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Mr. Heathcoat-Amory: If the hon. Lady will wait, I shall explain. One of the items that I intended to raise later was the Government's failure to reform the welfare state as they promised. The House will remember that the Prime Minister promised to fund the extra expenditure on health and education by reforming the welfare state, as the Conservative Government had been doing. In the last three years of our Administration, the Conservatives achieved a flat expenditure profile on social security expenditure: it went up in real terms by a total of1.5 per cent. over those three years. That contrasts with
the 3 per cent. annual real-terms increase to which we have now returned. If the Labour Government had continued the successful reforms that the Conservatives had implemented, there would be plenty of money available to use an alternative to the tax-raising measures that I criticise.
Mr. Bercow: Does my right hon. Friend recall that, writing in The Times of 11 March this year, the respected economic commentator Anatole Kaletsky dismissed the Government's claims for the Budget as "simply false"? Mr. Kaletsky went on to say:
- "As shown unambiguously in the Government's own Budget Statement, taxes have risen in each of the past two years and will rise even more in the next financial year."
Mr. Heathcoat-Amory: My hon. Friend is entirely and absolutely correct. The Treasury Committee reached a similar conclusion. The Committee--which has a distinguished Labour Chairman, the hon. Member for North Durham (Mr. Radice), and a Labour majority--deliberated about the precise matter to which my hon. Friend referred, and concluded:
- "The tax burden will increase during the coming financial year."
- "the aggregate tax burden is certainly rising."
Mr. Ian Bruce: When the Government came to power, they introduced a utilities tax--the so-called windfall tax--to retain the totals and make it appear as though taxes were not rising. More important, has my right hon. Friend noticed that, although the new deal--which has operated for a whole year for 18 to 24-year-olds--reduced youth unemployment in the Government's first year, it is now rising again? The Government have taxed the utilities, wasted the money and put more people out of work.
Mr. Heathcoat-Amory: My hon. Friend is correct. All the make-work and employment schemes in the world do not compensate for a job market that is going in the wrong direction. If one taxes businesses excessively, one will create fewer jobs. It is quite simple, and my hon. Friend is right to draw that fact to the attention of the House. The only people who do not understand are those sitting on the Government Benches. The truth has been revealed: this is a tax-raising Chancellor and a tax-raising Government, it was a tax-raising Budget, and we now have before us a tax-raising Finance Bill--and we will oppose them all.
One would not know all that if one were to rely on the propagandist leaflet published by the Treasury on Budget day. Some 1.5 million copies of the pamphlet, called "Budget 99", were printed and circulated. A post office
in my constituency has refused to distribute the leaflet on the ground that that would be in breach of its contract with the Post Office not to deal in partisan and party political literature.
The postmaster in my constituency has spotted several curious omissions and misleading statements in that leaflet. For instance, it asserts that the 10p starting rate applies to the first £1,500 of income. That is flatly untrue--we did not discover that from the Chancellor on Budget day, but we have since read the Red Book and the small print. We now know that all those who rely on savings--and the Government are trying to encourage people to save--will continue to pay tax not at the new 10p rate but at the rate of 20p on that band of income.
The Government have compounded that injustice by failing completely in the Finance Bill to reverse the injustice already referred to whereby 300,000 non-taxpaying pensioners will not receive their dividend tax credits. That scandal remains uncorrected. The Government are compensating better-off savers and taxpayers for the withdrawal of dividend tax credits. However, those who, by definition, are the poorest savers--those who do not pay tax--will not receive from April this year any of the dividend tax credits.
The Chancellor and the Treasury leaflet also misdescribed the nature of the 10p tax band in another respect because they did not refer to the fact that, although the Government are introducing a 10p band, they are abolishing the 20p band. More than 4 million people will now be paying a higher marginal income tax rate of 23 per cent. instead of the previous rate of 20 per cent. In other words, they are being pushed upwards into the 23p band rather than downwards to the new 10p band.
Exactly the same habit of stealth is apparent in the treatment of the married couples allowance. We shall vote and argue to retain that allowance because it is important that the institution of marriage remains recognised in the tax system. Not only have the Government abolished that allowance, but the children's tax credit, which the Chief Secretary just described, will not replace it until a year later. For a full year between the abolition of the married couples allowance and the introduction of a new and unsatisfactory alternative, the Government have the use of nearly £2 billion.
I turn now to the savings fiasco. The Government came into office committed to a radical reform of the welfare state. They had great plans to reform and reduce expenditure on social security. As I have already explained in reply to an intervention, they failed to do that. Conservative Members understand that reform is a question not only of cutting social security benefits, but of getting people into employment, ending their reliance on benefits and helping them to rely on their own savings and pension provision. So what are the Government doing? They are enmeshing businesses and savings in a web of regulations and extra taxes.
That is well illustrated by the Government's spiteful abolition of the most successful vehicles of all time--tax-exempt special savings accounts and personal equity plans. They were established over many years and have a proven record of success. They have genuinely established a savings habit among the British people. I do not know whether the Government's action is due to a lack of business experience on the Treasury Front Bench or to stupidity, but they are abolishing those tried and
tested savings vehicles and replacing them with a scheme that is wholly untested and not trusted. People do not trust the new individual savings accounts because the Government cannot be trusted on savings ever since they introduced their annual £5 billion raid on pension funds. No member of the public trusts the Government on pensions or savings.
Mr. Gardiner:
Does the right hon. Gentleman accept that the take-up rate in ISAs suggests that the Government have maintained the public's trust and have, in particular, targeted the means to save at those on lower incomes, rather than those who, rightly, took up PEPs in the past, most of whom were on higher incomes?
Mr. Heathcoat-Amory:
No, the hon. Gentleman is entirely wrong. I do not know whether he read The Sunday Times last weekend, but it reported that the take-up of ISAs is running at about 50 per cent. ofthe previous commitment to PEPs. In contrast to the Economic Secretary's complacent remarks at Question Time last week, the record on the take-up of, and savings through, ISAs is extremely disappointing. ISAs are less generous, more expensive and more complex than what they are replacing. The Prime Minister used to refer to an army of an extra 6 million savers that he was going to attract to this new savings product, but we do not hear any more about that from the Government; perhaps the Financial Secretary, who is to reply to the debate, can give us some updated figures. How many of those extra 6 million savers are applying to save through this new and untried savings vehicle?
Another awkward statistic for the Government, again from their own Red Book, is that the savings ratio has fallen from 11 per cent. in 1997 to 7 per cent. last year. The Government's effort to create a savings culture to replace a welfare culture has failed, and they have only themselves to blame.
Business taxation--
Ms Sally Keeble (Northampton, North):
Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory:
I hope that the hon. Lady will forgive me, but I have been fairly generous in giving way. I must make progress because several of my hon. Friends wish to contribute to this important debate.
Exactly the same propaganda machine has been busy in respect of business taxes. The Government came into office saying that they wanted to be friendly to businesses. Well, they have been friendly to a number of business men, but the general taxpaying business community has experienced nothing but an increase in the regulatory and tax burden on their enterprises. There are pages and pages of extra regulations and a massive extra complexity in the tax system.
The Government do not understand that a complex tax system, with multiple rates and complicated allowances, is itself a form of overhead that has to be borne by the productive sector of the economy. The Government have taken a tax system that we were simplifying and lowering, and made it more complex and raised it. I ask the House not to take my word for it, but to listen to what outside commentators and trade bodies are saying.
The president of the Confederation of British Industry, Sir Clive Thompson, said on Budget day:
The problem does not lie only with the taxes inherited from the previous two budgets. The Association of British Chambers of Commerce, again in response to the Budget, said that its members faced an extra £3.2 billion increase in taxes over the next three years from the 1999 Budget alone. It concluded in a press release:
Unemployment in my constituency is going up because firms are simply not able to take on extra unemployed people because of the extra regulations and taxes heaped on them in one Budget after another. The Prime Minister goes to Milan and lectures other European Union leaders on the need to follow the United States model of low regulation and low taxes, yet in the Finance Bill he is converging not on that model but on the European Union model of more regulations and higher taxes. A very good example is what the Chancellor is doing with stamp duty, which is going up again. Contrary to what the Chancellor implied in his Budget speech, three quarters of the revenue is paid by businesses, not by individuals. Again, he is heaping extra burdens on the very sector of the economy that he hopes will provide extra employment.
The leaflet to which I have already referred is entirely silent on stamp duty, even though stamp duty raises more than three times as much as something that the leaflet does describe--a new research and development tax credit. That is proudly stated in that propagandist leaflet which has supposedly gone to 1.5 million households, even though it is not in the Finance Bill and will not come into effect until 2001. That is what the taxpayer is paying for--propaganda issued by the Treasury, which talks about measures not in the Finance Bill and covers up tax-raising measures that are in it.
I have dwelt at length on the fiddled figures. I shall end by mentioning indirect taxes. We shall debate the subject at greater length tomorrow, which is an Opposition day, but let me simply say that it is now beyond doubt that the Government are engaging in a deliberate and systematic raising of fuel duties, which not only does great damage to the rural motorist and those who have to use car transport, but is making an entire British industry uncompetitive in European terms.
Not only have the Government increased the escalator: they have had an extra Budget. Moreover, they have targeted the increases on the fuel of industry--diesel. They have made it nearly twice as expensive as it is for most of our competitors on the continent. Diesel duty is now exactly twice the European Union average.
"over the next four years as a result of Budgets which we've seen in the last two years, we are going to face something like a £20 billion increase in business taxation".
If the Government do not agree with that figure, perhaps they would like to say so now.
"business today is more heavily taxed, more heavily regulated than we were two years ago".
These are the very firms on which the Government are relying to produce the extra jobs for their employment schemes, a point made in an intervention by my hon. Friend the Member for South Dorset (Mr. Bruce).
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