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Mr. Geoffrey Robinson: As for the share prices and the link to the eventual value of pension funds, surely the right hon. Gentleman will be pleased to know that, as at 11 o'clock this morning, the average of those shares was up by 7 per cent. compared with the FTSE average of just 4 per cent. since 1 July this year.
Mr. Lilley: It will not have escaped the hon. Gentleman's notice that the share markets in this country and in some other countries have been rising fairly rapidly and continuously for some time. That is almost certainly not the effect of imposing a tax on them. If he thinks that shares go up when one imposes a tax on them, one ends up with the absurd justification that the Government offer for almost everything--that taxing things is good for us. If the Minister really believes that the shares have risen because a tax has been imposed on the pension funds in question, he will believe almost anything.
It is particularly strange that the Government should justify the tax as having been expected by everyone. The Labour party was invited to contribute to the Railtrack prospectus not long ago. I can find four pages in that 600-page document which were contributed by the Labour party and which describe its policies as they affect Railtrack. There is not a whisper about the possible imposition of a windfall tax on Railtrack. I should like the Minister to confirm that Railtrack will indeed fall within the general purview of the tax. The Bill certainly mentions railway companies, so we may legitimately assume that Railtrack will be included.
The Paymaster General has been a business man in the past. He must know that it is a serious matter to sign off a prospectus that is not a full and complete statement of the facts known to people at the time. Is he saying that, when Labour submitted its contribution to the prospectus, it did not know that it intended to introduce a windfall tax; in which case how could the market, the investors in these companies, or the rest of us, be supposed to know? Or did Labour keep it a secret, in defiance of company law? Who signed off the submission to the prospectus? Perhaps the Minister will tell us, so that we shall know whom to hold to account if ever legal proceedings are taken against the Government for the deceit inherent in the process.
Mr. David Watts (St. Helens, North):
When the previous Administration sold off the utilities, they undervalued them. Does the right hon. Gentleman agree that that was gross incompetence on the part of the Conservative Government, and that it justifies this tax? If there were any justice in the world, the Conservative Ministers involved would be facing a surcharge for losing such large amounts of taxpayers' money.
Mr. Lilley:
The difficulty that arises when selling off formerly nationalised industries is that it is hard to tell how successful they will be under privatised management compared with the appalling failures of nationalisation. If the Labour Government were proposing to levy an excess tax that related the price at sale to the profits in the four years before flotation, that might be reasonable. If they did so, they would have to hand back money to quite a few shareholders. But the profits made afterwards were unforeseen and unforeseeable; as it turned out, only the most bullish advocates of privatisation were right about them. It is a tribute to privatisation that it produced the improved profitability which, at the end of the price period, is then passed on to customers in the form of lower prices--if they are not siphoned off by extra taxation.
Mr. Campbell-Savours:
Is it not true that anyone who put his money into Railtrack doubled it in 12 months? Is that right? Does the right hon. Gentleman agree that there is a case for taxing some of it?
Mr. Lilley:
Capital gains tax is usually levied on gains that are realised. If it was so obvious that any windfall should be taxed, when invited to state its policies in the prospectus, why did not the Labour party think it worth telling the public about this great truth which the hon. Gentleman holds to be self-evident?
Mr. Campbell-Savours:
I bet some Tory Members doubled their money, too.
Mr. Lilley:
I assure the hon. Gentleman that I did not. As Ministers, we were never allowed to participate in the privatisation of those companies--or to hold millions of pounds' worth of shares in them, I might add.
During debates on clause 1 and subsequent clauses relating to the windfall tax, we shall want to focus on the Government's failure to understand how privatisation works. We shall want to concentrate on their failure to pass on the benefits of that privatisation in lower charges to customers and their desire to increase charges to customers and families by imposing the tax. We shall
want to focus on the need for protection from that higher cost, just as we protected pensioners and others from other cost increases that were affecting their household bills. We shall want to focus on the importance of preventing the tax from becoming a permanent and continuing levy.
The Paymaster General justified the tax as a means of financing the welfare-to-work programme. We are not here to debate the merits of that programme. I previously said that I wish it well, but I doubt whether it will be successful. One thing we know from experience of such programmes around the world is that they continue to cost money for as long as they exist. How can the Government justify the existence of a temporary tax by a permanent programme that will need permanent taxation to finance it? Can the Government give an assurance to the House that the tax will not become a permanent burden on household bills?
Liz Blackman (Erewash):
During last week's oral questions, in an almost throwaway remark, the shadow Chancellor said that the programme was temporary. Does he not concede that good-quality skills and employability are transportable? Behind employability lies behaviour that many young people in this country have not learnt, such as getting up early in the morning, getting themselves to work on time, following the rules once they are there, supporting their colleagues and generally taking on responsibility that they have not had to bear in the past. Does not the right hon. Gentleman concede that such behaviour has an air of permanence about it?
Mr. Lilley:
I was saying that it is a permanent programme, but the tax is allegedly temporary. According to the hon. Lady's analysis, as each cohort of young people comes through, there will be a permanent need to fund the programme. We are not here to dispute the arguments that she has advanced--for the sake of argument, I shall accept them--but according to her analysis, the tax will have to be permanent.
We want an assurance from the Government that this will not be a permanent levy on the gas, electricity, water and telephone bills of every person in the country, particularly pensioners. I shall be urging my right hon. and hon. Friends to oppose the clause.
Mr. Malcolm Bruce (Gordon):
I, too, wish to probe and oppose the clause. Although many of the arguments have been rehearsed and the Government have a mandate to implement the tax--we all know that the measure will be voted through with a comfortable majority--it is important that genuine concerns are put on the record and that the measure is tested against practical experience.
Those of us who oppose the windfall tax readily acknowledge that the first problem is that it is superficially popular. It appears to have no victims; the money will be spent on many good causes; many people made a lot of money, so why should there not be some consequences? However, there are good examples to show that that is a superficial argument. The tax is superficially attractive, but it is basically dishonest.
It is dishonest, first, because it is a retrospective tax. Most of the people who made the excess profits have pocketed them and gone; they will not be paying the tax. If the Labour party had been as concerned about the matter as it claimed, it might have done something about
the tax rates of high earners, such as those earning more than £100,000 a year. It would then have ensured that some of the people earning that sort of money made a slightly greater contribution to the general welfare. But that is not the central thrust of the debate on the clause.
I suspect that most people will think, "This is fine; I do not have to pay the tax and I shall receive benefits from it in training, employment and so on for my children or for me." The welfare-to-work programme is not part of this debate; whether we support it is a separate issue. We have expressed support for many of the Government's proposals, which we accept have some good features, and we have come up with some alternative proposals.
However, the way in which one spends the proceeds of a tax is separate from the merits of the tax; spending the proceeds of a tax on good causes does not in itself turn it into a good tax if its impact is fundamentally wrong. As has been said, it is not a victimless tax and it is not a tax that ordinary people will not pay; over time, they will pay it in one way or another.
The shadow Chancellor was right to say, in response to an intervention, that if, in calculating the price formula for a utility, a regulator takes into account the impact of the windfall tax, the regulator will basically be determining what prices should be after a significant amount of money has been taken out of the company's budget.
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