| Previous Section | Index | Home Page |
Mr. Derek Twigg (Halton): The Conservatives have opted for their usual scare tactics. I recall that the previous Prime Minister, the right hon. Member for Huntingdon (Mr. Major), sent out letters to perhaps millions of shareholders before the general election. Indeed, my father received one. As far as I know, he has never had a share in any of the utilities. That being so, I am not sure why he received the letter. However, it set out how much the windfall tax would cost the people of this country. The message was that they should not vote Labour. That approach did not work then and it will not work now. The Conservatives lost the mood of the country--that became clear on 1 May--and they have lost it again.
The windfall tax has been warmly welcomed in my constituency. When I was campaigning during the election campaign, many people said that they considered it to be a good idea. They were supportive because of the reasons for such a tax. They understood that it would create jobs and other opportunities for young people and the long-term unemployed.
Conservative Members have talked about the utilities--North West Water is an example. There is talk also about the utilities being sold off cheaply and the result being excessive profits, fat cats and price rises. All these issues come to mind. They were mentioned to me on the doorstep by those who are now my constituents. The shadow Chancellor of the Exchequer did not say that prices had doubled in the water industry. It is not all roses in the garden.
Basically, the windfall tax is seen as a fair tax.
Mr. Peter L. Pike (Burnley):
My hon. Friend referred to North West Water, which came on the market at a knock-down price. People who live in the north-west--I am one of them--can be supplied with water by only one company. Similarly, sewage treatment can be undertaken by only one company. That being so, the company cannot fail to make a profit. That is why the windfall tax is fully justified.
Mr. Twigg:
I entirely agree with my hon. Friend. He will be aware that the number of complaints about North West Water has increased significantly over the past few years.
It is said that the windfall tax is a temporary measure but will result in permanent benefits, which will be important to my constituency. That is why the measure is so warmly welcomed. In my constituency, 44 per cent. of young people do not have a job and are not in training or at college. That is a major problem. The windfall tax will bring about improvements, and the problem in my constituency will become less severe.
There are social problems when young people have not been in employment since leaving school. They may have moved from one temporary job to another. In many families, two generations have not been employed. Young people were shabbily treated by the previous Government and the windfall tax is a means of addressing the problem.
The largest employer in my constituency is the chemical industry. The number of people employed in it has been drastically reduced during the past 10 or 15 years. Middle-aged men, especially, have lost jobs and are unable to find new ones. They are having a great struggle. They must acquire new skills, and that means retraining. Many people telephoned me to speak about these matters shortly before the election. They were keen to obtain more information, and keen for Labour, when in government, to take the issue forward.
The windfall tax is about bringing hope and benefits to people in constituencies such as Halton and, indeed, generally. The tax is warmly supported in my constituency and its introduction will be welcomed. The sooner it is implemented, the better.
Mr. Quentin Davies:
The windfall tax, by its very definition--I do not think that Labour Members will be able to quibble with this--is arbitrary, discriminatory as only some companies will pay it, and retrospective. It is--[Interruption.] I shall happily give way to any Labour Member who wants to quarrel with the three simple propositions that I have put before the Committee. Does the hon. Member for Workington (Mr. Campbell-Savours) wish to take issue with me? He is shaking his head, but it is in the nature of a windfall tax that it should be retrospective, arbitrary and discriminatory. It is quite right that we should give the Government a hard time on this: it is scandalous. They should be made to face the essential aspects of the windfall tax they have introduced.
Why does it matter? I shall deal with the point about the tax being retrospective. When the public, individuals, little old ladies, business men with some money to put aside, people providing for their pensions, institutions that manage the pension funds of millions of people, and foreign investors, who, traditionally, take a favourable view about investing in this country--all sorts of institutions and individuals--applied for shares when the utilities were privatised, they read the prospectuses, which were thoroughly and professionally drafted and written. As far as I know, my old firm had nothing to do with the initial privatisation issues. I can say that without fear of any conflict of interest.
People who subscribed to the shares believed that the essential facts relating to their investment--so far as they could be predicted at the time--and above all the regulatory and political regime within which those companies would exist, had been fairly, adequately, indeed definitively, described in the prospectuses. We now find that that is not true, because another Government have been elected and have said, "No, we are going to change the framework of understanding against which
people took the decision to invest in shares,"--whether it was a widow investing £200 or a pension fund investing tens of millions of pounds. "We are now going to change those rules."
This is a very serious matter. It is not something that can be done with impunity. It means that, the next time a Government, of whatever political complexion, offers shares to the public, or for that matter a debt issue, a gilt issue, which Governments do all the time--it is terribly important that the interests of the whole country, of every citizen and taxpayer, irrespective of his or her political views, are considered--the offer of shares or stock will be received by the market on the basis that the political risk attached to subscribing to shares is now much higher in Britain. That is regrettable, because this country always had a favourable, stable climate of investment. Traditionally, it had integrity in these matters because our Governments have had a reputation for straight dealing, not retrospective dealing. That reputation will be damaged today.
The country's interests will be seriously damaged if the windfall tax is passed by the House. For ever more it will be said that the British Government may come forward with a prospectus and say, "The following are the particular terms on which we are prepared to sell shares, and the following is the regulatory and tax climate in which companies will continue to operate in the United Kingdom," but, in practice, a year or two later, another Government may come into office and decide to change retrospectively the rules of the game.
That is happening now. Such an act leads to the de-rating of a country's credit rating. Every issue made by a Government who develop such a reputation, or by a country with Governments who act in such a way, suffers a discount. The price in the form of interest rate that they have to pay when they wish to raise debt is correspondingly higher; the price at which they can sell shares is correspondingly lower. The whole country pays a long-term price for the loss of that credibility and for investor confidence being damaged in that way.
There are hon. Members on both sides of the House with experience of development economics who have been involved with third-world countries, many of which are trying to extract themselves from appalling structural poverty. They will have looked at the various controversies in the academic and political worlds about what characteristics are right for a country to try to develop to help its way out of poverty and what framework is needed to generate wealth.
Everybody who has looked at these matters and at the experience of countries in the third world will recognise that there is an enormous premium to security of investment, to integrity, in generating investor confidence. There is an enormous discount for countries that have in some way damaged their credit standing, that have damaged investor confidence, that have damaged the propensity of overseas investors to invest because they have developed a reputation for retrospective taxation or for placing retrospective burdens on investors.
A retrospective tax is very damaging. It cannot be imposed with impunity. It will not be done with impunity in this country. It is deeply damaging to many of our principles of equity. It is also deeply damaging in a quantifiably economic sense. That is the first thing that I have against the windfall tax. It is the reason the
Committee should think very carefully before we let it through. If we let it through, a precedent will be created and the Government will no doubt consider it an easy way to raise money.
Many of us feel, on the basis of two months' experience, that we have a very irresponsible Government--a Government who brought forward a Budget that directly contradicts the diagnosis of the country's economy in the Red Book. A country run by such a Government obviously has some difficult moments ahead, and there is no doubt whatever that the Government will run into severe budgetary and economic problems.
| Next Section
| Index | Home Page |