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10.8 pm
Mrs. Louise Ellman (Liverpool, Riverside): I welcome the Bill which, together with other measures that have been enacted or are planned, shows that it is possible to combine the search for social and economic justice with support for initiative and enterprise. The other developments that go with the Bill include public investment, investment in our health and education
services, the beginning of measures to address the needs of a public transport service, and wide-ranging and far-reaching support for business, including financial measures and the creation of regional development agencies.
Both the main Opposition parties seem to be aggrieved by the Bill, the Conservatives because it seeks to change the system that they established and that failed the people of this country so badly, and the Liberal Democrats because they resent the effectiveness of presentation and because they are so trapped by their own rhetoric that they join the Conservatives in opposing the working families tax credit, which will put about £23 extra into the pockets of the families who need it most. The Liberal Democrats seem to be acting under the delusion that it is possible to govern without complexity. Anyone who has tried to govern will know that complexity is an aspect that must be handled. What really matters, however, is that the direction of policy should be correct. The policy in this Finance Bill is directed towards social justice, combined with the development of our economy.
The right hon. Member for Fylde (Mr. Jack), in response to an intervention, said that he did not want to turn the debate into a debate about all our yesterdays. I am hardly surprised by that, given that the "all our yesterdays" of the last Conservative Government led to more inequality than the country had seen since the last war. As a result of the economic deficit that that Government created, not one region outside London could match the European average in terms of gross domestic product per head, and the social deficit was so marked that the National Institute of Economic and Social Research considered adding a new category--that of the socially excluded--to its social class categorisation.
The hon. Member for Chichester (Mr. Tyrie) expressed the remarkable view that the Labour Government had been elected to continue the policies of the last Government. In fact, the Government were elected--with a majority rarely seen before--to change what the last Government had done. I am pleased to note the direction taken by the Bill, which builds on the work already done by the Government. That direction is towards social equity, and the development of economic initiative and entrepreneurship.
One of the most unacceptable features of the economy inherited by the Government was the penal rate of taxation imposed on the poorest people. Because of the way in which the tax and benefits systems worked together, when the Government came to power 750,000 poor people faced effective tax rates of 70 per cent. or more as they tried to better themselves. The number has now fallen by two thirds, although we have further to go. That has happened because of the Government's consistent and determined efforts to deal with inequality, and to look at the tax and benefits systems together with the aim of bringing about more justice and creating incentives for those who are working hardest.
If we examine the measures in the Bill, we see that the Government's policy is directed towards seeking more social justice. Twenty million households will be better off, including 7 million with children; 700,000 children will be taken out of the worst poverty; and child benefit has already been increased by 25 per cent., which is the largest increase ever. Because of the introduction of the working families tax credit--opposed by both Opposition parties--families will have a guaranteed income of
£200 a week. The Government are introducing the long-awaited system under which families whose incomes are no more than £12,000 a year will not be taxed.
The working families tax credit will bring many benefits, including proper child care credits amounting to up to £100 per week per child. There are also the new low tax rates--the new low base rate, and the new low rate of 10p in the pound. That 10p rate will take 300,000 of the poorest people out of tax altogether, and will halve the tax bill of 1.8 million. Cuts in national insurance contributions will mean that 900,000 of the poorest people in work will not pay contributions. The Government have included all those measures in the Bill to address problems of inequality, and to start to make it possible for us to give more justice and incentives to those who need them.
The Budget does more than look directly at economic injustice; it looks to supporting business--the creation of wealth. The new 10p rate of corporation tax supports small businesses in particular, and the main rate of corporation tax was cut last year.
I welcome the continuation of support in tax incentives for investment, tax credits for research and development, and the changes in the enterprise investment scheme to permit more small companies to benefit and encourage more start-ups of more new companies. I also welcome the extension of capital allowances and the setting up of the Small Business Service. All those measures, put together, send out a message to business--a strong message that the Government are supporting businesses and that practical measures are being taken, and will continue to be taken, to support them.
I represent Liverpool, Riverside--an inner-city constituency which must rank among the poorest in the country. It is in the city that is No. 1 on the list of cities with urban deprivation--and one of the poorest areas in Europe, qualifying for objective 1 funding. In that area of urban deprivation there is great poverty, but also great initiative and enterprise. I welcome the Bill because it, together with other measures that the Government have introduced, will assist my constituents, as it will assist people elsewhere in the region and in the country.
The Bill will give direct assistance to people who are suffering acute poverty, and the extra finance--including the additional £23 a week which will soon go to into the pockets of people with families who are most in need--will make a direct difference to their lives. For someone who is very poor and struggling to survive, £23 a week is a significant amount which will make a real difference. I say: shame upon those who voted against that measure in the Budget.
I welcome the Bill's support for business. There is great entrepreneurship in Liverpool and businesses are developing and thriving. The regeneration policies being introduced and developed by the Government mean that there are increasing opportunities for business development and business support.
The Government are backing business, and the Bill will give it further support. General measures are already in place to develop an effective infrastructure and create a supportive atmosphere for business, for business start-ups, for expanding businesses and for businesses growing out of the regeneration initiatives; so the Bill will help businesses to survive and prosper and to create more and much needed employment.
Mrs. Jacqui Lait (Beckenham):
I hope that the hon. Member for Liverpool, Riverside (Mrs. Ellman) will forgive me if I do not follow her detailed critique of the Bill with my own, because we are coming under some slight time pressure.
So many Budgets are greeted on the day with great cheers, but, the more one examines them, the more one sees the flaws. Many of my hon. Friends have analysed in great detail the problems of this Budget and the difficulties that the Government have stored up for themselves.
I shall mention briefly one or two issues of particular interest to my constituents. For instance, the small businesses that have been badly affected by the increase in red tape are disappointed because the Small Business Service will, so far as they can make out, teach them how to use e-mail, but will not help them with their regulatory problems. There is an even more detailed concern among many people who use their own limited companies to do their work. They are worried that those may be abolished in the sacred name of combating tax avoidance.
When we add up all the complexities that the Government have introduced to the tax system, it is clear that there will be a return of the tax avoidance industry. If this Budget is for anyone, it is for the accountants.
I shall spend most of my time talking about the same subject as I have spoken about in Finance Bill debates for the past five years. Indeed, I remember that, when the Economic Secretary to the Treasury was first appointed, I welcomed her to my annual contribution about smuggling and bootlegging. The hon. Member for Barnsley, Central (Mr. Illsley) spoke on the very same subject. It is refreshing that at long last the Government have recognised that the problem is growing by leaps and bounds, and have acknowledged an official figure for lost revenues--£1.5 billion.
Just before Christmas, I went to Dover harbour and saw an exercise in which Customs and Excise, the transport arm of DETR, the Benefits Agency and the police worked together to pick up the white vans. Twenty-six vehicles were dangerously overweight with beer and tobacco. Ironically, the drivers were allowed to telephone local taxi firms and hire taxis to take away the excess goods, so they got clean away with bringing in excess tobacco and alcohol. Eight of the vans were prohibited as defective, and 90 people were interviewed by the Benefits Agency. I understand that the agency reckons that it saved £31,000 in benefits on that morning alone. There were also customs seizures of about £19,000 worth of tobacco and alcohol.
If that was the effect of a by no means comprehensive exercise lasting only a few hours on one day just before Christmas, it is easy to imagine the sheer volume of tobacco and alcohol being smuggled and bootlegged.
The Budget has done nothing to make any difference. The Chancellor patted himself on the back for having frozen alcohol duty, but that will have no effect because the price differential is such that it is still extremely profitable to smuggle alcohol.
The Chancellor increased the revenue from cigarettes. At least, he thinks that he has increased the revenue from cigarettes, but in fact he has only increased their cost. He is simply encouraging worldwide smuggling. A packet of cigarettes from South Africa costs only 70p, so it is worth smuggling in crates and pallets full of cigarettes from somewhere that far away--not to mention the profits made by smuggling from Europe, especially from Belgium.
Inevitably, we are seeing the knock-on effects on health. The fact that the number of people smoking in this country is increasing has been confirmed by studies by Mintel, the British Market Research Bureau and several other respectable organisations. The Department of Health's figures prove the same thing.
We are building up a smoking-related health problem directly related to the increase in cheap tobacco. The Government cannot say any longer that the high price that they have put on tobacco is stopping people smoking--first, because it is palpably not doing that and, secondly, because wherever people are in the country, they can get cheap tobacco.
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