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Dawn Primarolo: Why do the Liberal Democrats advocate an increase of 1p in everyone's taxation rate while defending a position whereby some people avoid paying the proper rate of tax or national insurance?
Mr. Davey: The Paymaster General could not have been listening. I argued against tax avoidance. The hon. Lady should consult officials and the industry and try to devise more targeted provisions which tackle the avoidance problem but do not create genuine difficulties for important sectors of British industry. When we debate the matter fully in Committee, I shall ask the Paymaster General how she will monitor the impact of IR35 to ensure that key people do not leave these shores and work elsewhere.
I shall also ask the Paymaster General to ensure that the IR35 provisions are implemented flexibly, especially in the early years, to ensure that tax officials give the benefit of the doubt to businesses that make legitimate mistakes in interpreting unclear provisions, and help them to comply. We shall argue that if Ministers stick to the IR35 provisions, the Government should provide for more generous allowances, especially for administration and training.
Liberal Democrats cannot support the Conservative amendment because it is irresponsible. It proposes reducing taxes when the economy is growing fairly fast
and when, to quote the right hon. and learned Member for Rushcliffe, a loosening of fiscal policy is planned. It would therefore be irresponsible to agree to the Conservative suggestion of reducing taxes all round. That would lead to higher inflation, a higher exchange rate, higher interest rates and a catastrophe for the United Kingdom economy. Indeed, it would mean a return to boom and bust. We shall therefore not support the Conservative party in the Lobby tonight.We shall oppose the Bill because it is too long, creates too many complexities, provides for a fiscal policy that is too loose and is far too niggardly to pensioners, the health service and schools.
6.56 pm
Mr. Roger Casale (Wimbledon): I am pleased to speak in support of the Finance Bill and against the amendments tabled by the Liberal Democrats and by the Conservative party.
The Bill builds on the work of previous Budgets. It establishes a new and stronger framework, which will safeguard the future prospects of the British economy. It builds further a platform of stability, locks it in place, extends employment opportunities for all and lifts millions of hard-working families out of poverty. The Bill sets out strong but realisable ambitions for the British economy; we should accept nothing less. However, they were unthinkable under the boom-and-bust policies of the Tory Governments of the past.
Step by step, the Government are constructing a platform of economic stability. The platform is an effective metaphor: it has sound and solid foundations, which are based on the independence of the Bank of England and the new fiscal rules. The Bill will rightly lock the new stability into place. We reject the boom-and-bust economics of the past for the simple reason that Britain cannot afford to repeat the mistakes of the previous Tory Government. Reckless borrowing led to swingeing cuts in public services; scarce resources had to be siphoned off to pay the interest burden on the public debt.
It would not be right to accept the Liberal Democrats' suggestion and abandon prudent management of the economy for the sake of short-term gain. That would also take us back to the boom-and-bust economics of the past that the hon. Member for Kingston and Surbiton (Mr. Davey) and his party rightly reject.
Boom-and-bust economics took Britain through two of the most damaging recessions of the post-war era; it led to millions of men and women losing their jobs and their livelihoods; it destroyed hundreds of thousands of businesses and broke the dreams and aspirations of a generation.
It is right to remind the House of the economic legacy of the recent past, not least because the right hon. Member for Kensington and Chelsea (Mr. Portillo) said that specific groups of people in Britain would be under attack because of the Budget. What about the damage that the Tory years of boom and bust did to Britain? We can celebrate only one victim of boom and bust: the Tory party's reputation for economic credibility and competence.
Is it a surprise that the man who argued in the House for the privatisation of the health service one week was appointed shadow Chancellor the next? Is it a surprise that
we heard soon after of reckless proposed tax cuts for the privileged few, packaged as a tax guarantee? Those are reckless promises because the country will remember broken Tory tax promises and 22 Tory tax rises in the previous Parliament alone. That appointment is no surprise because the Tories are still in the business of making rash policy gestures based on a horizon that stretches no further than the next general election. Apart from its record in government and the posturing that has gone on since, the Conservative party should examine the economic figures that it suggests, which simply do not add up.I welcome the fiscal tightening represented by the Budget. Putting to one side the debate about whether there is tightening or loosening, tax revenues are increasing because of the Government's policy, opposed by the Conservative party, of increasing employment and participation in the labour market. That is boosting tax revenues. As a result, we are able to spend more on much needed public services such as education and health. Contrast that with the previous Government's record: the generation of mass unemployment, the huge social costs of carrying it and public services starved of the resources that they needed.
The Budget locks in place the platform of stability that we need to build a new economic framework to safeguard Britain's future. On that platform the Government seek to build three lasting and interrelated elements of the new economy.
Mr. Geraint Davies: On stability, does my hon. Friend agree that the comments of the right hon. and learned Member for Rushcliffe (Mr. Clarke) were ridiculous? He said that there would be no independence for the Bank of England, interest rates would be lowered unilaterally and inflation would rip. Perhaps he should be known as the Chancellor ripper. Does my hon. Friend agree that stability has been the key to our success--800,000 jobs--and that the Opposition would jeopardise that?
Mr. Casale: I have some respect for the right hon. and learned Gentleman and for his views on Europe in particular, which are out of kilter with those of his party. However, in 1996 he had to strip hundreds of thousands of pounds of much-needed investment due for London Underground out of the last Tory Budget--with deepest regret, I am sure--and public services in my constituency, especially the Northern line, have been run down ever since. As a result, South Wimbledon station's refurbishment, which was due in 1997, has been carried out only this year. He is as much to blame as the others, but whether he wants to learn from those mistakes is an open question. The Conservative Front-Bench team seem to want nothing more than the opportunity to repeat them.
The first and foremost of the three elements is modernisation of the public services. We rightly want to provide a massive injection of new funds, especially into the health service, and to achieve far-reaching reforms to deliver best value and raise productivity. We want extra money for schools and for other public services such as transport and the fight against crime. However, we can contemplate such reforms only against the backdrop of economic stability.
The second element is welfare reforms that focus on reconnecting the lives of many people who have become completely disengaged from the labour market. However,
the reforms will also provide security and dignity for all those for whom that is not an option and encourage people to save and to make more provision for retirement.The third related element is labour market reform based on putting a floor under wages through the national minimum wage and making resources available for training and for lifelong learning. That will not only enable us to bring people back into the labour market, but allow them to contribute more productively once they are back in. Their work will be of greater value and they will be able to move up the labour market value chain and raise productivity for the whole country.
These reforms are closely interrelated; we cannot reform welfare without reforming the labour market to make it more flexible. If we can get people off welfare and into work, there will be greater resources for the public services. They could be invested in education, which would increase skills. That would raise productivity, which would help people to become more productive in the labour market later on.
In contrast to the vicious Tory cycle of boom and bust and neglect and decline, and built on that platform of economic stability, we are starting to see a virtuous circle of increased productivity and increased long-term productive capacity in the British economy.
In office, the Tories made the mistake of believing that the economy could grow and Britain could succeed while millions were left out and forgotten. Their Government thought that it did not matter in economic terms if thousands of young people left school without a job and no immediate prospect of getting one and were given no chance in life. Promoting fairness and bringing individuals back into the labour market is precisely how we build the foundations for long-term prosperity, which is why the steps in the Budget aimed at creating a fairer Britain are also part and parcel of building a stronger economy.
The Budget is lifting children out of poverty--it aims to halve child poverty in 10 years and eliminate it in 20--and delivers extra support for pensioners. More than 15,000 in my constituency of Wimbledon will benefit from the increase in the winter fuel allowance. It also rewards working families through the tax system with the working families tax credit. Step by step, a broader vision of how Britain could be in future is emerging. Contrast that with the narrow attack on individual Budget measures or the Liberal Democrat position that this visionary Budget is simply too long.
In that vision, Britain's long-term economic prospects are more secure. All who want to work are able to, which is perhaps a modern definition of full employment. In that Britain, child poverty will be halved, hard-working families will be lifted out of poverty and public services will be modernised, reinvigorated and working for the good of all rather than a rump serving those who cannot afford private provision.
Contrast the Bill's strength and vision with the pathetic spectre of a Tory party that has lost its reputation for economic competence and hides behind criticising the proposals as too complicated--the Tories' proposed simplicity would result from privatising public services, borrowing against future revenues and reckless tax cuts--and a Liberal party that has again become entangled in the complexities of its own contradictions. Once again, the Liberals have failed to see the wood for the trees.
The Bill is substantial. Taken together, its measures represent an important new step in the creation of a framework for a fairer and more prosperous Britain. I commend it to the House.
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