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Mr. Gibb: How is it stable for a family that, under the new Labour Government, has to pay an extra £10 a month because of the Government's decision to abolish mortgage interest relief at source, and an extra £20 on the mortgage because of three interest rate rises, and now needs to find another £20 a month because of clause 19, which will result in higher pension contributions? How can a family find an extra £50 a month if it did not have £50 surplus in its pay slip before the Budget?

Mrs. Liddell: I am surprised by the hon. Gentleman, who prides himself on being a technician. If that is the level of his expertise, for the sake of his clients, I am grateful that he is in the House.

Earlier in the debate, the shadow Chancellor acknowledged that all the rhetoric is pointless. When I challenged him specifically about whether a future Conservative Government would reintroduce ACT, he refused to make any such commitment. That sums it all up. What we have seen here is posturing. Throughout the Standing Committee, Opposition Members were posturing without raising any points of substance.

Mr. Lilley: The hon. Lady berates my caution in not making commitments at this stage in a Parliament. What has she to say of the present Under-Secretary of State for Social Security, the hon. Member for Southampton, Itchen (Mr. Denham), who, only months before the general election, gave a clear and explicit assurance to people in the City that the Labour Government had no plans to introduce this very measure?

Mrs. Liddell: The right hon. Gentleman is the shadow Chancellor, and his hon. Friends have subjected us to

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weeks of scaremongering. The hon. Member for North Tayside (Mr. Swinney) legitimately made the point that the worst thing that we can do to pensioners is to introduce uncertainty. The only uncertainty that has been introduced has been created by the scaremongering of Opposition Members. If they were so wedded to the concept of ACT, why in 1993 did the right hon. Member for Charnwood (Mr. Dorrell) say that it was the least damaging way for the Government to raise money?

Mr. Clifton-Brown: Will the hon. Lady give way?

Mrs. Liddell: No. I must make some progress.

The right hon. Member for Hitchin and Harpenden referred to the mis-selling of pensions. He did it with a straight face. We should like to know how it was that the previous Administration had eight years to act on the mis-selling of pensions, but did not do so. They sat on their hands. That shows how much they were concerned about the impact of the mis-selling of pensions.

The shadow Chancellor made some dubious comments about his visit to Uxbridge and the number of pensioners there who would be affected by the measure. He did not tell us how many pensioners in Uxbridge had been mis-sold pensions and how many of them had died without the problem being solved. We do not take lectures from Opposition Members who have been responsible for the biggest financial scandal this century.

The right hon. Member for Hitchin and Harpenden talked about how local authority pension schemes will hit council tax payers. That theme has come up repeatedly in debate. Yet again, I should like to put it on record--I know that Opposition Members do not like listening to the facts--that any impact on local authority budgets will not apply until after the next revaluation in March 1998. I say to the hon. Member for North Tayside that, in Scotland, revaluation will take place a year later than that, so the earliest effect will be between 1998 and 2000. Any impact on budgets will depend on decisions taken by actuaries.

Mr. Ruffley: Will the hon. Lady give way?

Mrs. Liddell: No, I am going to make some progress.

Any impact on budgets depends not just on the actuarial impact of changes in ACT but on the impact on company performance of the reduction in corporation tax.

Much has been made of the letter that my hon. Friend the Minister for Local Government and Housing sent in relation to the impact on local authority pension funds. This time, I shall quote from that letter--and I quote accurately. I had the letter in front of me while Opposition Members were trying to quote it, and I found a wide discrepancy between what they said and the facts. The letter states specifically:

"The Government will take all these factors into account in determining the level of local authority provision for that and subsequent years."

That to me is quite clear-cut.

Mr. Loughton: Will the hon. Lady give way?

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6 pm

Mrs. Liddell: No, I want to make some progress.

A number of hon. Members, especially the right hon. Member for Hitchin and Harpenden, talked about the briefing paper of the Association of Consulting Actuaries. It has been much prayed in aid in the debate. I understand that the consulting actuaries have now acknowledged that they failed to take into account the effect of the 2 per cent. cut in corporation tax rates. They also failed to take into account the distortion to which tax credits led and the preference that pension funds had for dividends rather than capital gains.

Despite all the hyperbole and invective of Opposition Members, the reality is that pension schemes are still very favoured by the tax system. There is tax relief for contributions, plus tax-free build-up, plus a tax-free lump sum where that is part of a scheme. It is important to get a sense of perspective into the debate.

The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) claimed that pension funds would shift out of United Kingdom equities. The decisions that pension funds take are for them. Rational investors put their money where the return is greatest. In international comparisons, the UK still has a very high dividend yield. From 1992 to 1996, the return in UK equities was higher than that in foreign equities, even without the payment of tax credits.

My hon. Friend the Member for Dudley, North (Mr. Cranston) made one of his very perceptive speeches in which he talked about the impact on investment of retained profits. We have returned to that point repeatedly. Although it is always very interesting to listen to the hon. Member for Grantham and Stamford (Mr. Davies)--once one gets beyond the hyperbole, one often finds that he has something to contribute to the debate because of his expertise and experience--he argued in circles about decisions that companies will take on the future of investment. The Government make the point that it is up to companies to decide what is to their long-term benefit as against distributed profits or retained profits.

The hon. Member for Bognor Regis and Littlehampton made a most impassioned speech about the operation of free markets. For a free market to operate effectively, it has to operate without distortion. Frankly, his argument is fallacious.

I turn to a point made by the hon. Member for North Tayside.

Mr. Quentin Davies: Will the hon. Lady give way?

Mrs. Liddell: Yes, I promised that I would.

Mr. Davies: Does the hon. Lady agree that the abolition of dividend tax credit involves the institution of double taxation in many circumstances? Double taxation is, by definition, a distortion.

Mrs. Liddell: I shall come to that in a minute.

I first want to reply to a point made by the hon. Member for North Tayside, who referred to Standard Life. He said that it was delaying quoting transfer values for people changing occupational pension schemes and claimed that that was due to loss of tax credits. A number of factors affect transfer values for people moving from one

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occupational pension scheme to another. Share values and general dividend levels, which have been changing substantially over the year, are just as important as issues such as tax credits. There is no reason for Budget changes to cause any serious delay in the quotation of transfer values.

Mr. Swinney: The point which I was making was that, as the hon. Lady correctly identified earlier, a variety of factors will bear on decisions made by actuaries. No one factor can be isolated. If the Government introduce a measure that increases uncertainty in the entire decision-making process of actuaries, they must accept some responsibility for the disruption that that causes in the marketplace.

Mrs. Liddell: The hon. Gentleman is contradicting the point that he made in his speech. He referred to the need for long-term stability. As long as there is distortion in the tax system, there are automatically preconditions for instability. The change would mean a move to greater long-term stability. The minute that the previous Government started altering the rate of tax credits, a process of uncertainty began. If we want a coherent corporation tax policy, the logical next step is to get rid of tax credits.

I turn to the point made by the hon. Member for Grantham and Stamford about double taxation of pension funds. There is no such double taxation. The basis of imputation will continue as it is now. Where individual shareholders are taxable on dividends that they receive from a UK company, they will continue to get a tax credit to set against that liability. That mitigates any double taxation. Pension funds, however--this is the point that the hon. Gentleman was seeking to make, but he confused the two matters--are usually exempt from tax. There is no tax charge on exempt pension funds when they receive dividends, so there is no double taxation.

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