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Mr. Bercow: In addition to being an assiduous representative of his constituents, my hon. Friend is an established and well-respected student of political theory. Does he agree that it is lamentable that Labour did not state in its election manifesto that it intended in this Parliament to reduce tax relief on mortgages when it has always prided itself on being the party that believes in the mandate theory of political representation--in other words, a party that receives a mandate is entitled to do whatever is in its manifesto? Does he agree that that reduction was not in Labour's manifesto and that it is particularly outrageous that, without notice or fore-warning, the Government should now propose that highly damaging measure?
The Second Deputy Chairman: Order. Can we have brief interventions please, and not minor speeches?
Mr. Collins: I am grateful to my hon. Friend, and I am also grateful that the Financial Secretary to the Treasury is paying attention. Had she been in the Chamber for the previous debate, she would know that the entirety of the Paymaster General's argument for the windfall tax was that it was in the manifesto which was endorsed by the public, and therefore it must go through. That argument cannot apply to what we are considering now. The reduction in MIRAS was not in the manifesto, nor was it addressed in the election campaign. There is no mandate for it.
Mr. Jim Murphy (Eastwood): I have listened with interest to the hon. Gentleman's version of political theory. Does he apply that analysis to the Conservative party's pledge on VAT on domestic fuel? Will he take the opportunity to apologise for the previous Government--his party--introducing VAT on domestic fuel, or is it only the current Government who have to keep their pledges?
Mr. Collins: I am grateful to the hon. Gentleman for allowing me to nail one of the most pernicious pieces of mythology passed around by the Labour party during the last Parliament. If he studies the 1992 Conservative manifesto, he will find that there is not one single reference in the document to any pledge concerning VAT. It is simply untrue that the previous Government breached any manifesto pledge on VAT. The Labour party manifesto made no mention of MIRAS, yet we are facing substantial changes in it.
Mr. Murphy: That is not an answer. [Interruption.] Well, it is an answer, but it is not an answer to my question. Does not the fact that the increase in VAT was not in the Conservative manifesto make it even worse? The manifesto did not contain that pledge, and no mention was made of it; yet the previous Prime Minister stood at the Dispatch Box and announced that VAT on fuel would
be introduced. Had it not been for the then Opposition preventing him from doing so, the charge on pensioners and the poor would have been greater.
Mr. Collins: I gave a clear answer to the hon. Gentleman's charge, which was that we breached a manifesto pledge. We did nothing of the sort. If he is arguing that, before a party introduces a tax increase, it should announce it in its manifesto, he is making my point for me, which is that the Labour Government should have pledged to tinker with MIRAS.
In moving the amendment, my hon. Friend the Member for Daventry (Mr. Boswell) linked changes in MIRAS to changes in interest rates. Another important principle--which was, broadly speaking, adhered to by the previous Government, even in the adjustments that they made to MIRAS--is that the rate of MIRAS should be related to the basic rate of income tax. Two adjustments were made to MIRAS during the last Parliament. The first was to reduce it to 20 per cent. That was set out clearly as the long-term objective for the basic rate of income tax. By the time that the previous Government left office, they had made substantial progress towards reaching that rate. The basic rate had been reduced to 23p, and a large number of people were already paying at a rate of 20 per cent.
The second adjustment was to reduce MIRAS to 15 per cent. I believe that, over time, it was possible to believe that a Government who had reduced the basic rate from 33p, and then most of the way to 20p, could set a target of a basic rate of 15 per cent., at which point MIRAS and the basic rate would have been reunited.
I remember an excellent speech by my hon. Friend the Member for Buckingham at a Conservative party conference in the 1980s, when he received a standing ovation for proposing that the Conservative party should set a target of a 15p basic rate of income tax. He was greeted by the then party chairman--as I greet him now--as a future Chancellor of the Exchequer.
The difficulty now is that the level of MIRAS being set by the present Government--10 per cent.--is not intended to be related in any way to any target for the basic rate. The Labour party has said that it wishes ultimately to set a starting rate of 10 per cent., but it has no target for the basic rate. Notably, the Budget made no progress towards introducing a 10 per cent. starting rate even at the lowest and smallest level. So the Budget and the Finance Bill have removed any semblance of a relationship between the rate of MIRAS and the basic rate of income tax. That is a dangerous and pernicious development.
What is the purpose of MIRAS? It is, explicitly and rightly, a subsidy of home ownership. Many things are subsidised in the tax system. A generous level of MIRAS subsidises something that is important in our society. Wider home ownership is one of the great achievements of 18 years of Conservative government. Millions more people became home owners as a result of successive changes in financial and other legislation made by the last two Prime Ministers and successive Chancellors.
Dawn Primarolo:
I have been listening carefully to the hon. Gentleman. Will he explain why the Chancellor of the Exchequer in 1993, Norman Lamont, gave two
Mr. Collins:
I am sure that the hon. Lady will recall, as I do, that Norman Lamont said clearly that one of the reasons for picking 20 per cent. for the first reduction--I made it clear that there were two reductions, first to 20 per cent. and subsequently to 15 per cent.--was that it was the long-term target for the basic rate of income tax. I am sure that other factors were involved.
If the hon. Lady says that the reduction was justified then and is presumably justified now for the purpose of raising revenue, one wonders why the present Prime Minister was so scathing about the Conservative Government's reduction, even three years later. He did not say, "We are in favour of higher public spending. We might not have increased taxes in quite this way, but it was necessary to do it." The Prime Minister said that the reduction in MIRAS was a pernicious Tory tax increase. What is sauce for the goose is sauce for the gander.
Dawn Primarolo:
The hon. Gentleman has laid out the case that there was a logical and reasonable basis to the previous Government's decisions on MIRAS, and that they were guided by principles related to the housing market. Will he confirm that the then Chancellor of the Exchequer made it crystal clear in this Chamber that the reduction in MIRAS was a revenue-raising measure? He did not link it to the housing market, whatever might have been in his mind for the future.
Mr. Collins:
Any tax increase is clearly made for a number of reasons. Raising revenue is likely to be one of them. One of the reasons why MIRAS was reduced by a Government who were, unlike the present Government, not ideologically in favour of increasing taxes for the sake of it was to plug the gap in the nation's finances caused by a global recession. I am sure that that was a factor. If the hon. Lady goes back and checks in full all the remarks made by the then Chancellor of the Exchequer, she will find what was his thinking. If all that he had been interested in doing was raising as much revenue as possible, he would not have picked a particular level but would have abolished MIRAS entirely.
There is a general case for mortgage interest tax relief. Wider home ownership was a huge achievement of the past 18 years. It helps to underpin social stability. On housing estates, there is now mixed ownership. Communities in places such as Westminster, in the environs of the House, which has a mixture of public sector and owned housing, are more stable. There is a wider spread of ownership, and more people feel that they have a stake in society. That has always been at the heart
of Conservative philosophy. It is one of the differences between the two parties. It is why a Conservative Government, against ferocious Labour opposition, took through the right-to-buy legislation.
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