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Mr. Quentin Davies: I think that the hon. Lady has seriously misunderstood the basis of corporation tax. The whole purpose of a dividend tax credit is indeed to ensure that pension funds are not taxed. Now, they are having tax deducted in the form of ACT, which is not being refunded to them. They have therefore suffered a tax on their dividends. The hon. Lady has not understood the basis of her own tax system.
Mrs. Liddell: Frankly, that is nonsense, and the hon. Gentleman knows it. I congratulate him on being able to say it with a straight face. To the extent that pension funds are not exempt from taxation, they can set any tax credit against their liability, just like anybody else. In the debate on 9 July, I believe that he suggested that pension funds were being taxed on their dividends. That is not so.
I turn to another point made by the hon. Member for Grantham and Stamford about pensioners and pension funds being worse off, "if other things remain equal". We are all familiar with that phrase. Other things are not remaining equal. We are cutting corporation tax rates and boosting capital allowances as part of the package. That means that we are not only removing a damaging distortion but encouraging more and better investment, to the benefit of the UK economy in the long term.
Mr. Davies:
Will the hon. Lady give way?
Mrs. Liddell:
No, I want to make some progress. I am very anxious to do so because I know that Opposition Members wish to debate other matters. I have already given way a number of times.
I should like to take up one other point that the hon. Member for Grantham and Stamford made about whether companies will have to make higher pension contributions to defined benefit pension schemes. There should be no effect on many companies until the next actuarial valuation of their pension schemes, which could be as far as three years away. What is more, removing a distortion benefits the pension funds, because they get a more stable corporate base on which to develop investment.
Mr. Davies:
Will the Minister give way?
Mrs. Liddell:
No. The hon. Gentleman made a great contribution in Committee, but he tends to make the same speech, about how companies that invest in research and development pay dividends. If I have made the point to him once, I have made it half a dozen times: yes, many companies that distribute dividends spend money on R and D--but they would do that anyway, because they are large global companies with large reserves to spend on that activity. The change affects specifically the smaller high-tech companies that the distortion has forced to distribute dividends, when it would have been more effective for them to retain the money.
The gracelessness of the hon. Member for East Worthing and Shoreham has marked our debates. On behalf of his hon. Friends, I must testify to the fact that he has been most insulting to them, describing them as "woodentops". I accept that several of them are new to the House, but they tried hard, and the fact that the hon. Gentleman used that description may suggest that he has been indulging a little too much in the English wine about which he talked earlier.
The Leader of the Opposition has talked several times about why the previous Government fared so badly in the general election, and has made it clear that features such as arrogance and a lack of humility put the voters off. Perhaps the hon. Member for East Worthing and Shoreham does not care what the right hon. Gentleman thinks--perhaps he supports the prince across the water--but I must tell him that, when people look at the House and see the condescension that was portrayed in his speech, they tend to tar us all, not only on the Opposition side but on the Government side, with the same brush.
To summarise, we have seen in the debate an attempt to replay the Standing Committee. The shadow Chancellor said that we were ramming the Bill through the House. That is nonsense. Considerable time was given in Standing Committee. That must be so, because I now have an intimate knowledge of the family tree of the hon. Member for Daventry, we have been taken up and down the Orinoco by various members of the Committee, and I also now have a considerable knowledge of English wine, which may lead me to sample it in the next few weeks. However, what we have not heard are convincing arguments about why the Government should not make the change. I therefore ask the House to reject the amendment.
Mr. Lilley:
I am sorry that the Minister is made to feel so inadequate by my presence at the Dispatch Box.
It is undoubtedly a great help to the hon. Lady to have the effrontery that she no doubt picked up in Glasgow politics and elsewhere.
Mrs. Liddell:
I feel that, for the sake of my constituents in Airdrie and Shotts, I must make the point that not only am I not a Glaswegian, but I live between Glasgow and Edinburgh, and my constituency lies between Glasgow and Edinburgh. There is no greater affront to a Lanarkshire lassie than to suggest that she is a Glaswegian.
Mr. Lilley:
I apologise unreservedly to the hon. Lady, and look forward to the repercussions that her remarks may have among her hon. Friends. I should say that such Scots blood as I have comes from the same part of Scotland from which she comes, so I have no excuse for having made that mistake.
I must return to the essential issue that faced us throughout the Committee stage. There have been only 12 working days between the publication of the Bill and today, the end of Report. That compares with an average of about 77 days during the preceding 18 years of our consideration of Finance Bills.
That is all the more alarming because--I have already exposed this fact--the Government have introduced in this measure the biggest of the 17 tax increases that they have made, in flat contradiction of specific promises and assurances given by Front-Bench Labour spokesmen only a few months before the election.
That is another reason why the Minister needs her brazen effrontery. When faced with the truth, she goes into auto-rant about the defects of other people. The fact is that the people who now form the Government made promises to the British electorate that they have broken, and for which they will be held to account.
The hon. Lady pretends that the measure involves some high-minded purpose to do with fiscal neutrality--but it is not fiscally neutral to take £5 billion out of pension funds. Nothing that she has said, or can say, can convince us that it is. She has not answered the Primarolo paradox. If the measure is harmless, why is it essential to protect charities from its impact? The Financial Secretary to the Treasury could not explain that, and the Economic Secretary has not been able to do so either.
The hon. Lady took up the issue of mis-selling, from which she sometimes shrinks when it is raised from the Opposition Dispatch Box in such debates, although she had the effrontery to say that she would take no lectures from us on the subject. I shall certainly take no lectures from a former public affairs director of the Maxwell group during the four crucial years when Maxwell was ripping off surpluses throughout the country in a way that the Government now seek to emulate.
When I became Secretary of State for Social Security, the biggest issue that I faced was the Maxwell--[Interruption.] I got the money back for the pensioners, including the Minister--every penny of it. Not one of those pensioners had to suffer a penny's loss. That is why we will take no lectures, especially on this issue, from a Government who reassure pensioners by putting a former Maxwell employee in charge of dealing with mis-selling, who appoint as a Government spokesman someone who was previously Maxwell's fearless seeker after truth--Alastair Campbell--and who employ Lord Donoughue, one of his cronies, as another Minister. I am afraid that this is not an issue on which we shall take lectures from them.
We want to know the answers to our questions. Will what the Government have done encourage people to opt back into the state earnings-related pension scheme system, as we are convinced it will, and as are all the experts whose testimony I have read out? Do the Government agree that that will be the impact? Was that their intention? Have they made any calculation of the number of people who will be persuaded to opt back in?
Will that number be equal to the number who ought to opt back in? If not, will it constitute mis-selling that those who are not properly informed and persuaded to do that, despite the change in their circumstances, will be left outside with pensions less adequate than those that they could have received inside, because of the changes?
The other big issue that has come up in the debate is the impact of the measures on local authorities. We have received no satisfactory response from the Government Front Benchers to the issues raised by their own Back Benchers as well as ours, and by Labour as well as by Conservative councils throughout the country.
Council tax payers need to be reassured that the change will not inevitably feed through into higher council tax when hundreds of millions of pounds extra are required every year to ensure that local authority employees receive the pensions that the boroughs, the districts and the county councils have promised them. It is just not good enough for the Minister to say, "Oh, we shall not know the cost for a year or so; therefore, we need not take any action or inform everybody about the impact now."
This is a very important issue. Some £5 billion of tax revenue is to be raised for no purpose other than to be spent in future, because Labour Governments only tax now to spend later. The Government are acting in clear breach of their election promises, and in a way that will disadvantage members of occupational and personal pension schemes and leave them in ignorance of how the change will affect them. Our amendments would help to remedy some of those defects, and we urge the House to support amendment No. 16 in the Division Lobby.
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