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Mr. Kenneth Clarke: The hon. Gentleman is making a rather selective comparison between the lower rate and the basic rate. I assume that he is comparing one change by taking it off the 20p rate instead of the 25p rate. I hope that he has not overlooked the fact that one of the key things that we have done is to raise the threshold of personal allowances. There is absolutely no income tax payer who does not benefit from this Budget by way of a reduction in income tax. We deliberately raised the thresholds precisely so that every income tax payer, including the lower-paid, gets some benefit.
Mr. Salmond: I have not overlooked the fact about raising thresholds; I am talking about the direct comparison between the choices of 2 per cent. off the lower rate and 1 per cent. off the basic rate. I would not vote against raising the thresholds. I shall vote against the option off the standard rate. The Chancellor will see from the Order Paper that I have tabled an amendment to take 2p off the lower rate, reducing it to 18p. I used that figure because the cost to the Exchequer would be similar.
The choices that benefit the lower-paid are more valuable than the ones that benefit those with significant incomes. In view of the impact that the Government's policies have had on the poorest sections of the community in the last 17 years, a decrease in the lower rate would have been the right choice for the Chancellor to make.
We shall vote against a cut in the standard rate of tax. That is not our policy: we want to concentrate help on the lower-paid. We will vote against the petrol increases. The Chancellor would do well to remember that we are now in a period of stabilising, indeed rising, oil prices.
The combination of rising oil prices and a 5 per cent. real increase in petrol duty is having a substantial effect on rural economies and, potentially, on rural industrial units, because of increased transport costs. I plead with the Chancellor to consider that problem, because it is a double whammy aimed at rural communities.
Mr. William Ross (East Londonderry):
I agree with much of what the hon. Member for Banff and Buchan (Mr. Salmond) said, especially about air travel and oil prices.
In such debates, I always express my concern about the sheer size of the public sector borrowing requirement. My concern is not lessened by the fact that it is coming down rather more slowly than was hitherto expected.
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I am concerned about a subject that has not been mentioned, but will come into the equation before the year is over, and may prove inflationary. Some of us voted against the 2p cut in income tax in the 1986-87 Budget. That was accompanied by a general freeing of the money supply, which created an enormous number of problems, not least when MIRAS was extended to cohabiting couples so that both of them could claim it until August. I am concerned about the £16 billion that will allegedly appear in the economy in the next year or so as a result of the demutualisation of the building societies. That money will not go overseas in public sector debt repayment, but is all home-grown money. Did the Chancellor take that factor into account when he did his Budget sums?
The slow growth in tax revenues is tied to the globalisation of business. Given the amount of money that is floating around the world between the various sectors of large companies, we may be driven, slowly but surely, towards a globalisation of tax rates.
We have not discussed in depth the fact that the Government are not spending a reasonable proportion of the huge revenues that derive from motorists in one form or another on new roads or on the maintenance of existing structures. That will have to be paid for some day, and will cause a future Chancellor enormous difficulties, because the money will have to be found.
Revenue is lost every year as a result of tobacco smuggling. The Chancellor will have received the brief from Gallaghers in Northern Ireland, which points out that six out of every 10 packets of hand-rolling tobacco that it produces are smuggled back into the United Kingdom, and are on sale at various markets within a week or 10 days from leaving the factory in Northern Ireland. The end result of tobacco smuggling is an annual loss of £600 million to the Exchequer.
Although I understand the concerns expressed by the hon. Member for Fulham (Mr. Carrington) about the medical costs of cancer and other diseases, it would be a wasteful exercise of the Chancellor's powers to raise tobacco taxes now, because I do not think that there is any possibility, even with the new task force, of stopping smuggling.
The hon. Member for Banff and Buchan has already mentioned the tax on air travel. We have no real alternative to air travel in Northern Ireland. Furthermore, there is a real cut in the block grant to Northern Ireland. It may be that the Government think that cutting expenditure in that manner and tying the diminished expenditure to terrorist activity will put community pressure on the IRA. Government spokesmen in Northern Ireland have said, "The bomb went off in Lisburn. One went off here, there or somewhere else, and the damage has to be paid for. It will have to come out of the Northern Ireland block grant. A school has been burnt down. That will have to be paid for out of the block grant." That concept is entirely wrong.
The IRA want to ensure that Northern Ireland fails. Therefore, whenever Government spokesmen say to the IRA, "You are hurting Northern Ireland," all they are doing is encouraging the IRA to continue committing its violence, bombing and murder and imposing its costs. When the Chancellor considers the block grant for Northern Ireland and Treasury Ministers consider expenditure of the grant in Northern Ireland, I hope that they will keep that thought in the forefront of their minds.
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Mr. Alistair Darling (Edinburgh, Central):
I shall not deal with the issues raised by the hon. Member for East Londonderry (Mr. Ross) now, although I shall do so in the course of my speech.
As we conclude the debate on the Budget, it is clear that it will be judged on two matters. It will be judged first in straightforward political terms--whether it will save the Conservatives at the next general election--which is the primary concern of Conservative Members. At the previous general election, the Tories fought and won on one central proposition: that, year on year, they would cut taxes. They said that they would not increase VAT or national insurance and, in fact, accused Labour of wanting to do so. Their central promise was that they would not increase taxes, but they cynically broke all their promises. Therefore, I think that we are entitled to judge the Government not only on what they have done during this Parliament but on what they said at the previous general election and on what they did subsequently.
Based on that judgment, we are entitled to form a view on the credibility of the Government's current promises. It is interesting that, when the Deputy Prime Minister spoke today, he spent less than 10 minutes of a 40-minute speech on the Tories' Budget proposals. Instead, he spent most of his time talking either about Labour's proposals or about proposals that seem to have been drawn from the land of fantasy. He certainly had very little to say about the 22 Tory tax rises that have been implemented since the previous general election. If the Conservatives broke the promises on tax, spending and borrowing that they made at that election, why should we believe them again? Cutting taxation was their promise--their "one-club" approach--at that election, and it was broken.
Secondly, the Budget will be judged in economic terms and on what it will do for the country and our long-term prospects. The Tories tell us that Britain is now the enterprise centre of Europe, and that it has been so since last year. We are entitled to ask, "What about the previous 16 years?" If one examines the Tories' approach to the economy, one will notice that they use the same starting point with tax. They will say anything and do anything to try to convince people that their stewardship of the economy has been a success.
The Government repeatedly say that, since last year, Britain has been the enterprise centre of Europe. But they are the Government who would invite us to ignore what happened in 1981, and the savage cuts implemented by Lord Howe. They are the Government who would have us believe that 1988 never happened, when the then Chancellor, Lord Lawson, stoked up an unsustainable boom. We do not hear much about who was Lord Lawson's Chief Secretary to the Treasury at that time, or who succeeded him as Chancellor--the man who is now Prime Minister. All that is to be forgotten. Instead, we are invited to judge the Government on what has happened in the past 12 to 24 months. We are to forget about what happened in September 1992.
The Tories' claims about Britain as an economic centre in Europe do not stand up. We hear Ministers say day after day that we have the best prospects for a generation,
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We are told that we are in an era of low inflation. We are just coming out of one of the deepest recessions that the country has ever had, but comparing Britain's record not with that of the Tory Government in the past but with the rest of Europe shows that we are 11th out of 15 in the European inflation league. One of the problems is that, because the Tories have so weakened our industrial base and our economic capacity, whenever we have a recovery there is the fear of rising inflationary pressure that may become unsustainable. The only way to achieve the sustained low inflation and stability that we all want is to ensure that there is investment, and the conditions to encourage investment, in skills, technology and infrastructure.
We are told that we have low interest rates. We are 11th out of 15 in Europe on that. We are told that unemployment has come down, but what do we find? One household in five have no one in work. What an indictment of the Government. Although the figures for those entitled to claim unemployment benefit are coming down, many of the new jobs created since 1990 have been part-time or casual jobs. That is an option that many people like, but for many others, they are the only jobs on offer. Many people are simply disappearing from the count. We do not know what is happening to them.
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