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Mr. Bercow: Given the inextricable link that exists between monetary policy and fiscal policy--a link that the hon. Gentleman highlighted--does he accept as a matter of plain logic that the arrogation of powers to the European central bank to run monetary policy will in due course inevitably have to be followed by a similar arrogation of powers to the central bank to run fiscal policy as well?
Mr. Radice: That is a debate for another day. As the hon. Gentleman knows, I shall be pleased to take part in it, but I will not be tempted down that path this afternoon.
I shall now deal with the tax burden issue. Mr. Andrew Dilnot, of the Institute for Fiscal Studies, told the Select Committee that
On the other hand, if we also take account of increases--mainly in company taxation--that were announced in previous Budgets and will come into effect, we see that the tax burden will increase. I do not think that that is anything to be ashamed of, however, because there has been a reduction in tax on people, and some increase in tax on companies, during the period concerned. That is a sensible policy: it has allowed tax rates to be reduced, and has allowed us to control the Government's fiscal policies.
Mr. Ian Bruce:
Surely, at the beginning of a tax year, people want to know whether they will pay more tax than they did in the previous year, rather than when the Government announced that they would pay the increased taxes.
Mr. Radice:
As a result of this Budget, most individuals will pay lower taxes. The Institute for Fiscal Studies has said that. It is not just coming out of my head; it is what we were told when we took evidence. That is the point of Select Committees: experts come and tell them things.
Mr. Heathcoat-Amory:
I hesitate to intervene, but I must correct what the hon. Gentleman has said about the evidence from the Institute for Fiscal Studies. Mr. Dilnot specifically said that, although it appears that families are
Hon. Members:
What is the reference?
Mr. Deputy Speaker (Sir Alan Haselhurst):
Order. We cannot have sedentary exchanges. The hon. Member for North Durham (Mr. Radice) gave way to an intervention; he must now deal with it.
Mr. Radice:
The right hon. Member for Wells quoted from our report without giving us any reference.
Mr. Heathcoat-Amory:
I quoted from Mr. Dilnot's response to a Conservative questioner. On page 4 of the minutes of evidence, he says that it is rather artificial to suppose that company taxes are borne by companies. He makes the point--a point that is familiar to tax specialists--that all taxes are eventually borne by the public and by individuals.
Mr. Radice:
That is a possibility, but it does not apply in the short term, and it may not even apply in the medium term.
Sir Michael Spicer (West Worcestershire)
rose--
Mr. Radice:
No, I will not give way for the moment. I want to make some progress.
Sir Michael Spicer:
The hon. Gentleman is giving a fair interpretation, certainly of what the Select Committee has said and of what the facts are, but why are his own Front Benchers so coy about the net effect of all these taxes in respect of the percentage of gross domestic product if the position is exactly as he describes?
Mr. Radice:
My Front Benchers have been making the point that this Budget reduces taxes. That point has been denied by Opposition Front Benchers.
Sir Michael Spicer:
The Chancellor, in evidence, refused to accept the precise point that I am now raising. He constantly refused to accept that taxes were going up over a period in respect of the percentage of GDP, even if the various Budgets were compounded. Why does the Chancellor think, in his own mind, that that is the case?
Mr. Radice:
The Chancellor must answer for himself. I am saying that the Government have been trying to make it clear this afternoon that taxes will decline as a result of
The tax burden depends on which definition people accept. We have looked at different ways of calculating the tax burden as a percentage of GDP. The excellent table 2, which is on page xi of the Treasury Committee report, shows that, in all three aspects, there is a reduction in the tax burden related to GDP as a result of this Budget. It goes up in latter years. It is only fair to say that, in respect of the national accounts definition of the tax burden, receipts rise year by year--including this year.
Jacqui Smith:
When considering the tax burden, would it also be fair to say that figures in the 1999 Red Book are lower than those in last year's Red Book and lower than those in the last Conservative Budget?
Mr. Radice:
Both those points are correct and, in the light of our report, it is quite absurd to accuse the Government of fiddling the figures. That is a stupid charge to make against them. It is also absurd to talk about smoke and mirrors--everything is in the Red Book, if hon. Members trouble to read it.
I accept that, in some instances, the Red Book is not as clear as it might be and takes some reading. Therefore, our report contains some presentational suggestions, which I hope the Treasury will look at. [Interruption.] The right hon. Member for Fylde (Mr. Jack) smiles, but some of those suggestions would have been applicable when he was in government. Our experience over a number of years prompted me, as Chairman of the Committee, to draft those suggestions. They were accepted by the Committee.
Mr. Jack:
I smiled because I have read those three paragraphs in the conclusion. I was quite amused by the fact that it took this Budget to provoke the hon. Gentleman and his Committee to administer a real rap across the knuckles to the Treasury for having gone so far in making it so difficult to find out some of the detail.
Mr. Radice:
It was very much the same when the right hon. Gentleman's party was in power, so he cannot come up with that kind of line. He knows that perfectly well.
There is no table setting out the basis on which the Budget changes are estimated. They are difficult to work out--one has to be a considerable scholar to do so--and they are not easily accessible. The figure in question is the £18 billion from which the Government were able to derive tax cuts and increase spending.
As our report says:
Mr. Jim Cousins (Newcastle upon Tyne, Central):
I am grateful to my hon. Friend for giving way, because he has given me the opportunity to be a total Government loyalist.
Mr. Radice:
A sycophant to the end.
"it is possible for anybody to . . . say, 'The changes announced in this budget will cut the tax burden' . . . while it is also a true statement to say that, as a result of all the budgets of this Parliament, taxes will be going up in April."
Our conclusion, with which neither of the two Front Benches may entirely agree, was that, both on the basis of including rebates and scoring them as expenditure and on the basis of excluding rebates scored in that way, taxes are cut in this Budget. There is no doubt about that: I have done the sums, and looked at the proposition in all possible ways.
"we can be certain it is people who will pay them."
The distinction between company taxation and the taxation of individuals is, to that extent, rather artificial.
"We . . . asked for a note on how the figure could be derived. This note explains that the £18 billion figure is reached by subtracting from the expenditure changes listed in table B13 the figures in lines 3, 6, 15, 16 and 19 to 27 of table 1.11, which are the budget measures affecting spending as distinct from taxation."
I can see that, but it is rather a difficult way for the ordinary individual to work out what is happening. We suggest that, next time, the Government give a clearer table so that we can understand the figures better.
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