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Mr. Gareth Thomas (Clwyd, West) rose--
Mr. Heathcoat-Amory: Perhaps the hon. Gentleman wants to give us some examples.
Mr. Thomas: Does the right hon. Gentleman accept that his party's claim, rather late in the day, to be the pensioners' champion is regarded by many older people as extraordinary effrontery? It lies uncomfortably with reality and with the previous Government's record, which included, among other things, the imposition of value added tax on domestic fuel--something which hit pensioners very badly.
Mr. Heathcoat-Amory: Yes, there was some mis-selling of private pensions if the hon. Gentleman is referring to that. When we were in government, we put in place procedures and mechanisms to put that right. That
does not justify the wholesale mis-selling of pensions now being attempted by the Government. People--I am sure that the hon. Gentleman is familiar with such cases--who were quite properly advised to leave the state earnings-related pension scheme and take out a personal pension did so on the basis that the personal pension offered a better prospect. Along come the new Government and remove the main prop from under personal pensions and render invalid, retrospectively, the original calculation. That is mis-selling pensions on a truly colossal scale and I am surprised that the hon. Gentleman appears to condone it.
Millions of pensioners now realise how badly they have been let down. A 30-year-old who has been contributing to a pension scheme will now have to put in, on average, an additional £20 a week to maintain his benefit, yet the Financial Secretary--and I keep returning to this point because it has not yet been corrected by the Government--told the House last week that there was no problem. She said:
On Budget day, the Chancellor thought that he had discovered a victimless crime. He thought that he had discovered a tax that no one really paid. In reality, by the changes to advance corporation tax and the associated tax credits, he is imposing a savings tax on the British people. He has been found out.
It took the Government only a few weeks to break their election promises. They promised not to increase taxes, but they have. In particular, they made great play of the assertion that ordinary people would not be taxed. As the Government have now discovered, ordinary people have pensions. It might have come as a surprise to them to learn that. Millions of ordinary people have done what successive Governments of all parties urged them to do--provide for their old age either by taking out personal pensions or by entering contracts with company pension schemes.
Mr. Darling:
I think that the right hon. Gentleman was a Treasury Minister in June 1993. Does he remember sitting in the Finance Bill Committee with the right hon. Member for Charnwood (Mr. Dorrell) who, when justifying the proposed reduction in tax credits in Norman Lamont's Budget, said:
Mr. Heathcoat-Amory:
Cannot the right hon. Gentleman see the difference between a 5 per cent. reduction in advance corporation tax credits, bringing the rate down to what is now the lower rate of income tax, and the total and immediate abolition of all such credits, which is what the Government are trying to do? It is a body blow for the entire pensions industry.
In recent days, Labour Members have complained about our use of quotations from radio and television in which Ministers have denied that they have tax-raising ambitions. I do not think that they can deny a sentence in the Labour party manifesto, which states:
The issue of local authority finances also has not yet been resolved. Earlier in the week, we learnt that the Local Government Association had written to Ministers about the issue. The association said that, in its opinion, the Government's action will cost their members at least £300 million a year and that that money will have to come out of local authority services if it is not made up by the Government. I again ask Ministers whether they are content for services to be cut or whether they will compensate local government. They have agreed to compensate charities for the effects that the same tax changes will have on charitable income.
My county, Somerset, calculates that it will have to find an additional £1.2 million a year to plug the gap in its pension fund. As it is expected to be rate capped--an issue which we will soon debate--there is no prospect of that burden being unloaded on to council tax payers. The money will have to come directly out of services.
In mitigation, the Government pretend that the problem can be ignored and rolled forward into some valuation that, they say, will occur in two years' time.
Mr. David Heath (Somerton and Frome):
Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory:
In a moment. The hon. Member for Somerton and Frome (Mr. Heath) has some relevant experiences and will confirm that the Somerset revaluation is currently under way. It would be entirely irresponsible for the county--part of which I represent--to hope that, in a few years, a Labour Government will compensate it for an expenditure backlog on that scale.
Mr. Heath:
I am grateful to the right hon. Gentleman, who also represents a Somerset constituency. I entirely agree with his statement that the revaluation will have a severe effect on Somerset. Does he accept that that is one of the unavoidable costs that the county council will have to meet and that it should provide a very strong argument when it makes its case to the Government not to apply
Mr. Heathcoat-Amory:
The hon. Gentleman is attempting to join two separate issues--whether Somerset should be rate capped for the generality of its expenditure and whether it should be reimbursed for the new impost, which is a direct consequence of the Budget. I will certainly support the county that we both represent in the second of those tasks.
The Budget raises other issues. Withdrawal of tax relief on health insurance is a mean measure which will hit about 600,000 people who will be thrown on to the NHS as additional patients if they cannot now afford that insurance. They will therefore add to pressure on health expenditure, although there will be no more money for health--which brings us to another issue in the Finance Bill. Not only will no more money be allocated to public services, there will be less money.
At Question Time, the Chief Secretary evaded that issue and the questions asked of him, although the matter can be put quite simply. Because of the additional inflation that the Government are building into their projections, the costs of public services are set to rise. Ministers, however, are saying that services, although they may be more expensive, will not receive more money from the Government. There will therefore be less to spend on health care, social security, the environment, the police and all other services.
"The measure is good for pensions and pensioners, not bad for them . . . People should understand that our reforms will benefit pension funds."--[Official Report, 3 July 1997; Vol. 297, c. 507.]
We will continue to quote the hon. Lady because she was speaking on behalf of the Government, on behalf of the Chancellor, on behalf of the Cabinet and on behalf of the Labour party. If she really meant what she said, how does she reconcile her words--which are clearly erroneous--with the Finance Bill's attack on pensions and pension funds?
"We needed to raise revenue in a way that did least economic damage."
He said that they would do so from pension funds
"from a group of people with taxable capacity, but who are not taxpayers, in a way that does minimum economic damage."--[Official Report, Standing Committee A, 15 June 1993; c. 377.]
Did the right hon. Gentleman disagree with that statement? I do not remember his leaping to his feet to do so or walking out of the Committee. If he thought that
that was a raid on pension funds, why did he not object? Was that, perhaps, what prompted his ultimate resignation from the Government?
"We will support and strengthen the framework for occupational pensions."
How on earth can the Government reconcile that with the fact that they are now knocking away the income stream on which such pensions rely? How can they support occupational pensions by removing £5 billion a year from them?
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