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7.50 pm
Mr. Ian Pearson (Dudley, South): Budget 1999 takes a major step towards building a stronger economic future for Britain and I warmly welcome the Finance Bill that takes it forward. The Bill adds to the two previous Finance Bills of the new Labour Government and, in many ways, will be seen as the most radical of the three. With 129 clauses and 20 schedules in 169 pages, it is certainly shorter than the two previous Finance Bills, but is none the worse for that--although it continues to surprise me that there are no fewer than eight schedules covering various aspects of stamp duty. However, there is a great deal of meat on the Bill and I am sure that all those who discuss it in Standing Committee will find that there is plenty of work to do.
I have served on every Finance Bill Standing Committee since I was elected to the House in December 1994, so I am becoming something of a connoisseur. Although 1995 and 1996 were good vintages for Bordeaux and Burgundy, they were very poor indeed for Birmingham, Brighton, Bristol and the rest of Britain. That meant that, when the new Labour Government took office in May 1997, we inherited an extremely fragile economy, a national debt that had doubled and public finances that were in a terrible state.
Our first two Budgets laid down a sound macro- economic framework for the United Kingdom and this Budget builds on that. The Budget is finely balanced. The overall fiscal stance of all three Budgets has clearly benefited the British economy, and will put us in a position that ensures that, in the next century, British companies will have the ability to succeed in Europe and our European home market.
Mr. St. Aubyn:
The hon. Gentleman tells us that the situation that his Government inherited at the election was unsound. We could argue about that for a long time, but will he tell us whether he believes that the situation was better or worse than that which the Conservatives inherited in 1979?
Mr. Pearson:
I have no desire to spend Second Reading giving the hon. Gentleman a history lesson, but, if he wants to pursue that matter outside the Chamber, I shall be happy to engage in debate with him.
It is clear that the Budget and the Finance Bill will make work pay and help to build a fairer society. I particularly welcome the 10p starting rate for income tax; that will benefit many hundreds of thousands of people throughout Britain. It sends an important signal as to the Labour Government's views on personal taxation. I also welcome other measures, such as the national insurance reforms that have taken place. They will relieve almost a million people from paying tax at all. The minimum income guarantee means that families with one wage earner will be able to earn slightly more than £10,000 before they have to pay tax. A package of reforms totalling £1 billion will benefit pensioners. We should also welcome the increases in child benefit that were announced in the Budget.
I want to devote most of my speech to the effects of the Budget on business. The first point to acknowledge is that the 10 per cent. starting rate of corporation tax
is widely welcomed by small businesses. The research and development tax credit is also welcomed by small and medium-sized businesses. The Opposition have lost the plot when it comes to issues such as the R and D tax credit. Britain's future clearly lies in building a knowledge-driven economy. Research and development encouraging innovation and the development of value-added products and services must be the future for the British nation. It is essential that we have an R and D tax credit and I am sure that it will be used by businesses.
The extension of the scheme for employee share ownership is welcome; a vast body of evidence suggests that that is an extremely sensible measure that will help to improve company performance. Likewise, the 40 per cent. capital allowances regime will be significant in helping to encourage investment and growth--I shall say more about that later.
Finally, in respect of measures that are welcomed by businesses, there is the announcement of the establishment of the small business service. For too long, small businesses have received short shrift from Governments of whatever political persuasion. Now, the small business service has the potential to do something radical and to ensure that the voice of small business is heard at the heart of Government. My hon. Friend the Financial Secretary and her colleagues on the Treasury Bench are keen that that should happen, and I hope that we follow through on that matter so that we develop a powerful body with the same clout as the Small Business Administration in the United States.
As other Members want to contribute to the debate, I shall be brief. I want to focus on three matters: road fuel duty; the climate change levy; and the capital allowances regime. In relation to road fuel duty, I have no time for the opportunism of the Tories. The Conservative Government introduced the road fuel duty escalator and it is a bit rich for the Conservatives to say that they have changed their minds on that issue now, late in the day. The road hauliers, too, have not been especially well served by having as their chief spokesman a former Tory Minister with ambitions to be the mayor of London.
Countless local road hauliers have talked to me about the road fuel duty. I have seen their balance sheets, profit and loss accounts, cash-flow forecasts, management accounts and order books, and I know that many of them have real problems. The problems are not confined to road hauliers; large swathes of manufacturing industry are beginning to be hit by the tax. As no other Government in Europe are following the road that we are going down, and as the pace of technological change is such that new developments in clean fuel technology and alternative propulsion systems mean that year by year our cars are becoming cleaner, we need to reconsider the road fuel duty escalator. We have reached the stage--we may even have gone past it--when it is time to take our foot off the gas and to say that the road fuel duty has now achieved what we could have reasonably expected for it without damaging the competitiveness of British industry. Common sense says that we must take our foot off the escalator at some time; I should like to think that, after this year, we shall decide to discontinue the road fuel duty escalator policy--perhaps that is an early Budget 2000
representation. I should welcome any review or detailed proposals that the Government might want to make on that matter.
Mr. St. Aubyn:
I applaud the courage of the hon. Gentleman in standing up to the pressure from his colleagues on the Treasury Bench on that matter. However, if he accepts that it is right to call a halt to the escalator, why does he criticise the Conservatives for saying that we should call a halt before the Finance Bill is passed and not afterwards? Surely, we are on the same side; it is only a question of when we call a halt. The road hauliers in his constituency are telling him that we should call a halt before this latest increase, not after it.
Mr. Pearson:
I can assure the hon. Gentleman that we are not on the same side. The Conservatives' opportunism beggars belief: they have wound up hauliers and they have given tacit support to some of the recent demonstrations, which I condemn. However, the issue will not go away. The hon. Member for East Londonderry (Mr. Ross) was right to say that the problem is especially acute in Northern Ireland. My hon. Friend the Member for Barnsley, Central (Mr. Illsley) also made some sensible points in respect of the road fuel duty escalator.
On the question of technological progress, every major automotive manufacturer is currently spending a lot of money on research into battery-operated vehicles and fuel cells. Daimler-Chrysler has already announced that, in 2004, it is to start production of a fuel cell-powered car, and Toyota, Ford and GM are all following suit. The technology already exists and the costs are being driven down, if not by the minute, then by the day. If we were able to fast-forward to 2010 and look back on the period between now and then, we might feel rather silly at having taken action that damaged British competitiveness when cleaner, more fuel-efficient cars were coming along to remove the problem. If we do not have a European solution to the problem, we do not have any solution at all.
The climate change levy will not be introduced until 2001, and consultation will be carried out in respect of the proposals, which is welcome. I remain concerned that the primary impact will be on manufacturing industry, so we must take care during the consultation phase to do all that we can to ensure that extra burdens are not imposed on manufacturing. I am sure that the Government will come up with an exemption scheme for high-energy users, but I should like to highlight the glass industry, which is important to my constituency.
Glass manufacturers operate in an extremely competitive environment and they are significant energy users. The industry uses fairly large pieces of capital equipment, so changing to investing in more efficient technology in anything less than the medium term would create insuperable business burdens and threaten the future of large sections of the industry. I raise those issues as part of my early representations and hope that they will be considered during the consultation process.
The 40 per cent. capital allowances regime is extremely welcome--perhaps in the next Budget, the Government will announce that it is to be a permanent feature of their policy. The specific matter which I want to highlight is leasing, which is currently excluded from the proposals
for the capital allowances regime. I have no qualms about saying that some of the scams that went on in finance leasing occupied a lot of our time, as we tried to do something about them in previous Finance Bills. No one wants the tax base to be eroded by purely artificial schemes, but let us consider leasing in connection with information technology.
The current tax system has the potential to distort investment decisions, because, if a company has the money or the financial security to borrow the money to do so, the existing regime provides an incentive for it to buy, or to take out a loan to buy, capital equipment such as IT equipment. Most sensible companies consider leasing as a means of purchasing IT equipment, but the companies are unable to benefit from leasing arrangements under the current regime. That is wrong, because leasing computer equipment is a sensible option that gives small businesses the opportunity to upgrade their equipment, which is not possible if they buy the equipment. As a Government, we should not in effect be encouraging companies to buy IT equipment when leasing deals would be far more efficient.
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