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Mr. Deputy Speaker (Sir Alan Haselhurst): Order. Mr. Ashdown.
5.8 pm
Mr. Paddy Ashdown (Yeovil): I have heard of waving papers for success, but waving in desperation is another thing--or perhaps Conservative Members were waving their Order Papers in sheer relief that that speech was over.
In line with the traditions of the House, I offer the Chancellor my congratulations on a long Budget speech. I think the right hon. Gentleman's Budget will be considered one in which he had opportunities to do big things but decided instead to follow a scatter-gun approach and do quite a number of rather smaller things. I regret that; I shall return to the subject in a moment. Nevertheless, I think that anyone outside this place who has not had a total loss of memory will feel that the speech just made by the leader of the Conservative party was a mix of hyperbole, hypocrisy and hysteria in about equal proportions.
I had written down that we could welcome some things in the Budget; in fact, we can welcome many things in it. It seems that the Chancellor has once again made a selective smash-and-grab raid on some of our bright ideas and proposals; they feature in considerable number. Although that was not done with the clarity and decisiveness that I would have wished, they are there, and we welcome that.
These raids are becoming such a habit that I had thought of offering the Chancellor honorary life membership of the Liberal Democrats. Starting with giving independence to the central bank--the Bank of England--which was our manifesto policy, not Labour's, he seems to have applied more policies from our last general election manifesto than he has from Labour's. We saw those policies clearly in the proposals for vehicle excise duty, fiscal neutrality in charging a carbon tax, and the uprating of basic pensions in line with wages.
However, the Chancellor may be relieved to hear that, on second thoughts, I have decided to withdraw the offer, for three reasons. First, I do so because, in his first two years, he cut our public services, especially those relating to health and education, more, in real terms, than even the Conservatives planned to. Whatever the Government intend to do next year, the fact remains that, by the end of this Parliament, taking the Parliament as a whole, the Government will have put funds into health and education at a lower level than the Conservatives intended.
Secondly, I withdraw the offer because the Budget does not do as much as it should--or, we believe, given the sum of money available, as it could--to tackle poverty in Britain. [Interruption.] If the Secretary of State for Education and Employment, speaking from a sedentary position, would be prepared to wait a moment, I shall see whether I can prove that proposition to him.
Lastly, I withdraw the offer because, in many cases, where the Chancellor accepts our aims, the means by which he seeks to achieve them are, at best, inefficient and, at worst, ineffective; so if I sound a little grumpy in my response, I admit that it is because it is extremely frustrating to hear someone else singing snatches of our song but doing so completely out of tune.
Before I come to the detail, let me look at the wider economic picture. Liberal Democrat Members agree with the Chancellor's basic fiscal judgment that this should be broadly a neutral Budget. I want to study the detailed figures, but I believe that it is broadly neutral. The priority must be to bring interest rates and the pound down.
Last November--I wonder whether the Chancellor remembers; I do not suppose that he does, because he does not read my speeches every day--I told him, in my speech after the Budget, that he was wrong to deny that we would have a manufacturing recession this year. I note that, in the small print of his Budget, the Chancellor has at least had to acknowledge that he was wrong, and that we are witnessing a significant manufacturing recession. That is probable; indeed, it is probably under way as we speak. As the Chancellor well knows, the main reason for that--the main reason why exporters and manufacturing exporters and farmers are in trouble--is the overvalued pound, still 10 per cent. higher in real terms than in May 1997 and 25 per cent. higher, a quarter higher, than it was in May 1996.
As I told the Prime Minister a couple of weeks ago, we welcome the fact that the Government have inched across the Rubicon on joining the euro, even though they still try to tell us that they have not; but, once again, the Government will the end but do not will the means. Why is the commitment to join the euro when conditions are right not followed by the policies to make them right? That is what a Government should do if they are governing and leading the nation. A change of gear is not enough if no one is driving the car.
The Chancellor told us that the centrepiece of the Budget is his tax reform. We agree that there is some tax reform to be done, and it can be done within a broadly fiscally neutral Budget. Today's tax reforms should have been an exercise in simplicity, fairness and honesty. Instead, they have been an exercise in complexity, gimmickry and a good deal of conjuring.
First, let us consider simplicity. The Chancellor told us last November that
That does not include the further personal and company tax complications that emerged today. Under the present Government, the tax system in Britain is becoming an
unholy mess. In the era of self-assessment, that is madness. It is costly and complicated for businesses. It is becoming a boon only for tax accountants. We all know that the tax incentives of today, however superficially attractive in the short term, quickly become the tax avoidance loopholes of tomorrow.
Secondly, on tax fairness, we do not object to the removal of mortgage interest tax relief. Indeed, I remember proposing it in our manifesto before the last election and in the 1992 election, and being roundly criticised by Labour for doing so. The proposal was considered outrageous. We are delighted that the Chancellor has adopted our policy. The previous Government began to phase out MIRAS, and the Chancellor has taken the logical end position. Amen to that.
If ever there was a time to remove mortgage interest tax relief, it is now, with interest rates low. The right thing to do, it seemed to us, was to use the money generated to raise the level at which people start to pay tax. I agree with the Chancellor that tax allowances should be removed or restructured to pay for lower tax on the working poor and others on low incomes.
The Secretary of State for Education and Employment, who questioned what I said earlier, might like to pay a little attention, rather than having a chat with the Chancellor. It is a manifest absurdity that someone on the minimum wage has to pay income tax. That is the current situation, and the Chancellor's proposals have done nothing to tackle it. That manifest absurdity remains.
We disagree with the Chancellor's plan to create yet another tax rate--a 10p tax rate. The Secretary of State for Education and Employment might listen.
The Secretary of State for Education and Employment (Mr. David Blunkett):
I am listening.
Mr. Ashdown:
I beg the right hon. Gentleman's pardon.
Why not increase the personal tax allowance--the 0 per cent. tax band--instead? Perhaps the Chancellor will listen for a moment to the experts in the matter, the Institute for Fiscal Studies. He has quoted them often in the past, and perhaps he accepts their view on this as well. They say that
Let us admit that the 10p tax rate is a policy driven by headlines, not results. I said earlier that the Chancellor has been raiding our policy bank. Unhappily, he has raided our policy bank for a policy that we had but that we rejected because it made no sense. My hon. Friend the Member for Gordon, the Treasury spokesman, was the first person to propose it, but when we looked at it, we decided that it was nonsense. Increasing the allowances would have been far better, far more efficient, far fairer and a far more effective way of tackling poverty and encouraging jobs.
We believe that the Chancellor should and could have taken a first step towards the long-term aim of raising tax allowances to £10,000, over two Parliaments. Perhaps we
should not object; that is a Liberal Democrat policy that he can raid in future years, when he finds that the 10p tax rate has failed. He should have paid for that measure by abolishing the 20p rate, as he did, and mortgage tax relief, as he did, and adding to that the introduction of a 50 per cent. tax rate for those earning more than £100,000 a year.
There is no point in saying that such a measure would kill incentive in this country; it would do nothing of the sort, as any comparison with similar tax rates in enterprise economies abroad would show. That measure would have raised enough money to increase personal allowances this year to £5,600, taking 2.5 million of the lowest paid people in Britain out of income tax altogether, tackling poverty and improving work incentives. That would be a far more efficient way to use broadly the same amount of money.
In respect of honesty on taxation, the Tories are a little unwise to lecture us on hidden taxes; I do not think that memories are that short. Let us be frank: neither the Government nor the Tories are telling us the whole truth on taxation and spending. The Government claim that spending on our public services is going up, but they say that taxes are not going up. The Tories imply that we are overspending and that taxes are soaring. Both are wrong.
I have not had a chance to look at the detail of what the Chancellor has said, but figures from the House of Commons Library show that taxes will rise in this Parliament by about 2 per cent. of national income, rather more than the Government are prepared to admit to us. The Tories are wrong, because spending, as a percentage of national income, is not going up. It is going down. In the Tories' last year in power, public spending was 41 per cent. of national income. In every year of this Parliament, it will be significantly lower than that.
"our policy is pro-tax simplification".
If that was his aim, he has been heading consistently and enthusiastically in the wrong direction. I shall give him some figures. A decade ago, there were four personal tax rates. Under his predecessor in the previous Government, there were eight personal tax rates. Under the right hon. Gentleman, there are no fewer than 54 personal tax rates. We will send the Prime Minister and the Chancellor the list, if they wish. My hon. Friend the Member for Gordon (Mr. Bruce), who is absent, will do that. He is no doubt making that case on the nation's television screens even as I speak.
"a 10 per cent. tax rate is an expensive way of achieving little. . . it is likely to increase the complexity of the tax system"
which
"could be reformed for equivalent cost, yet with more progressive results . . . by an increase in personal allowances."
Exactly.
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