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Mr. Christopher Leslie (Shipley): Are we hearing a guarantee that the Conservatives will cut tobacco duty?

Mr. Heathcoat-Amory: The hon. Gentleman sounds rather worried, so I invite him to join us in the Lobby to express his concern. The Opposition have voted against those increases in every Finance Bill since the general election. I remind him that, even when we had a Budget deficit, in our last two Budgets we froze duty on alcohol and cut it on spirits precisely because of the problems that I have described. The Labour party entered office and reversed that policy; they increased duty on all those products and made smuggling and racketeering worse. If the hon. Gentleman cares to follow up his concern with a little action, he will have an opportunity to do so shortly.

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The abiding impression we have of the Bill is that it is another tax-raising measure; furthermore, it is a measure of almost stupefying complexity. In its excellent publication "Towards a Better Tax System", the Institute of Chartered Accountants in England and Wales gave the Bill marks out of 100 based on the institute's 10 principles of good taxation. The final score was 30. I am tempted to give the same score but, on reflection, I have decided that that would be over-generous. The Bill will continue to annoy and baffle taxpayers for many years after it has become law. We shall vote against it.

10.27 pm

Mr. Edward Davey: One hundred and fifty-seven clauses, 40 schedules and 572 pages later, the House should consider striking medals for veterans of the Committee on the Finance Bill. With its complexity and length, the Bill does this country's tax system no good. We are left with the question of whether we should support the Bill's Third Reading, and I suggest that the House applies two tests to find the answer. The first is a cost-benefit analysis of the contents--the Bill contains some good measures, but, as I shall demonstrate, many bad ones as well--and the second is the wider role of the Finance Bill and what it adds or subtracts from the management of the public finances.

As I said, the Bill contains some good measures, albeit small ones: for example, the change to amusement machine licence duty, which is a small measure, but one that will be welcomed in British Legion and non- profit-making clubs throughout the country, and a measure which my hon. Friend the Member for Twickenham (Dr. Cable) pressed to be included in last year's Finance Bill. Air passenger duty exemptions are likewise welcome to those living in the Scottish highlands and islands. As I told the Financial Secretary in Committee, I hope that the exemption will be extended, for example, to cover the special case of the Scilly Isles, and to ensure that passengers benefit when they arrive at airports in the highlands and islands. Gift aid is also a welcome measure.

A large measure that we support is the climate change levy, although we have had some concerns, which we have expressed in a forthright manner. My hon. Friend the Member for Hazel Grove (Mr. Stunell) moved amendments and spoke on various issues relating to the levy in an effort to improve it. Unfortunately, the Government did not listen, but we decided ultimately to support the schedule's inclusion in the Bill because we believe that, on balance, it is better to have the measure in the Bill than not to have it--it is certainly better than the status quo left by the previous Government.

Those are the good things in the Bill, but, I am sorry to say, there are quite a few negatives.

Ms Rosie Winterton (Doncaster, Central): Will the hon. Gentleman give way?

Mr. Davey: I will not give way. [Interruption.] Perhaps I will give way later.

Fuel duty increases have raised costs for motorists, but have not been offset, as we have advocated, by substantial reductions in vehicle excise duty. The Government have

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also failed to sort out the employers' national insurance contributions impost on share options. The most significant negative point, however, is IR35, with which we disagree profoundly. The abuse on which the Government have tried to clamp down is far more narrow than Ministers have made it out to be. Measures to clamp down on tax avoidance could have been more narrowly targeted and far more effective. The way in which the Government have chosen to act means that many small companies in the information technology sector will be seriously hit.

What has concerned us most is that the Government have at no stage admitted that market forces require many small firms--in the IT industry, the oil industry and the engineering consultancy sector--to form limited personal service companies. At no time were the Government prepared--[Interruption.]

Mr. Deputy Speaker (Mr. Michael Lord): Order. Far too many private conversations are going on. I cannot hear the hon. Gentleman.

Mr. Davey: Thank you, Mr. Deputy Speaker.

At no time on Second Reading or in Committee have Ministers acknowledged the fundamental objection to IR35. Many companies are forced into the arrangements that they make by market pressures and by the larger companies. The Government seem unaware of that in spite of all our arguments.

The wider role of the Finance Bill also raises some serious concerns. The Government have said many times that they have not sufficiently increased expenditure on our public services over the first two or three years of this Parliament because they were trying to get the public finances under control. There are three ways in which to do that--increasing taxes, restraining public expenditure and taking benefits from the growth dividend. Over the past few years, tax rises have been introduced and there has been significant growth. Those measures, coupled with tax rises introduced by the Conservative Government, have ensured that the public finances are extremely healthy. No objective observer could say otherwise.

That is why there was no need for the Government to curb public expenditure in their first three years. There have been problems in the health service and a loss of police officers, and our schools have been starved of the funds that they need. The real reason why the Government imposed that public expenditure restraint was that they were trying to build up an election war chest. That was one of the major political reasons for their decision, and that is a great shame given the need in our public services.

A second political reason was that the Government felt the need to convince the City that they could be trusted on public finances. That is their legacy, through no fault of the people who use the public services. They have played politics with our country's public services.

The Government are offering tax cuts in the Bill. There is a penny cut in the basic rate of income tax in clause 31. But that is being done ahead of the huge and very welcome investments in public transport announced in the comprehensive spending review yesterday. Why is income tax being put ahead of investment? The Chancellor talked about deficit reduction. That was necessary, and he is right to point out the mismanagement

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of the economy by the Conservative Government. Frankly, however, deficit reduction is becoming almost a fetish for the Chancellor. Why must pensioners wait for an increase in the basic state pension when the Chancellor is using a lot of money to reduce the deficit? He has his priorities wrong.

Ms Rosie Winterton: Is the hon. Gentleman saying that we are taxing the country too little?

Mr. Davey: The Liberal Democrats have often argued that targeted tax increases are necessary for public service investment. The House cannot say that that is a secret.

There is one argument for supporting the Finance Bill and the overall management of the public finances, which is that the Conservatives' proposals are even more ludicrous. They have been saying that the Government's spending proposals are reckless and that spending is getting out of control. Unfortunately, nothing could be further from the truth, and when they look at the facts, the Conservatives will be unable to continue making that point.

In this financial year, total managed public expenditure, as a proportion of GDP, is at a level that has not been seen since 1963-64, so it starts at a low base. At the end of the comprehensive spending review period, 2003-04, it will reach 40.5 per cent. of GDP. In only three years of the Conservatives 18 years in Government was public expenditure as a proportion of national income lower than that. If the Conservatives claim that public spending is out of control, they must acknowledge that it was out of control for 15 of their 18 years.

There is no way that we could support the Conservatives' approach to the management of public finances. The problem, however, with the management in the Finance Bill is that the Government's proposals are too modest and do not put public services first. We shall vote against Third Reading because the Bill puts a tax cut before public service investment and includes an outrageous measure in IR35.

10.36 pm

Mr. Jack: At the conclusion of consideration of the longest Finance Bill in history, I would like to put on record my appreciation of the way in which my Front-Bench colleagues have solidly and resolutely attacked and unmasked the Government's tax-raising agenda. They have done it despite all the difficulties that any Opposition face in dealing with highly technical and complex matters, and they have done it with great skill and exposed the truth of the Bill.

It is a pity that when we tried to use modern equipment such as laptop computers in the Standing Committee to assist us in our job of probing the Government, and suggested having the notes on clauses in a modern electronic form, the somewhat arcane rules about what one may or may not bring into a Standing Committee meant that I got my knuckles rapped because I was out of order in bringing in a laptop. I hope that the Chairmen's Panel will consider that matter in due course because we ought now to be allowed to use modern aids further to enhance the ability of the Opposition--and, indeed, right hon. and hon. Members on both sides of the House--to have access to the complex information needed to consider the Bill.

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I want to put on record my appreciation of the Inland Revenue for drafting excellent notes on clauses, which helped us to understand the Bill. I wish that the same clarity of explanatory information about the Bill had been available to the Chancellor of the Exchequer yesterday, when I challenged him on the tax burden that results from these measures. In this House, he denied that this country's tax burden is rising. For the record, I point out that in the financial year that ended in April, total Government receipts, excluding the windfall tax, came to 39.6 per cent. of GDP; in the current financial year, that proportion rises to 39.7 per cent., and by the end of the Parliament, it will have reached 39.9 per cent. I wish that the Government had the honesty to admit what their own figures say and what will result from the Bill.

The Bill contains a number of measures on energy saving. As my right hon. and hon. Friends have said, they are too complex and will not work. I make this prediction: the climate change levy will, if the Government continue, be turned into a nice little earner. They say that it is fiscally neutral because of the national insurance rebate, but that claim will go out of the window, as it has with the landfill tax. The Government's increase in that tax did not result in a corresponding decrease in national insurance payments.

The Bill has worsened Britain's international competitiveness, as clauses 103 and 104 bear testament. The Government have taken little note of the impact of that aspect of the measure on their tax policies.

I conclude--[Hon. Members: "Hear, hear."]--on one important point. I am glad to hear the cheers of Labour Members. My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) and the hon. Member for Kingston and Surbiton (Mr. Davey) pointed out the length and complexity of the Bill.

Even if Treasury Ministers do nothing else in response to what the Opposition have said, they should expand, with immediate effect, the remit of the tax law rewrite project to begin the much needed task of mapping out how we simplify, shorten and improve the operation of our tax system. Every company would welcome that and every citizen certainly deserves it. If the Government want to do something for tax--other than raising it--they should make its operation simpler.

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