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Public Expenditure
4. Mr. Luff: To ask the Chancellor of the Exchequer what is the average public expenditure per head in (a) Scotland and (b) England in 1996-97; and if he will make a statement. [14172]
The Chief Secretary to the Treasury (Mr. William Waldegrave): In 1994-95--the last year for which figures are available--identifiable public expenditure per head was £4,505 in Scotland and £3,614 in England. This provision for Scotland is some 20 per cent. higher than the United Kingdom average.
Mr. Luff: In the event of the creation of a Scottish Parliament, it would have full control of public
expenditure in Scotland and could levy a tartan tax, while Scottish Members continued to be over-represented in this Parliament of the United Kingdom and could vote on English public expenditure and tax levels. How does my right hon. Friend think that I could justify that enormous differential to my constituents?
Mr. Waldegrave: With difficulty. The inevitable consequence of Labour's ill-thought-out plans, leaving aside the fact that they would be divisive between England and Scotland in many other ways, would be that the House would want to look at the basis of the financial deal between Scotland and England. There would be no way of stopping that, and it would not be to the benefit of Scotland.
Mr. Sheldon: Is the Chief Secretary aware that the Barnett formula, which was formulated by Lord Barnett, then Chief Secretary, when he and I were at the Treasury, was based on the population of Scotland? It was decided that it represented a fair allocation for the people of Scotland as a percentage of the total of Government expenditure throughout the United Kingdom. This is a serious matter. Is the Chief Secretary aware that, if we were to change that formula for any political considerations, it would cause serious danger to the unity of our country?
Mr. Waldegrave: I am very familiar with the formula, which is, of course, based not only on population but on an assessment and an attempted assessment of need. As I said to my hon. Friend the Member for Worcester (Mr. Luff), and it is a little odd for the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) to say it, it is the right hon. Gentleman's party, the Labour party, that is putting forward proposals that are liable to threaten the arrangements between England and Scotland. It is his party that is putting the Union in danger. One of the least of the consequences of those proposals--although an extremely important one to the people of Scotland--would be that people in England would want to look at the figures with increased attention.
Mr. Bill Walker: Does my right hon. Friend understand that Scottish Members, too, are equally concerned about what they can say to their constituents? As I understand it, the Barnett formula is designed to remove progressively and slowly the differences in expenditure levels between parts of the United Kingdom, particularly Scotland and England. The Labour party proposes to change that virtually overnight; we would be faced with what could only be described as the most unfair proposals ever brought before Parliament, because they would mean that Scots would be running the Westminster Parliament and making decisions on English spending matters, and Scots would be running the Edinburgh Parliament and making decisions on Scottish spending matters, but English Members of Parliament would not be able to influence either.
Mr. Waldegrave: My hon. Friend is absolutely right. I remember that, when I was Secretary of State for Health, my then opposite number, the current shadow Foreign Secretary, put that almost as eloquently as my hon. Friend has done; it has received no answer in the very badly thought out plans that the Labour party has since introduced. Those proposals would be disastrous for the Union, and also disastrous for Scottish taxpayers and for the standard of living in Scotland.
Mr. Mike O'Brien: Given that public expenditure on agriculture affects every taxpayer in England and
Scotland, will the Chief Secretary confirm that £3.3 billion, or the equivalent of 2p on income tax, is the sum needed to deal with bovine spongiform encephalopathy? Is that a minimum or a maximum figure?
Mr. Waldegrave: As far as I remember, the figures over two or three years are about £1.5 billion this year and then there will be a considerable refund from the European Union. The figures are set out and separately identified in the Red Book.
Mr. John Townend: Does my right hon. Friend agree that public expenditure per head in Scotland, particularly on health and education, is unfair to England and unjustified? Does he accept that, if there were a Scottish Parliament, many Conservative Members like me who feel strongly about public expenditure would campaign vigorously to bring the level of expenditure per head in Scotland down to the level in England? That would benefit English taxpayers.
Mr. Waldegrave: I will not go as far as my hon. Friend, because those matters are negotiated each year in relation to Wales and Northern Ireland as well as to Scotland. What I am saying, and what my hon. Friend has represented in his question, is that, if the Labour party's ill-thought-out, half-baked plans were to come about, there would be a huge reaction from England. That would be bound to damage the situation as my hon. Friend has described--it is only one of the matters in which the Union would be damaged, but it is one of the most important.
Value Added Tax
6. Mr. Alan W. Williams: To ask the Chancellor of the Exchequer if he will make a statement on the total revenue raised from value added tax in (a) 1978-79 and (b) 1995-96. [14176]
Mr. Jack: In constant 1995-96 prices, the receipts were £14.1 billion and £43.1 billion respectively.
Mr. Williams: Can the Minister say what the Chancellor meant when he said in the Budget statement on 30 November 1993 that one of his options
- "must be to extend the VAT base. The main candidates are food, children's clothes, transport, sewerage and newspapers"?
Mr. Jack: I am intrigued that the hon. Gentleman has chosen to ask me that question, when he could have asked my right hon. and learned Friend the Chancellor a little earlier. I also notice that he was reading in order to get accuracy. If he had read my right hon. and learned Friend's Budget speech in 1993, he would have seen that it is perfectly true that, in that context, my right hon. and learned Friend rather teased the House of Commons when he talked about his views on how we should have a broader tax base. He reviewed a number of possibilities and then went on to describe his own solution to broaden the tax base at that time. He introduced the House to the
concept of the insurance premium tax and the air passenger duty. At the end of his speech, he said to the House of Commons:
- "I can now confirm that I have no need this year to propose any changes to the VAT base."--[Official Report, 30 November 1993; Vol. 233, c. 940.]
Mr. Stephen: Does my right hon. Friend recall that, when we increased VAT to 17.5 per cent., the amount of that extra tax was refunded by way of subsidy to council tax payers? Does he also recall that, when we put tax on domestic gas and electricity, we fully compensated pensioners and people on low earnings by increasing their pensions and social security? Is he aware of any plans to compensate pensioners and people on low earnings for the consequences of a windfall tax?
Mr. Jack: My hon. Friend is entirely right to remind the House of the steps that we took to protect the interests of pensioners when we had to take difficult economic decisions as we were recovering from a very deep recession. We have now got the economy on track--we have the fastest-growing major western economy--and it is doing extremely well. That would be damaged by the arrival of the tax to which my hon. Friend refers and, as far as I am aware, we have heard nothing from the right hon. Member for Dunfermline, East (Mr. Brown) to tell us anything about the windfall tax, never mind about compensating pensioners.
Ms Primarolo: Does the Financial Secretary remember the Prime Minister's promise at the last election not to extend the scope of VAT? Does he also remember that, in his Government's pre-election Budget, the then Chancellor promised not to put VAT on fuel? Can he explain to the House why his Government broke those promises and why the electorate should trust them at all on any tax issue, particularly VAT?
Mr. Jack: My right hon. and learned Friend dealt very adequately with the question of VAT and the last election in his own very clear answer. However, I shall tell the hon. Lady because, when it comes to the economy, people should judge a Government not only on an individual item, but on whether they actually deliver. We have never hidden from the fact that putting VAT on fuel and power was a very difficult decision but, as my hon. Friend the Member for Shoreham (Mr. Stephen) reminded the House moments ago, we did help those who were most harshly hit, either through social security benefits or through direct help to pensioners. We have now delivered an economy that is the fastest-growing in western Europe, rapidly falling unemployment, the best inflation record for 50 years and the lowest mortgage rates for nearly 30 years. That is why people will believe us and not the Opposition.
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