| Previous Section | Index | Home Page |
6.26 pm
Mr. Robert Sheldon (Ashton-under-Lyne): The right hon. Member for Charnwood (Mr. Dorrell) praised the record of the Conservative party on privatisation. I shall be arguing that the windfall tax is a direct consequence of errors made by the Conservatives in the sale of the assets. In my role as Chairman of the Public Accounts Committee, I have looked at all privatisations. The Committee took evidence on every single one and all our reports were unanimous, with no fudging. The reports on privatisation were no exception. We did not look at the politics of the sales, but at whether the best price was achieved and whether the expenses of the sales were justified.
The conclusions of the all-party Committee--which did not divide in nearly 14 years--were that, in nearly all cases, the assets were sold too cheaply. As Harold Macmillan might have said, "If you are going to sell the family silver, do try to get the best price." The real question we have to ask is not why we sold the family silver--and the Canalettos--but why they were sold so
cheaply. The previous Government naively believed that shareholders in every home would have a beneficial influence on the actions of boardrooms. Stockbrokers were introduced in high streets, but such developments rapidly disappeared.
What was more lasting was the benefit to the Exchequer. In addition to the income from North sea oil, this income could have been used for a resurgence in investment in industry, or we could have used the money to spend on the infrastructure. Instead, we accepted the dilapidation of much of our transport, housing and schools, and the resources were used once and for all to create an economic boom, the effects of which are still being felt in the economy that the Government have inherited. The previous Government used much of the capital from the sales of assets to provide a higher standard of living than was justified. Capital was turned into income--precisely the charge made by Harold Macmillan.
The question that we must now ask is not merely why we used the money badly, but why those assets were sold too cheaply. The main reason for the hurry was the Government's desire to get their hands on the money. The philosophy came second. Obviously, the Treasury rightly wanted to know how much it would obtain each year from the proceeds of the sell-off. The difficulty was that the sale had a fixed timetable, which did not take into account market sentiment. Instead of selling when the sale would be most favourable, in some circumstances there was almost the flavour of a forced sale.
The Public Accounts Committee dealt with the matter in its 32nd report in 1992-93, "The Sale of National Power and PowerGen", in which it stated:
The Government also made it even harder to get the best price by insisting in nearly all cases that the sale had to be made at one go--it has been characterised as selling overripe fruit on a Saturday evening. How different from the way that the Government manage their gilt sales. In that case, the Government broker has traditionally understood the market and sold his stock at times favourable to the sale. In the event of a change in the market, the sale could have been deferred. The Government broker understood the market. Those who sold our assets did not and were not encouraged to learn.
Again and again, the PAC urged by a senior Conservative on the Committee, pressed the Government to privatise in tranches. The lack of experience in undertaking sales of such magnitude ought to have resulted in a much more careful and informed approach to the share offers. If the Committee's advice had been accepted, sales could have been conducted with advantage to the taxpayer.
Mr. Richard Page (South-West Hertfordshire):
As the right hon. Gentleman knows, he was the Chairman and I was on that Committee at the time. I suggest that the 1992
Mr. Sheldon:
I did not have any doubt at any time. The hon. Gentleman will remember that Sir Peter Hordern argued again and again that the assets should be sold off in tranches to get the best possible price. The Committee supported him again and again. The hon. Gentleman supported that view as well--all the reports were unanimous. The Government failed to get the best price. There is no question about that.
The argument used again and again was that if one sold the assets in tranches and the price on the initial sale were too low, the price and the receipts from subsequent sales could be improved. The failure to get a better and a proper price for the nation's assets is a serious indictment of the previous Government. It cost the country billions of pounds.
That failure to get a fair deal for the taxpayer provides the complete justification for the Chancellor's introduction of the windfall tax. I understand why the Conservative Opposition do not like the idea of that tax. It shows up their failure to guard the public finances, but it is right that some corrections should be made in the way in which those bargain sales were conducted.
On the expenditure of the windfall money, I am sure that the priority that the Chancellor attaches to unemployment is right. Like many hon. Members I meet from time to time the chief of police in my area. It comes as no surprise that at those meetings he singles out young men from 18 to 25 as his major problem. He points that out again and again. After numerous attempts to get employment, they give up. Their relationship with their parents deteriorates and after numerous rows they leave home and join up with other young men. In a consumer society, it is hard not to feel angry when one is not consuming. Eventually, many young men will form into groups, stealing and sometimes drug taking, and become the dangers to our society that we recognise too well.
We should welcome the source of those funds and the use to which they are being put. This Chancellor of the Exchequer is the first for 18 years to be serious about unemployment. The previous Government talked about unemployment for years, but their actions created it. They said that it was a price worth paying. The true price has been the damage done to our society. We now have to give unemployment the high priority that the previous Government claimed they gave it, but did not provide.
I was particularly pleased at the measures on investment and I welcome the doubling of capital allowances. The 25 per cent. allowance was clearly inadequate--it was a disincentive. There are few capital items that do not depreciate in value by more than 25 per cent. in their first year. Twelve months ago, for example, I bought a computer for £2,000. The Inland Revenue says that it is now worth £1,500--a nonsense. I would willingly sell it for that. That item can be written off in three years, but with the pace of industrial innovation many items can be valueless after only a short use.
I understand the limitation on the concession to one year and have no objections. It will encourage companies to bring forward their investment and it is sensible to find out how the pattern of investment changes and then, perhaps, introduce more permanent arrangements.
I also welcome the reduction in mortgage relief. For many years, one of the basic arguments in my Budget speeches has been the need to deal with that matter. One of the many nonsenses of Margaret Thatcher's Government was the way in which people were encouraged to look to their homes as investments. Advantage upon advantage was given to the purchase of houses. Schedule A, which was a way of taxing the notional rent of the house, has been abolished. Capital transfer tax, capital gains tax, inheritance tax and mortgage relief all gave advantages that were not available to those who made what I would call a true investment. [Interruption.]
Mr. Deputy Speaker:
Order. Many hon. Members are in conversation. A debate is taking place.
Mr. Sheldon:
All those advantages encouraged people to invest in their homes. True investment means a return on one's capital based on the more efficient use of that money. That does not apply to housing. Up to a certain level, housing needs some fiscal encouragement, but the trading up for profit was absurd. Such trading up is consumption and, as such, should be taxed like other forms of consumption, not encouraged. I welcome the Chancellor's attitude in that respect.
Finally, the welfare-to-work programme is a recognition of the difficulties of getting people to become part of the employable population. One major problem needs to be tackled--the cost incurred in earning a living. In modern conditions, being in employment results in a considerable outlay. Transport, clothing and meals are large expenses, which have to be offset against the income from employment. When a person moves from benefit to employment, he or she incurs those expenses of earning a living and the tax system does not allow for that.
"our examinations of this and of previous sales have shown that privatisation timetables can sometimes impose considerable pressures on departments. Clearly the timing of sales can have significant impacts on the total potential proceeds, but it is important that the pressure on departments to do things quickly is not used as an excuse for uneconomic arrangements. We therefore expect departments to organise themselves and to plan sufficiently far ahead so that they can exploit the scope for savings."
That view was unanimously accepted.
| Next Section
| Index | Home Page |