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Mr. Stuart Bell (Middlesbrough): Lord Healey.

Mr. Smith: He is Lord Healey now, but he was plain Dennis Healey then.

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Mr. Healey announced that all income tax rates would be increased by 3p, taking the basic rate to 33p, except for the top rate, which was increased from 75p to 83p in the pound. National insurance charges were increased for both employers and employees. He said that VAT at 10 per cent. was to be charged on petrol, taking the typical price of a gallon of four-star from 50p to 55p. VAT was also to be applied to previously exempt sweets, ice creams, crisps and soft drinks. In 1975, Mr. Healey added another 2p to income tax, taking it to 35 per cent.

As one of my hon. Friends said, there has never been a Labour Government who have not increased the standard rate of income tax. Anybody who wants to know what is likely to happen if we have the misfortune to have another Labour Government can simply look back at the appalling record: Labour Governments always increase taxes.

9.8 pm

Mr. Edward Leigh (Gainsborough and Horncastle): As time is short, I shall simply say that, naturally, I congratulate my right hon. and learned Friend the Chancellor on a prudent Budget at this stage in the cycle. I fully support my hon. Friends in their attacks on the Labour party. Perhaps their comments can be read into my speech so that I do not detain the House.

In the few minutes available, I want to deal with the married couple's allowance, with which my right hon. Friend the Member for Selby (Mr. Alison) dealt earlier in the debate. During his Budget speech, my right hon. and learned Friend the Chancellor said:

It is true that the tax system recognises marriage, but it is a fairly grudging recognition. The cash value of the married couple's allowance is to be raised from £268.50 to £274.50, an increase of £6 a year or 11.5p a week. That, by any measure, is a very small increase indeed.

I do not want to be churlish. At least the Chancellor has reversed the freeze on the married couple's allowance that existed for five years. He has reversed that policy, and my only purpose in making this speech is to encourage him in his next Budget to go further and to ensure that the married couple's allowance is fully uprated.

An increase of £6 a year is not enough to convince the nation that we want to reward marriage in the tax system. Every study on the subject proves the value of marriage in raising children. I do not need to quote all of them. Professor Halsey, a well-known member of the Labour party and author of "English Ethical Socialism", has written:

Those are the words of Professor Halsey, a well-known socialist.

Everyone who writes on the subject accepts that we should use the tax and benefits system to encourage marriage, but over the past 30 years, as the former deputy chairman of the board of Inland Revenue, Leonard Beighton, has made clear, the tax system has gradually shifted away from the recognition of marriage. He writes:

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    "In broad terms the combined effect of the changes has been to increase the tax burden on married couples and others with family responsibilities, particularly single earner couples and to reduce--in relative if not absolute terms--the burden on single people including cohabiting couples without children".

It is necessary to give examples to prove that the tax system disadvantages marriage. A married couple with two children and gross earnings of £250 a week will take home just under £200 a week; a single person with no children on the same gross pay takes home just over £180; but a lone parent with two children on £250 gross pay takes home almost £209--over £9 more than the married couple. The married couple with two children will therefore have £9 a week less than the lone parent to support four people rather than three, and just over £19 a week more than a single person to support four people instead of one. Whichever way one looks at it--in replying to the debate the Minister may by all means answer this point--the evidence is clear that the tax system discriminates against marriage.

In his 1993 Budget speech, my right hon. and learned Friend the Chancellor described the married couple's allowance as "something of an anomaly". I am glad that he has changed his mind. He is a successful politician and it is right that he has changed his mind.

It is disturbing, however, that the Labour party does not seem to have changed its mind on the married couple's allowance. A Labour spokesman can reply on this point. The Commission on Social Justice appointed by Labour called for the married couple's allowance to be scrapped for those under 55. It calculated that £2.5 billion could be raised by abolishing the MCA, and the money could be used to extend nursery education or increase child benefit by £5 a week. The logic of increasing child benefit in that way is perverse and profoundly anti-marriage. Married couples would be taxed so that child benefit could be raised; the only net gainers would presumably be cohabiting couples and lone parents. I hope that, in framing its plans for the general election, Labour will scrap the proposal advanced by its commission.

Both parties should ensure that we right the fundamental injustices in the present tax system. We should ensure that the tax system does not discriminate against married couples and does not provide financial disincentives for the wife who wants to stay at home. The way to achieve that is through transferable allowances. At present, a wife's personal allowance can be used only if claimed against income. If the wife wants to stay at home and raise a family, the state treats that as a matter of personal choice. The state's financial incentives are for a woman to go out to work. At present, there is no way in which a personal allowance can be transferred and shared between husband and wife; nor can a husband and wife have joint assessment.

Transferable allowances are a perfectly sensible idea. They operate in Denmark, Iceland and Italy. Joint assessments operate in Germany, Spain, Ireland and the United States of America. Many countries operate systems that are much more favourable to marriage than our system. Ultimately, there is no reason why we should

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not move to transferable tax allowances, and I urge my right hon. Friends on the Government Front Bench to consider them.

9.14 pm

Mr. Jacques Arnold (Gravesham): My right hon. and learned Friend the Chancellor of the Exchequer set out his Budget at the beginning of the debate against the best economic background that we have seen in this country for decades. We have the lowest inflation for 50 years, the longest period of low interest rates for 30 years, high growth--the highest in Europe--and, in contrast with the remainder of Europe, falling unemployment. In my constituency of Gravesham, unemployment is at its lowest level since early 1991 and is continuing to fall.

Why has that come about? It is because Britain has had to set its own economic policies since "white Wednesday" in autumn 1992. After all, that is what we were elected to do--we were not elected to pass the buck. We have had to grasp the nettle, and it has been extremely painful for people and for business. Our local government councillors have paid a fearful electoral price for that process, but we have put in place Tory policies that have brought Tory successes.

This Budget builds on those successes. We now have a 23p in the pound standard tax rate, which is the lowest level for 60 years and is 10p lower than the 33p in the pound rate under the last Labour Government. The Budget extends basic allowances by 3.5 times inflation and the 20 per cent. band has been extended by twice the rate of inflation and is double its limit at the last general election.

The Budget favours particularly the working men and women of Britain. Its overall impact is: "Steady as we go." It is not the razzmatazz of soundbites that are understood by Labour spin doctors, but it is an election Budget. Basically, the British people are not fools. They know that Budgets give absolutely nothing: Budgets take. They take in tax in order to pay the Government's bills.

What affects the British people is the economy, because strong growth, low inflation and falling unemployment mean better incomes for all. This Budget underwrites that. It reduces pressure on interest rates, which is good for industry and jobs and for mortgage borrowers. A significant increase in interest rates would not only be bad for those sectors but put upward pressure on the pound. That would be bad for exporters, for industry and for jobs. My verdict is, "Well done, canny Ken." I hope that my right hon. and learned Friend will continue to exercise his fabled judgment in his meetings with the Governor of the Bank of England.

In some ways, the Budget is a first instalment of what I would like to see: a Budget for the family. The measures that I mentioned earlier are good for the working man of this country and for his family. We have indexed the married couple's allowance for the second year--although, as my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) pointed out, it is only a small amount. I ask my right hon. Friends on the Front Bench to consider their next Budget, when strong growth should give more scope for tax reductions. I hope that that Budget will facilitate the transfer of personal allowances of non-earning mothers of young children to working fathers. That would cost some £1 billion, but the impact on those families could be enormous--£1,200 per year.

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Almost all newly wed couples work in this day and age. However, when their first child arrives, they face the considerable costs of coping with the child and the loss of the wife's income together with her personal allowance. In too many cases--particularly at the lower earning levels--the wife returns to work. That is not the best way to nurture the next generation of young people in this country. It leads to child-minders and to latchkey children, with all the associated problems. Young children need the full-time attention of their mothers--that is better for a child's development. Giving mothers the incentives and opportunities to stay at home with their children would have the side effect of releasing jobs to the many unemployed young males who would benefit from an earned income and from increased self-esteem, which is lacking in far too many cases. It would strengthen the family. Indeed, I remind my hon. Friends that Benjamin Disraeli identified the Conservative working man as the chap who led a decent working life and cared for his family, its well-being and its future. We in the Conservative party should take up the challenge of our inheritance and back the Conservative working man.

Earlier, my right hon. Friend the Secretary of State for Health spoke of the private finance initiative and the pioneering of new hospitals. I welcome the fact that Darenth Park hospital, which will serve my constituents, is in the forefront of the programme with its £102 million project. I noted, as I am sure my constituents will, the hostility of the right hon. Member for Derby, South (Mrs. Beckett) towards the PFI and, indeed, towards Darenth Park hospital. The right hon. Lady spoke for real Labour. I noted also that she made no commitments to the funding of my constituents' hospital.

I welcome especially the measures that have been announced for small business. Small companies' rate of corporation tax will fall from 24p to 23p. I welcome another cut in employers' national insurance contributions and the increase in the threshold for VAT registrations. Above all, I welcome the freeze on rates bills for 1.25 million smaller properties, including 400,000 small shops. The measure will be especially welcome in the town centre of Gravesend.

I offer one word of caution to the Minister, my hon. Friend the Member for Fylde (Mr. Jack). I ask him to examine carefully his "spend to save" programme. It will be wonderful if he gets a factor of eight to the cost involved, but I hope that he will ensure that the Inland Revenue and Customs and Excise inspectors do not drive millions of legitimate business men mad by interfering in their businesses.

The Budget's message is that we are doing well. When a Conservative Government run the nation's economic policies and take responsibility, we make an impact. The lessons of the recent past are perhaps that the Government have tried to pass responsibility to others. In the 1980s, our economy was anchored to the deutschmark. We then joined the exchange rate mechanism. Both those policies had disastrous effects on our economy and caused a massive downturn, which has done so much damage.

There is now the threat of that sorry story being repeated. The sirens of Europe are luring Britain back into an ERM and, inevitably, into a euro currency. For my part, I would much rather Britain be a small rowing boat with our hands on the oars than be looking for some mythical safety in a large galley in which we are chained to our particular oar to row. It may be a larger vessel but

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we are entirely reliant on that chap upstairs. If he makes a mess of it, we are in dead trouble, being chained to our rowing position. I would prefer Britain to continue with its solo rowing in the difficult, stormy seas of the world economy. The Government have shown that they are worthy oarsmen.

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