| Previous Section | Index | Home Page |
Mr. Gardiner: Given that the right hon. Gentleman has quoted the Rowntree figures with such approbation, will he confirm that it is his view that, as a result of the Budget and the changes that will be effected therein, more than 260,000 people will be brought back into work?
Mr. Jack: The report does not highlight the alternative to that, which is whether there may have been other relevant activities in the economy. Although there has been a slowdown in some sectors, unemployment had until fairly recently carried on declining. When talking about a new deal, there was an argument about the dead-weight effect of that measure. The argument involved whether the natural cycling of jobs and changes in the economy might well have produced new employment opportunities.
I must be fair to the hon. Gentleman because, having quoted an analysis, I must accept that it indicates, in the judgment of those who produced it, that some people will be induced back to work. If someone finds a job after a period of unemployment, we would wish to support that and none of us would disagree.
I am talking about the effective use of money that we are asked to approve in the Bill. The report to which I have referred imputes a cost of £3 billion for the 10p starting rate of tax. That money could have raised the starting point to £5,000. That could be said succinctly to be £100 a week tax free. That might have had an even greater effect in inducing people back to work.
Mr. Ian Bruce:
I must caution my right hon. Friend. If he reads the Red Book, it tells us that 58,000 people have been helped back into work by the new deal. In fact, that is simply the churn. There are more than 30,000 additional people in the 18 to 24-year-old group who are unemployed than when the new deal started, and the scheme has not even been going for a year yet.
Mr. Jack:
My hon. Friend, who studies these matters with keenness and assiduousness, makes an important point. I hope that when he makes his own contribution to the debate he will be able to develop these matters.
The Bill seeks to make changes to vehicle excise duty. The Government were happy to triumph the fact that they had taken £50 off VED. However, they increased by £5 the licence fee for any cars with engines larger than 1100 cc. Perhaps Treasury Ministers could tell us how they decided that 1100 cc was to be the start-and-finish point of this measure. I am struggling, but I suspect that the real answer is that there are 25.6 million cars, of which about 2.3 million have engines smaller than 1100 cc. The cost of exempting 2.3 million cars from that increase in order to reduce VED by £50 equates exactly with £5 on for the remaining 23 million vehicles.
The bizarre feature is that the Government have triumphed this measure as a way of encouraging more environmentally friendly cars. I do not know whether the Financial Secretary is aware that the target that 1100 cc cars are supposed to be able to meet is a CO 2 volume emission of 140 g per kilogram per year. There are cars in the 1.5 to 1.9 litre category which achieve that objective already. They are diesel cars. If the Treasury is being consistent, why did it draw the line at 1100 cc in trying to encourage environmentally friendly cars, when there are other environmentally friendly cars with larger engines that do the same thing that are clobbered by an increase in VED?
Will the Financial Secretary promise to publish the detailed sales analysis that shows that the consultation exercise that the Chancellor of the Exchequer is carrying out on the tiered structure of VED will achieve its objective? I cannot see that changing VED by £100 or so a year will have the slightest effect on the purchase of the majority of cars in this country, when 55 per cent. of those cars are purchased by companies. Employees have little chance to influence the sales decision. It seems that the Government have introduced a Trojan horse to try to raise yet more money from the motorist. It was introduced as a revenue-neutral measure, yet the Red Book tells us that there will be an increase in tax revenue in the first year of £40 million. Perhaps the Financial Secretary will explain how a revenue-neutral measure will raise an extra £40 million in the first year.
Mr. Gardiner:
I am grateful to the right hon. Gentleman for giving way to me again. On his argument about diesel, it is important to reflect on the fact that more than 85 per cent. of the diesel that is consumed in this country is consumed by large lorries and not by small cars such as the ones to which he referred.
Mr. Jack:
The hon. Gentleman misses the point. I do not think that he has read in full the Chancellor's consultation document. I urge him to do so because it is very good for insomniacs. The document shows where the direction that the Chancellor's thinking is taking. We see in the proposal a piecemeal approach and, for the sake of a headline--reduced vehicle excise duty--a limit of 1100 cc. There is no logic to that, or to the rest of the consultation exercise.
Other right hon. and hon. Members who have contributed to the debate mentioned the fuel duty escalator. I find it intriguing that Labour Members attack the former Conservative Administration for having introduced it, but I notice that, when Labour came to power, it did not seek to reverse that policy. If the Government had wanted to get rid of the escalator, they could have done so, but they did not do so--they just doubled it.
Mr. Leslie:
Am I right in recalling that the right hon. Gentleman was Financial Secretary to the Treasury between 1995 and 1997? Am I right in thinking that he was responsible for partially implementing a fuel duty escalator? Will he now say that he was wrong to increase diesel duty by more than 10 per cent. in each of those years while he was a Minister?
Mr. Jack:
If the hon. Gentleman was aware of the duties of the Financial Secretary when I had the honour
The short answer is that we are dealing with the Labour Government's response to our criticism of the fact that, as a result of their escalator, diesel fuel in the United Kingdom is the most expensive in Europe. I remember that, when the fuel price was going up, we looked forward to an ending of problems in the middle east, so that the lower oil price would constitute a lower input cost for Britain's business and transport, but that has not happened under new Labour.
A reduction in the oil price to $10 a barrel--the lowest price ever--results in the most expensive diesel fuel and highly taxed petrol in Europe. That is a perverse situation. The increase in inflation that has been announced is entirely down to the Budget measures.
Mr. Ian Bruce:
In trying to be fair to the House, my right hon. Friend is perhaps being unfair to himself and the previous Government. Is he aware that the Automobile Association has conducted a survey on the effect of the Conservative Government's escalator on fuel prices, which found that people economised and that the amount of fuel burnt has gone down, despite mileage going up? The AA concluded that further taxes would be foolish. It would simply ensure that people bought their fuel in France.
Mr. Jack:
I am grateful to my hon. Friend. If the Government wanted to be radical, why did they not assure motor manufacturers that they would examine the VAT rate on the price of cars, and find a way of recognising more environmentally friendly cars by making them genuinely cheaper? If they had wanted to, the Government could have made an adjustment to the corporation tax of motor dealers to reflect the sales pattern of more environmentally friendly cars. Why did the Government not use the carrot, instead of using the fiscal stick? That is what worries me.
I shall now examine three clauses in detail. Clause 45 deals with the provision and support of bus services. Can the Financial Secretary explain why the Government have sought to provide help for services using buses with a seating capacity of 17 or more? Do they not realise that, in a rural environment, a company that hires a small minibus to pick up people and bring them to work, for example, to save wear and tear on the rural transport infrastructure, will specifically not get help under the provision?
Is that yet another anti-rural measure from the Government? Can the Minister explain why London-based companies are induced by the measure to clog up London's roads even more with large buses, whereas no relief is given on the provision of season tickets for employees wishing to use the rather more environmentally friendly transport system in London--the railway? Why is that?
In clause 47, we see that Treasury Ministers have been busy. The clause deals with tax relief on company-provided cycles and cyclists' safety equipment. We discover that that
relief is available only for the purposes of the "qualified journey", which is a journey between the individual's home and workplace or between one workplace and another. Does that mean that representatives of the Inland Revenue will be outside Tesco on Saturday, watching to see whether an employee has ridden on his company bicycle to do his shopping? It is the theatre of the absurd. The Financial Secretary should consider in more detail the practical application of the measure.
Finally, I shall deal with clause 27 and schedule 3. Clause 27 introduces the children's tax credit. I am intrigued by the wording at the beginning of schedule 3. In order for us to judge whether the measure is practical, can the Financial Secretary explain the wording in paragraph 1, which states:
"Paragraphs 2 to 5 below apply where at any time in a year of assessment--
What period does the phrase "at any time" cover? Is it one minute or the whole year? How are people to know whether they have fulfilled the time criterion to qualify? Will we see "Blind Date"-type marriages being entered into so that people can gain the benefit of the tax relief? What is the Treasury's definition of a man and a woman who are living together as husband and wife? I do not know how the Government will deal with the practical implications of that.
(a) a husband and wife are living together or a man and a woman are living together as husband and wife"?
| Next Section
| Index | Home Page |