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Mr. Ian Bruce: I am not sure that my right hon. Friend is doing his mathematics the new Labour way. When he
described a saving of £1 billion over three years, he assumed that that meant a third of billion a year. In new Labour mathematics, one starts with a sixth of a billion, in the second year one gets a third of a billion, in the third year one gets half a billion, and all three figures must be added together to reach £1 billion. My right hon. Friend said that a third of a billion was a small amount; a sixth of a billion is even less.
Mr. Jack: I am grateful to my hon. Friend for admonishing me on the arithmetic, and he may well be right, which emphasises the point on which I am probing the Treasury Minister--what has been going on about something about which Labour Members were, in opposition, zealots and now, in government, they have gone to sleep over.
The Government have been very sneaky in the way that little measures such as the 1 per cent. increase in insurance premium tax have crept in. I seem to remember Labour opposing the introduction of that tax, which took place at a time when my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) was seeking ways to address the state of the public finances. Now the Government are slipping in measures to gain another couple of hundred million, rising to £300 million at the end of the period outlined in the "Financial Statement and Budget Report". Not much has been said about that but, when people start to renew their insurance policies, they will realise what this new Labour Budget is about.
The sum total of the effect of all those tax changes is to be found in table B9 in the Red Book, dealing with current receipts, which is the sum total of the financial effects of this Finance Bill. In this financial year, gross receipts encompass 39.4 per cent. of gross domestic product. The percentages will be 39.5 next year, 39.6 the year after, 39.6 the following year and 39.7 at the end of the series, in 2003-04. Those figures take into account netting off, for example, the windfall tax, VAT, excise duties, social security contributions, other taxes and royalties, as well as income tax and the allowance for the tax credit. The percentage does not take into account the other hidden taxes--the increases in council tax, which people must bear as part of their personal tax burden.
Whichever way the Government try to wriggle on the hook of the question, "How are taxes going up under Labour?" the answer is that, in GDP terms, they are. It is no use Labour Members saying, "But if we had followed the Tories' forecasts, the percentage would have been higher." Well, I am sorry; on 1 May 1997, the present Government took over, and the responsibility for the economy passed to them.
When I consider in cash terms the combination of the measures that were introduced in 1998 but are yet to be introduced, and those in this year's Budget, I find that there is a net increase in the tax take over the next three financial years of, respectively £2.6 billion, £3.6 billion and £4 billion. Those are inescapable figures and cannot be denied. They are from the "Financial Statement and Budget Report".
In his opening remarks, the Chief Secretary to the Treasury told us that this was a business-friendly and investment-friendly Budget. If that is so, will the Financial Secretary explain later why chart A6, on page 141 of the "Financial Statement and Budget Report", shows business investment declining over the next two
years? She has until a late hour this evening to answer that question. When I asked the Minister for Small Firms, Trade and Industry that question, he frothed at the mouth. He did not recognise the truth in the graph that the Government have published.
Much of the Finance Bill is predicated on what the economy will do. Barclays bank, in its assessment of the Budget, told us that the projections on growth were more optimistic than it, and many other commentators, would predict. It will be interesting to note the extent to which the tax revenues anticipated in the statement are realised. Barclays bank's overall commentary on the Budget detail was more telling. It praised the
The CBI bears out that point in its judgment about the Budget, in which it also draws attention to the growing burden of tax--£5 billion--on its members. It talks about the fact that
The CBI says that the Budget reality disappointed after the pre-Budget rhetoric. It said:
The CBI also observes that a clause dealing with the 10p starting rate of income tax is a bit of a gimmick, and it similarly describes the 10p starting rate of corporation tax as such--because it applies only to the first £10,000 of profit. Thereafter, as profit increases, the tax increases very sharply. Those are not my words but those of the CBI, and it makes other detailed criticisms of the Bill.
The Association of Chartered Certified Accountants made another damning criticism of the cost of administration of the Budget, especially to small and medium-sized enterprises. It said:
Mr. Ian Pearson (Dudley, South):
If the right hon. Gentleman reads the ACCA's newsletter more closely, he will see that it refers to many other measures in addition to the one that he has mentioned.
Mr. Jack:
The first paragraph of the document reads:
In the magazine Taxation we start getting towards some of the detail of the Bill and some of the problems that it contains. In a leading article, Malcolm Gunn points out the enormous complexity that is brought about by the number of tax rates with which we are now having to cope. He observes that there are four different rates of income tax plus the schedule F upper rate of 32.5 per cent. I would like to know from Ministers on the Treasury Bench why they are prepared to sanction such a complex range of taxes. As has already been said, savers will not get the benefit on their savings of the 10p starting rate, but will have to pay on the basic rate. Why is that? Why is it that people with modest savings, whom, the hon. Member for Govan spoke about with such passion, are once again clobbered by the Government, who will not visit the benefit on savers, as we did, at the lowest starting rate for tax? The Government are wedded to complexity.
As Mr. Gunn said:
At the conclusion of his article, Mr. Gunn states:
"Chancellor's emphasis on macroeconomic stability",
but continued,
"but some of the detailed structural reforms could be criticised as being confusing, over-complex and expensive to administer, particularly for small businesses. The structure of personal taxation has become more complex with an increase in the number of tax rates. Simplicity, stability and minimal compliance costs are important virtues for a fiscal framework looking to promote effective planning and productivity."
That is a telling and damning criticism of a Budget, and a Finance Bill, that have been published in the name of the so-called reforming Chancellor. If the Government consider themselves to be individual-friendly and company-friendly, they had better address that criticism, because it is not unique to Barclays bank.
"Budget 99"
increased
"the burden of business taxation"
and it said there was
"little recognition of the concern about administrative burdens".
There we have it from the CBI, from Barclays bank and from other commentators.
"Against . . . encouraging background"--
the pre-Budget consultation--
"the steps actually taken in Budget 99 were somewhat disappointing."
That is from a body that is trying to do business with the Government.
"The cost of administration is around a third of the total tax bill. These new measures will impose further costs."
20 Apr 1999 : Column 740
That is a damning criticism--[Interruption.] If the hon. Member for Dudley, South (Mr. Pearson) disagrees, will he intervene and tell me why he disagrees with that respectable private body?
"ACCA is disappointed that the government introduced further complex tax changes in last month's Budget."
There could be no more damning a sentence than that.
"This must be one of the most complex personal tax systems ever devised for the United Kingdom and the taxpayer, an uninformed layman".
As he observes, they have to operate the system on the pain of penalties and surcharges if they get it wrong. It is important that we take note of such comments, which are a damning criticism of what the Government are up to.
"All this complexity is apparently to satisfy the political objective of introducing 'the lowest rate of income tax this country has seen for more than thirty-five years'--a statement which many consider to be little more than a devious political soundbite--coupled with the Treasury's insistence that the 20 per cent tax deducted from bank interest should not be repayable to the tiny number of taxpayers who are within the starting rate only."
That is how the experts see it, but let us consider in more detail clauses 19 and 20, which deal with the starting rate of 10p for tax.
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