why it is wrong. Some 40 per cent. of single-parent families have disposable incomes of less than £100 a week--but only 4 per cent. of two-parent families are in the same

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circumstances. Once again people who have little to start with are being targeted and the Government will ensure that those people have even less.

Overseas aid has been reduced for the second year running although we are told that the economy is booming and that our successful economy is the flagship of Europe. There are not too many signs of that in terms of overseas aid. I am pleased to see that Scotch whisky is being favourably treated because there are problems about smuggling and employment. However, I do not understand why the Chancellor did not treat the beer industry in the same way. It has a terrible problem with smuggling. Last year, cider makers were discriminated against and this year the Scotch whisky industry is getting preferential treatment compared with the beer industry. I regret that and I hope that in future the matter will be examined rather more realistically.

The problem that concerns me more than any other is that of housing, which is getting worse year by year. Some interesting statistics have been provided. I declare an unpaid interest in that I am a member of a housing association which is also an alms house. I do not receive payment but on a good day I get a cup of tea and perhaps a biscuit when I attend a meeting, and that is about it. It is depressing to have to make the same remarks year after year. There has been a 72 per cent. reduction in housing association finance since 1992-93. There will be fewer than 22,000 housing starts by housing associations this year compared with more than twice that number last year. The Government are failing to reach their 60,000 a year target. The Secretary of State for the Environment thinks that another 4.4 million houses will be required by 2016, but it seems that we shall fall a long way short of that.

The National Association of Housing Federations estimates that 90,000 homes would need to be built in the social sector each year to reach that target and we will be nowhere near that. Whatever is said, the situation is getting worse year upon year. That term was used by the Secretary of State for Health in a different context, but it also applies to housing. The condition of the housing stock will worsen because less money is being made available. We often hear about a ticking time bomb. There have been riots because of poor housing and if the trend of the past four or five years continues, I fear that in the not too distant future there could be more riots. Any Government must first ensure that their citizens are properly and adequately housed. I am afraid that the Government are not doing that.

7.35 pm

Mr. Douglas French (Gloucester): I am not sure which was the more formidable contribution--the opening demolition by the Secretary of State for Health of Labour's totally untenable position on NHS funding and his exposure of its ambiguity over the utilities tax, or the way in which the Chancellor presented his Budget.

The Budget was well received by individuals, by businesses and by the markets, but not by some Labour Members; and the Budget speech was widely respected for its excellent judgments. Those who had decided in advance to dislike the Budget and reject it naturally presented their objections, but it was interesting to note the extent to which those objections seemed to be pre-packaged and orchestrated.

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Like my hon. Friend the Member for Colne Valley (Mr. Riddick), I have lost count of the number of times in the past week that I have heard Opposition Members talk about the 22 tax rises. My hon. Friend was right to give more details of his research into what those 22 tax rises are said to be. They plainly include minor adjustments, technical amendments and changes in duty on tobacco and drink. In one or two cases, full indexation on allowances may not have been given. There has been no attempt by the Opposition to acknowledge the net position after tax decreases or the scale of tax decreases. They emphasise the number, but the scale is much more important.

The Opposition do not recognise that tax rises increase revenue, which is then spent on headings that are close to the hearts of hon. Members in all parts of the House--such as education, health and law and order. If Labour Members are so determined to claim that they have no sympathy with these tax increases, they must explain what decreases in expenditure they would make, having forgone the revenue from those tax increases.

In the past week, I have lost count of the number of times the Opposition have spoken about the average family having to pay an extra £2,120 in tax between the last general election and the next one. That was mentioned in the reply to the Budget by the right hon. Member for Sedgefield (Mr. Blair) and by the hon. Members for Bristol, South (Ms Primarolo) and for North Warwickshire (Mr. O'Brien) and many others. However, as far as I could see, there was no attempt to acknowledge that, when average earnings go up in real terms, it is obvious that the cash take goes up as well. If there had been no change whatsoever in the tax percentage taken from the average family, the tax take would be bound, when expressed in cash terms, to reflect the substantial rise in average earnings. The Opposition should stop making that claim.

The right hon. Member for Derby, South (Mrs. Beckett)--echoed by the hon. Member for Sheffield, Attercliffe (Mr. Betts)--attempted to criticise the use of the private finance initiative to fund hospitals. We have been told that, so far, only one hospital project has proceeded, and there was some dispute about whether the proposed hospital in Gravesham will materialise. In my constituency, we have been expecting an excellent new hospital to be financed through the PFI. I would be the first to acknowledge that progress on the project has been slow, but the only reason for the delay is that the Labour-controlled city council has found every reason to block it.

The council has been objecting to the project on planning grounds, whereas its real objection is that the PFI somehow offends its left-wing, doctrinaire attitude that the PFI and the NHS should not fit together. That is the reason why the excellent new hospital--which I very much hope the residents of Gloucester will have--has been delayed. The sooner the council changes its attitude on that matter, the better it will be for the residents of Gloucester.

Rather the same pre-packaged, anticipated and predictable reaction has come from Labour councils on the issue of expenditure. Earlier in the debate, an hon. Member mentioned "broken promises". I can mention broken promises by the Labour-controlled Gloucestershire county council. Every year for the past five years, upon hearing the Budget statement--or before hearing it--the

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council has promised that it would be forced to close libraries or to sack teachers. After more careful reflection on the Budget, it has discovered that it would not be forced into keeping the "promises" that it was so determined to make.

A very similar situation is occurring in the Labour-controlled Gloucester city council. It reactedto the local government settlement by immediatelystating that it would be forced to make expenditurecuts amounting to £600,000. Incidentally, it is a Labour-controlled council in which £1 million uncollected rent is outstanding, which recently decided to pay £10,000 to a firm of consultants to tell it whether its committee structure was right, and which paid £15,000 to a public relations firm to tell it what local residents wanted done with the home of Rose and Fred West, in Cromwell street.

It is also a Labour-controlled city council that gives more than 10 per cent. of its £10 million budget in charitable donations. Some of those donations support very worthy causes, but, sadly, some of them are made to quasi-charitable organisations, whose real purpose in life is to stir up political and not charitable activity.

This is the first Budget for quite a long time that has not had a savings package. Although there has been some clarification of the position on guaranteed income bonds, and there is a consultative document on life policy taxation--to distinguish between life and savings products--there is no savings package in the Budget. I regret that omission. I recall that, in the first half of the 1980s, the watchword in the savings market was "fiscal neutrality". That approach led to the abolition of, for example, life assurance premium relief, so that preferential treatment was not given to certain savings vehicles.

Thinking changed in the second half of the 1980s. A desire to encourage equity investment resulted in the introduction of personal equity plans and deposit-based savings schemes with preferential treatment, such as tax-exempt special savings accounts. It is now evident that TESSAs that are reaching maturity are providing many savers with a pot of gold for luxury purposes. I know of many examples in which maturing TESSAs are used for the holiday of a lifetime, for the purchase of a new car or for other luxuries. I have always thought that, if one planned to provide that type of fiscal incentive, it would be far better if it was for a very specific purpose.

I am very much reminded of the current debate--in which my right hon. Friend the Secretary of State has been so involved--on long-term care. His proposals have yet to be finalised, but the difficulty in doing so lies in making the cost of cover match the benefits. One of the difficulties is that a would-be policyholder will not always know whether he wants long-term care, permanent health insurance, critical health insurance, whole life cover or something else. So he has to take a gamble on which cover he should take out. I very much believe that it would be far better if there were some form of universal cover that included all those risks.

When one goes to the experts and suggests such cover, however, their answer is that it would be far too expensive unless it were taken out very early in one's career. That is why I should very much like to see the type of tax incentive that is currently given to TESSAs directed instead to a universal policy in which the arithmetic would add up if the policy was started early enough. I should

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like it to be directed towards an age relief at the front end of a person's career, so that the concession would be available, for example, to someone below the age of 35, but not to those who are older.

Another way in which to move in that direction would be to bring closer together the tax treatment of different types of pensions. I should like to declare an interest as an adviser to the consulting actuaries, Alexander Clay. The tax treatment of money purchase, final salary and personal pensions should be brought closer together. That would provide a savings vehicle that could be used to cover the different type of risks that I have described, including long-term care provision.

I should like to deal with the points on insurance premium tax made by my hon. Friend the Member for Ryedale (Mr. Greenway). The insurance industry clearly dislikes the tax, and it anticipated that it would be increased. Admittedly, the increase was less than expected, but it was still unwelcome. In many ways, it is not surprising that the industry would be hostile to IPT, because it makes business more difficult. Moreover, the industry foresees the chance of an inexorable rise in IPT for many years ahead, and that is unwelcome. Some would argue that it might be better not to have a separate IPT, but to incorporate it into the value added tax system, so that it would at least be possible for costs to be recoverable.

There have been many cries that the IPT increase will result in more people being uninsured, and, in particular, that they will not take out household and possibly motor and other types of insurance. That reaction is less than justified. I cannot recall that, when insurance premiums increased for non-tax, operational reasons, any spokesman for the insurance industry said that it was more likely that people would stop taking out insurance. One heard then that, notwithstanding the price increase, insurance cover remained a very good value product.

I do not think that it is tenable to argue that the customer's perception of a price increase--regardless of its origin--will cause him not to take out insurance that he might otherwise have taken out. On motor insurance, there are other ways to deal with the problem. The prediction I saw was that the average comprehensive policy might, as a result of IPT, increase by perhaps £5 a year. That amount, and far more, could be saved if the insurance industry would grasp the nettle of introducing insurance windscreen disks, as I have advocated for a very long time.

I applaud my right hon. and learned Friend the Chancellor for grasping the nettle of guarantee warranty insurances. There is absolutely no doubt that there was a loophole. The price of some electrical goods in particular was made artificially low when the goods were combined with an insurance guarantee in order to shift the balance from the 17.5 per cent. VAT applicable to the goods to the 2.5 per cent. insurance premium tax applicable to the warranty.

The Chancellor was right to tackle the problem, but, like my hon. Friend the Member for Ryedale, I very much doubt whether the proposed formula will work satisfactorily. It appears to mean that the cover for the electrical goods, for example, will bear a different rate of tax--either 17.5 per cent. or 4 per cent. IPT--depending on where it is bought and whether it is bought in conjunction with the product to which it applies. That

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seems administratively difficult to handle, and I strongly urge my right hon. and learned Friend to re-examine the matter.

Unlike the hon. Member for Sunderland, North (Mr. Etherington), I would not necessarily urge the abolition of or a reduction in capital gains tax, but I would strongly urge a simplification of the way it is worked out. It does not seem right that, although a tax may be relevant only to comparatively few people, it is virtually impossible for those people to work out their liabilities for themselves, and they have to go to an accountant.

The problem originated in the decision taken in the 1980s to index capital gains tax at a time when it was necessary to do so for inflationary reasons. Now that inflation is down to between 2 and 3 per cent., there is not the same need to compensate in the gain for any inflation. I would prefer a much simpler solution.

I do not subscribe for one moment to what I understand is the Labour party's recommendation, which is that there should be a short-term and a long-term rate of capital gains tax. That was tried before, but it did not work. The difficulty with that solution is that it encourages a sub-culture of advisers who try to convert what would normally be capital gain into income--or income into gain; it could work either way--and to avoid the long-term capital gain. Also, their judgments are distorted because the tax considerations become more important than the market considerations of the sale of whatever the asset is.

We must avoid renewed attempts to escape liability by presenting it as either a gain or an income in order to benefit from the lower tax regime. I hope that the matter will find a place in a future Budget, but I emphasise that simplifying the system is more important than abolishing the tax.

I greatly applaud the "spend to save" measures introduced by the Chancellor. On Customs and Excise, he has estimated that £88 million of expenditure is likely to produce £2.25 billion of savings from otherwise lost duties. That appears an extremely commendable step. It was probably not taken previously when there was so much pressure to reduce the number of civil servants, regardless of what they were doing. Now it seems absolutely the right step to take.

I know for certain that the news will be welcomed at the VAT office at Elmbridge court in Gloucester, where people's jobs have been under threat. They were dismayed, because they knew that they could collect revenue if they remained in their jobs, but they were told that the operation was being slimmed down. Now, I hope, they will be able to stay in their jobs and pay for themselves by bringing in revenue far in excess of their salaries. Such an approach is commendable, and the news will be well received.

I also congratulate my right hon. and learned Friend on his announcement that he is to go ahead with the plan to rewrite tax legislation in plain English. That was the brainchild of Lord Howe of Aberavon many years ago. I am pleased that he is proposing to play a part in the

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exercise, and I am confident that, as a result, we shall have much greater simplicity than we have had up to now.

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