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8.52 pm
Mr. Alex Salmond (Banff and Buchan): The speech of the hon. Member for Worcester (Mr. Luff) was enlivened by his reference to Sean Connery. I perked up my ears, expecting some of that gentleman's wisdom to be dispensed to the Chamber, but the hon. Gentleman moved away from the subject.
It is true, as the hon. Gentleman said, that Opposition Members have made some favourable comments about the Chancellor. I do not want to spare the Chancellor's blushes; in his absence several hon. Members said how much they admired various aspects of his policies. I shall begin by offering the Chancellor my congratulations on a limited aspect of his Budget--VAT repayment--then I shall tell him what I really think of his policies.
I was rather pleased by the Government's U-turn on the disparity between the reclaim date for repayment of VAT by the taxpayer and by Customs and Excise. Three years for both is fair. As the Chancellor knows, I have pursued the issue for several months, and despite earlier Government claims that the three-year limit would apply only to the taxpayer, I was not surprised by the climbdown, in the light of the substantial evidence that the previous proposal was in breach of basic European law. It seems that the Government have climbed down before they were pushed down by both the British and the European courts.
Although the Government may have saved themselves one embarrassing defeat by their policy reversal, I must warn the Chancellor that there is considerable legal opinion suggesting that their overall proposals on VAT repayments may still be in breach of European VAT law. For example, European law demands the use of transitional periods to protect the principle of legal certainty, whereas the Government are in fact acting retrospectively. They will be challenged through the courts on the matter, and should let the House know the Chancellor's assessment of that threat and the potential loss.
I urge the Government to continue their new-found flexibility on the issue and to negotiate further with industry to ensure that the proposals that finally become law are not found wanting in the courts, do not treat individual taxpayers differently and do not introduce retrospective taxation. I seek an assurance from the Chancellor that the proposals in the Budget are not yet set in stone and that, although they are a sensible advance on the previous position, they will still be considered in the light of representations from industry and others.
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I was struck by the number of references in the Red Book--we have heard such references in the debate as well--to the United Kingdom economy performing better than the other major European Union economies. When one examines that comparison and remembers that 10 of the 15 EU states are small states with populations of less than 10 million, it turns out that the Chancellor is comparing the UK with only four other countries--Italy, Germany, France and Spain. In a comparison that roams somewhat wider than four countries or further in time scale, the economic miracle that the Chancellor claims for his and his predecessor's policies does not bear close inspection.
Since the Conservative party came to power in 1979, the UK economy has grown by an average of less than 2 per cent. a year. The EU average, without the windfall of oil, has been marginally higher at 2 per cent. Among our major competitors, Britain's growth performance over that period has been worse than that of Australia, Austria, Canada, Finland, Germany, Greece, Iceland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Turkey and the USA. The economies of all those countries have grown faster than the UK's over the period since 1979. If that is an economic miracle, I should not like to see a disaster for which the Government were responsible.
Even if we give the Chancellor the benefit of the doubt--if we acknowledge that he has not been responsible for managing the economy since 1979, and note that he is not on the most intimate terms with his immediate predecessor--and relieve him of collective responsibility over that period, an inspection of more recent history shows a similar decline. Projections from the Organisation for Economic Co-operation and Development for 1996 show growth in the UK economy, during the enormous recovery hailed by the Chancellor, lagging well behind the USA, Australia, the Czech Republic, Finland, Iceland, Ireland, Mexico, New Zealand, Norway and Turkey. Many economies in the wide world are doing rather better than ours. Since 1979, the United Kingdom economy has performed below the European Union average--despite the fact that Norway was the only other economy in Europe with the benefit of an oil revenue endowment.
In 1979, the standard of living in Italy was 6 per cent. behind that of the United Kingdom; now it is 6 per cent. ahead. Norway was 8 per cent. ahead of the United Kingdom in 1979; now it is 26 per cent. ahead. Luxembourg was 32 per cent. ahead of the United Kingdom in 1979; now it is 68 per cent. ahead. Portugal was 86 per cent. behind the United Kingdom; now it is 42 per cent. behind. Ireland was 58 per cent. behind the United Kingdom in 1979; now it is only 10 per cent. behind. According to the Library, Irish gross domestic product per capita will overtake the United Kingdom average by 2000 and Ireland will be more prosperous per head of population than either England or Scotland. That is a dramatic change in Irish economic circumstances.
So when the Chancellor claims that the United Kingdom is the fastest-growing major economy in Europe, he conveniently forgets the small economy off our western shores that has grown almost four times as fast as the United Kingdom economy in the past year or so. To cap it all, nominal debt in the United Kingdom has doubled in the past five years, which means that the Chancellor will have some difficulty sustaining Britain's economic performance and reducing the public sector borrowing requirement and national debt totals.
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Earlier this evening, when the deputy leader of the Labour party claimed that the endowment effect of oil and privatisation proceeds combined totalled £250 million per week during the Government's period in office, I noticed the Chancellor and the Financial Secretary making frantic calculations in an attempt to ascertain whether the figure was accurate. Of course it is correct. Privatisation proceeds and oil revenues combined have created an endowment effect--which the Government have enjoyed since 1979--of roughly £1 billion per month, £12 billion per year and £250 million per week.
I do not believe that the Treasury team understands the extent of that endowment effect. Last week, the hon. Member for Amber Valley (Mr. Oppenheim), the Exchequer Secretary--there seems to be a proliferation of such posts in the Treasury team--gave the House his assessment of the impact of oil on the United Kingdom economy. He said:
Only this Government and their Treasury Secretaries could be so ignorant of the extent of the endowment effect of oil revenues in that period. Some £140 billion, in today's prices, flowed to the Exchequer during that time. If the Government believe that the "great wasted oil revenues" are a myth, why can we not have them in Scotland? Why can we not add those revenues to next year's Scottish budget? The Exchequer Secretary says that they are not worth anything, so the Chancellor should not mind adding them to the Scottish total.
During the great stone ceremony in Edinburgh on Saturday, I saw a poster which said, "Thanks for the stone back; how about the oil revenues?" The Exchequer Secretary says that they are not worth anything, so perhaps the Chancellor could be nice and kind to Scotland in his summing up and say, "Let's give away these worthless oil revenues which have nothing to do with our economic success and progress over the past 17 years."
I shall support the amendment on VAT on fuel standing in the name of the Leader of the Opposition I shall explain why the amendment is important because, remarkably, I do not think that the arguments in its favour were deployed earlier in the debate. Fuel poverty affects an estimated 800,000 households in Scotland--one in three Scottish households--and those on low incomes tend to spend a greater proportion of their incomes on fuel costs than do wealthier households. A 1993 study estimated that
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In general, it is more expensive to heat the homes of those compelled to live in poor housing conditions. To top it all, we know in Scotland, from work carried out and questions asked by my hon. Friend the Member for Moray (Mrs. Ewing), that it takes 23 per cent. more fuel to heat a home in Glasgow than an identical one in Bristol; that in Edinburgh, it takes 28 per cent. more fuel; in Dundee, 32 per cent.; in Aberdeen, 41 per cent.; in Lerwick, 53 per cent.; and in Braemar, 66 per cent. That justifies the requirement for a geographically based cold climate allowance. The issue of VAT on domestic fuel is of great importance to Scotland and to low-income families in all the countries of these islands. A move from 8 to 5 per cent. would be very welcome indeed.
The words "cynical ploy" will be marked across the political grave of the hon. Member for Edinburgh, Central (Mr. Darling). The next time the Deputy Prime Minister pokes fun at him for not supporting a reduction from 8 to 5 per cent. some two years ago, I suggest that the correct way to deal with him is to stand up and say, "Yes, our policy has changed. In January 1995, the Labour party did not support the reduction. Now we have changed our policy and we do support the reduction." He should challenge the Deputy Prime Minister to say that the Tories have not changed some of their policies.
The hon. Gentleman should not describe--four times in a short speech--the Scottish National party's amendment as a cynical ploy, as though the Labour party never entertains cynical ploys in the amendments that it tables in the House. It looks ridiculous and disables the argument for putting VAT on domestic fuel down to 5 per cent. now if he continues to defend his abstention in January 1995, which clearly was a mistake and a significant embarrassment to the Labour party. It would be much better to come clean than to continue to defend the indefensible and to allow the Deputy Prime Minister to ridicule him. Despite the fact that it is a Labour amendment, the SNP will be proud and happy to vote for 5 per cent. VAT on domestic fuel.
The hon. Member for Worcester (Mr. Luff) said that Budgets should not just be about the poor. I think that I quote him correctly. One difficulty with Conservative Budgets is that they never seem to be about the poor. Even when the Chancellor has choices to make, in terms of his modest tax reductions in the Budget, he makes choices that are not aimed at the lowest-income families.
"In the last year of the Labour Government, oil receipts in real terms, in today's prices, were close to £1.3 billion; this year they are expected to be close to £1 billion. In the past three or four years, they have cruised at around £300 million to £500 million. The only time at which they were briefly higher than in the last year of the Labour Government was in the mid-1980s, for three or four years.
I have seen the table depicting oil revenues since 1978-79, and it bears no relation to the claims of the Exchequer Secretary. In the last year of the Labour Government, oil revenues totalled £1.7 billion. According to the Red Book and at 1996-97 prices, if one projects to next year, oil revenues collected by the Government were less than their level in the last year of the Labour Government in only three of the past 19 years. They peaked at £20 billion, in today's prices, in 1984-85. According to the Red Book, they are now rising rapidly once again and are expected to total more than £4 billion by 1997-98.
Let us hear no more of this myth of the great wasted oil revenues. They never existed".--[Official Report, 26 November 1996; Vol. 286, c. 225.]
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