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Mr. Marlow: The windfall tax is an interesting concept. The hon. Gentleman is probably well aware of the fact that companies were privatised and people bought shares. Some of those companies were subsequently taken over at a higher price; that is what happens with shares and share ownership. The hon. Gentleman might say that the increase in value was a windfall and that the shareholder should be taxed on it, but the reality is that those shares now belong to somebody else and were bought at the full market price. The second owner paid the full market price for the shares and there is therefore no windfall. Is it the intention of the Labour party to tax such shareholders?
Mr. Miller: The hon. Gentleman makes an interesting point. Our policy has been known for several years, so prices have been discounted to take into account that possibility--or, rather, probability or certainty. The hon. Gentleman should logically apply his theory to the tax on the banking sector that I mentioned earlier, but of course he will not do that, because he happily acquiesced in it in the early 1980s as an acceptable way for the then Chancellor to raise revenue.
The notion that changing the threshold in inheritance tax is perfectly fair and proper and is to the advantage of the vast majority of people is another example of buck
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There is a powerful argument for periodically changing the thresholds and it is reasonable to say that, if people have received a large tax relief on the cost of a mortgage, some of the money should subsequently be returned to the state, if the state is paying for their care, but it is absolutely inhuman to take it when people are, in many cases, literally on their death beds and to put such enormous pressure on couples.
Surely it would be right to push all that nonsense out of the social security arena and to deal with the matter through inheritance tax. I appreciate that that does not give the immediate tax flow, but there is a logical relationship. The Government's attitude is once again of passing the buck in terms of budgetary responsibility.
I have a detailed and varied interest in hydrocarbon taxes--an interesting concept, developed over a number of years--which extends from my constituency responsibilities. On the one hand we have Vauxhall Motors, which is part of the General Motors Corporation and is a highly successful motor manufacturer. Ellesmere Port is the home of the Astra and the V6 engine, 95 per cent. of which are exported to continental Europe. Also, the constituency contains a large petrochemical complex that includes Associated Octel, which somewhat controversially manufactures tetraethyl lead--the anti-knock compound for petrol. Again, that company is a £200 million export earner for this country.
The combination has made me consider hydrocarbon taxes carefully. While I appreciate that the Government's move on low-sulphur diesel is well intentioned and I do not deny that a huge problem is associated with diesel particulates, which has to be dealt with, I plead with the Government and my colleagues who will be taking over responsibility in the not too distant future to undertake a serious scientific review of the changing information available to us. Before long, we shall certainly have to penalise users of high-sulphur diesels by raising duties in relative terms, perhaps bringing them closer to those on petroleum.
In years gone by, it was generally accepted on both sides of the House that, because of the additional mileages that vehicles would run on diesel, it was more logical to assist the diesel user. Without wanting to be drawn into the argument about penalising the transport industry, I believe that in terms of the purely environmental considerations it is high time that we had a wide-ranging review of the scientific evidence, some of which is highly controversial and which is still changing very fast.
I have heard a detailed presentation by one fuel manufacturer expressing one point of view in an all-party committee of the House, the major petrol companies expressing another and companies such as Associated Octel yet another. A lot of weighty scientific evidence ought to be evaluated before we commit ourselves to associating a permanent pattern with the fuels. That we should use the differential as a means of encouraging people to use the right vehicles is an area of common ground and I would encourage colleagues to consider carefully some of the more recently published evidence and to press for a wide-ranging review of it.
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Mr. Stephen Timms (Newham, North-East):
I begin by adding my congratulations to those that have already been expressed to my hon. Friend the Member for Barnsley, East (Mr. Ennis) on his speech. It is not long since I was in his position after a by-election. I enjoyed his speech and the film "Brassed Off".
At this late stage in the debate I will confine my remarks to three areas: first, the increase in duty on fuel contained in clause 6 of the Bill; secondly, the time limit for reclaiming overpaid value added tax, in clause 47; and, lastly, the wider impact of the Bill and Government policy on investment.
The Chancellor announced an increase of 3p a litre in fuel duty in his Budget speech, which took effect on the evening of that day and is documented in the Bill. Apparently, that is all quite straightforward, just like every other measure in the Budget--except that it is not. The Chancellor tells us that the overall effect of the Budget and the Bill on taxation--the Chief Secretary to the Treasury repeated it in his opening speech--is a reduction of £735 million. It turns out, however, that that widely quoted figure completely ignores the 3p increase in fuel duty and also the increase in tobacco duties. The 3p on fuel and the associated increases in other fuel duties alone raise an extra £850 million--a fact to which the hon. Member for Gordon (Mr. Bruce) referred--and singly more than cancel out the overall reduction claimed by the Chancellor and the Chief Secretary. If fuel and tobacco duties are taken into account, that claimed £735 million reduction becomes a £350 million increase in the level of taxation.
So, how can the Chancellor ignore those two items when making his statement? His reasoning was that it was announced a few years ago that fuel duty would increase by 5 per cent. a year in real terms and tobacco duty by 3 per cent. a year, which means that they do not count in assessing this Budget. That is preposterous--it is "Alice in Wonderland". The fact that the increase was announced a few years ago does not mean that it did not happen. In fact, it was the most visible change of all those announced in the Budget, because it appeared immediately on illuminated signs on petrol forecourts the length and breadth of the country. Petrol prices went up by 3p within a couple of hours of the Chancellor announcing it. Of course, it was part of the Budget. If the Chancellor had omitted it from the Budget speech, the 3p increase on fuel would not have been imposed. If it was not in the Bill, it would not have happened. There is no inexorable process by which, because an announcement was made a few years ago, fuel duty rises. It happened only because the Chancellor decided this year that it should. It is part of the Budget.
I am not arguing against the 3p hike in fuel duty, but merely asking that the Government tell us the truth about what they are doing. It is no wonder that the Tories are
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When it was announced in 1993 that fuel duty would be increased by 5 per cent. a year, the relief on fuel duty for local bus operators was frozen. It has not increased since 1993. As a result, the price paid per litre for fuel used in local bus services has doubled since 1993. That plainly undermines the stated objective of the annual increase in fuel duty, which is to discourage people from using their own cars.
The system for applying for relief works fine. Bus operators apply for it and it is paid back, but if the relief continues to be frozen at the 1993 level, the economics of public transport by buses will be seriously undermined. As the Confederation of British Road Passenger Transport UK says, it is a new tax on bus transport and on people who travel by bus.
In its submission to the Treasury, the confederation proposed various ways in which the problem could be addressed. For example, there is red diesel, which is used in agriculture and for maritime purposes, and on which there is no duty. Alternatively, the Government could announce that they do not propose to increase the level of duty payable by local bus operators in future, and that this year's increase was the last. I urge the Minister to announce that.
On the repayment of overpaid VAT, widespread concern has been expressed about clauses 44 to 49 which deal with VAT. The provision, which sets a three-year time limit for claims for VAT refunds, has alarmed many small and large businesses. There are four principal concerns about the provision. First, it is retrospective law, which is unfair. Secondly, it greatly increases the chance of businesses being unable to claim back tax that has been overpaid through no fault of theirs. Thirdly, there is a real prospect of the new provision being successfully challenged under British and European law. Fourthly, it does nothing to tackle those who deliberately try to defraud the commissioners, but concentrates on those who co-operate honestly.
We shall discuss the matter in detail in Committee, but it is worth drawing the attention of the House to the opinion obtained by Deloitte and Touche from Professor Waelbroeck and his colleagues on the position in European law. He states:
As the amendment tabled by my right hon. and hon. Friends points out, the most serious failure in the Bill is the failure to address the downward spiral in investment.
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Even more disturbing is what has happened over the past two years. Our position in the league has not changed: we are still 18th, but in those two years, as global economic recovery has allowed many countries to improve their ratio of investment to GDP, ours has slumped further, from 17.4 per cent to 17.1 per cent., pushing us even further behind our competitors.
That failure is the key to our long-term economic failure. The relatively large proportion of investment that we have attracted from outside Europe cannot make up for our failure to invest in ourselves. The Government are part of that failure. Table 5.4 in the Red Book shows publicly sponsored investment falling from £21 billion last year to £20.8 billion this year and £20.5 billion next year.
Those figures are bad enough, but they do not tell the whole story. They are based on estimates for the private finance initiative, which include not only signed deals and agreed deals, but every other vaguely feasible PFI project that the unit in the Treasury has been able to come up with. They are departmental wish lists. That is the basis for the PFI figures in the Red Book. If we consider the investment expected from PFI projects that have been signed, publicly sponsored investment looks set to fall every year until the turn of the century.
The Treasury Select Committee recognised that in its report on the 1996 Budget, as the hon. Member for Upper Bann (Mr. Trimble) mentioned. The report points out that sluggish growth of PFI expenditure means a reduction in conventional capital expenditure without compensating PFI investment materialising. The private finance initiative is not delivering and that failure is contributing to a wider failure in the economy on investment.
The PFI is a square peg that is being pushed into too many round holes. Despite the announcement the day before the Budget that, at long last, a major hospital contract under PFI had been signed, it turned out that the finance was not agreed. There is still no financial deal for any of the major hospitals due to be built under the private finance initiative. The National Health Service (Residual Liabilities) Act 1996, which was rushed through Parliament last summer, was supposed to solve the problem but did not. The Secretary of State has promised to write letters of guarantee for individual PFI deals on health, but that has not solved the problem either. There are serious difficulties in other areas also.
"Case law has established that the limitation period must correspond to the periods normally applicable for similar claims under UK law viz. direct taxes which usually attract six year periods."
In other words, introducing a different period--three years for indirect taxes, as opposed to six years for direct taxes--is challengeable. There is a growing view that it will swiftly be challenged if the Government press ahead with their proposal. The issue has been raised with me by Tate and Lyle in my area and by several small companies as well.
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