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Mr. Jack: I accept what the Economic Secretary said about the word "parity" as that would achieve the same purpose. She has set a challenge to the insurance industry to use the opportunities of discussion with the Treasury and the Revenue to develop a package in which my proposal might find a place. However, I would not expect her to commit herself at this stage.

As for my parliamentary questions, I think that those who draft the answers to questions were pretty clued up as to why I was asking them, so it was disappointing that rather than the negative answers that I received there was not a little more imaginative drafting. However, given the assurances about future dialogue and the fact that no doubt the industry will want to rise to the challenge, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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New Clause 2

Rates of duty, etc.: reference to Retail Price Index


'In setting rates of duty, taxes, tax allowances, or tax credits by reference to a change in the Retail Price Index, there shall be used the actual change in the 12 months to the month preceding the announcement of the change.'--[Mr. Heathcoat-Amory.]

Brought up, and read the First time.

Mr. David Heathcoat-Amory (Wells): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss new clause 7--Timing of announcement of pensioner income tax allowances--


'In section 257C(3) Taxes Act 1988 add at the end "The order shall be made by 31st December following the preceding September referred to in subsection (1).".'.

Mr. Heathcoat-Amory: An important part of the budgetary process is the uprating of tax rates and associated matters and, at other times of the year, the uprating of benefits and pensions. New clause 2 seeks to bring some honesty and transparency into the process and into Government finances more generally. It would require the Government to do what the previous Government did, and base the uprating of taxes, allowances and tax credits, and, by implication, benefits and pensions, on a single backward-looking or historical basis--in other words, to treat all upratings in the same way. Not only is that right in principle but it gives additional certainty and precision, because people can see that the increased rates are based on an arithmetical index that is generally published and available.

6 pm

The Financial Secretary to the Treasury (Mr. Stephen Timms): The right hon. Gentleman suggests that the Government should follow the practices of the previous Government. On a number of occasions, the previous Government froze the allowances altogether. Will he acknowledge that when he advocates that we follow their practices?

Mr. Heathcoat-Amory: Not only did we freeze some of the upratings but we reduced certain duties. In our last two Budgets, we froze the duty on alcohol and reduced it on spirits. We did that for sound reasons, and it is regrettable that the incoming Labour Government failed to follow that practice and uprated alcohol duties again. Now we hear that a main cause of disorder in all our streets is abuse of alcohol, some of it bought from illegal outlets and undoubtedly smuggled across the channel. The Government should have tackled the cause of that crime rather than trying to tackle its symptoms; they should have tackled the severe smuggling problem. So the answer to the Minister is that on occasions we froze some tax increases. I commend the practice to him.

The new clause ensures that where the Government increase taxes and benefits by reference to a prices index, they use a single historical one. I contrast that with what the Government are doing now. They pick and choose whether they use an historical or a projected index, purely for their own convenience. The most obvious example is the treatment of fuel duties. The basis of that treatment was changed in 1997 from an historical to a projected

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inflation assumption. That was a clear break with what had happened previously, probably caused by the fact that the Government sought to introduce an extra uprating. The Government introduced four upratings in three years before they finally came off the fuel duty escalator.

Mr. John Bercow (Buckingham): Given that 29.5 per cent. of the price of a pint of beer, 50.5 per cent. of the price of a bottle of wine and 61.3 per cent. of the price of a bottle of whisky goes directly to Treasury coffers, can my right hon. Friend offer the House a guesstimate of how much lower those proportions would be in the happy event that new clause 2 had been passed at the beginning of this Parliament?

Mr. Heathcoat-Amory: My hon. Friend makes a good point, and most usefully broadens the debate. We are not discussing the increase in road fuel duty alone. As he has rightly spotted, the same system has been used to uprate tobacco and alcohol taxes in the Budget by far more than was justified. The figures are revealing. Fuel and alcohol duties increased by 3.4 per cent. immediately on Budget day. That was the anticipated inflation rate for the rest of the year. Curiously, that inflation rate does not appear anywhere in the Red Book, but that was undoubtedly the Government's estimate. By contrast, income tax allowances and tax credits, such as the tax credit for the disabled, all increased not by 3.4 per cent. but by between 1 and 1.5 per cent. That is all laid out on pages 138 and 139 of the Red Book.

So the Government took a high inflation figure when it suited them for revenue purposes, but when they gave away some money to working families or disabled people, or simply uprated personal allowances, they used a far lower figure. The net benefit to the Treasury was simply colossal. The Government notoriously used exactly the same methodology to uprate pensions by only 1.1 per cent., leading to the 75p per week insult to pensioners with which the country is so familiar.

Needless to say, there was not a word about the change in treatment of fuel duties in the Budget speech. The increases were all described as simply increases by the rate of inflation. Worse than that, when challenged, the Government denied it. I am glad that the Paymaster General is attending the debate. She will recall that this very issue was raised by my hon. Friend the Member for Arundel and South Downs (Mr. Flight), who is in his place now. On 6 April, he challenged her and pointed out that petrol duty had been raised by an inflation index of 3.4 per cent., whereas allowances had been raised by only 1.2 per cent.

The Paymaster General replied with a mixture of patronising my hon. Friend and being wrong. She said:


That was the patronising bit. The false and wrong statement was as follows:


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Such examples show why people have lost faith in the Government and why the Government's assertions about taxes and benefits are simply not believed any more. Indeed, the contents of the memo leaked from No. 10, in which the Prime Minister whinges that no one believes him any more and he has lost touch with the instincts of the British people, are at least in part attributable to the fact that people have not been told the truth. When challenged, the Government flatly deny what is in fact the case. The practice of using two indexation procedures, simply for their convenience, has grown under this Government. I believe that that is not just wrong but probably illegal.

Some of us served on the 1998 Finance Bill. I have done more Finance Bills than I care to remember, and I certainly attended all the debates on that one. Under what became section 155 of the Act, the Treasury is committed by law to certain key principles in the formulation and implementation of fiscal policy. One of those key principles is transparency. I do not know what happens if the Government break one of their own laws--who gets arrested, or who is responsible for ensuring that an Act of Parliament is obeyed. That we can leave for another time, but the Government are building up a good deal of case law of instances in which they are in breach of section 155 of the Finance Act 1998.

The example of indexation subterfuges that are carried out and then denied comes in addition to other stealth taxes, and the House is familiar with many of them. The Select Committee on the Treasury, with its distinguished Labour Chairman and a Labour majority, drew attention in its report on the Budget this year to no fewer than five examples of a lack of transparency in the presentation of the national accounts. It pointed out that the Government used the term "tax burden" without making it clear that they were only talking about the direct tax burden. That conveniently omitted all the indirect taxes, which were increasing. The Select Committee asked that that be put right.

The Committee also drew attention to the rather propagandist little document that the Government published at Budget time, again at taxpayers' expense. It asked that in future such a document should be independently audited.


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