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Mr. Deputy Speaker: Order. Will hon. Members who are leaving the Chamber please do so quickly and quietly?
Under Standing Order No. 51, the first motion, entitled "Provisional Collection of Taxes", must be decided without debate.
Provisional Collection of Taxes
- That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:--
(a) Hydrocarbon oil (rates of duty)(motion No. 2);
(b) Hydrocarbon oil (rebate on unleaded petrol)(motion No. 3);
(c) Tobacco products (rates of duty)(motion No. 4)--[Mr. Gordon Brown.]
Mr. Deputy Speaker: I shall now call on the Chancellor of the Exchequer to move the motion entitled "Amendment of the law". It is on that motion that the debate will take place today and on succeeding days. The remaining motions will not be put until the end of the Budget debate next week, and they will then be decided without debate.
Budget Resolutions
AMENDMENT OF THE LAW
Motion made, and Question proposed,
(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) Subject to paragraphs (3) to (6) below, this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide--
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for varying any rate at which that tax is at any time chargeable;
(d) for any relief, other than a relief which--
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
(3) Paragraph (2) above does not exclude the making of amendments with respect to value added tax--
(a) providing for refunds of the kind specified in paragraph (4) below;
(b) providing for that tax to be charged at a reduced rate of 5 per cent. on supplies of the descriptions specified in paragraph (5) below (and on equivalent acquisitions and importations); or
(c) making provision of the kind authorised by paragraph (6) below.
(4) The refunds mentioned in paragraph (3)(a) above are refunds of value added tax where--
(a) that tax is chargeable on a supply to, or an acquisition or importation by, a museum or gallery, and
(b) the supply, acquisition or importation is attributable to supplies of free rights of admission to the museum or gallery.
(5) The supplies mentioned in paragraph (3)(b) above are--
(a) supplies, in the course of a conversion of a building (or part of a building), of services related to the conversion if after the conversion the building (or part) contains living accommodation;
(b) supplies, in the course of the renovation or alteration (including the extension) of a dwelling that has been unoccupied for at least three years, of services related to the renovation or alteration;
(c) supplies of goods by a person making a supply of services within sub-paragraph (a) or (b) above if--
(i) those services include the incorporation of the goods into the building concerned (or its site), and
(ii) the goods are building materials within the meaning of Group 5 of Schedule 8 to the Value Added Tax Act 1994;
(d) supplies of children's car seats.
(6) The provision authorised by this paragraph is provision re-enacting, without altering any person's liability to value added tax or the amount of any such liability, provisions providing for that tax to be charged at a reduced rate of 5 per cent. on certain supplies, acquisitions and importations.--[Mr. Gordon Brown.]
4.26 pm
Mr. William Hague (Richmond, Yorks): This is the Chancellor's fifth Budget, but those of us who have observed the previous four will already know a great deal about this one. The first thing we know is that those who naively relied entirely on what the Chancellor had said for
their Budget information ended up being grossly misinformed. In previous years, the clobbering of the pension funds, the abolition of the 20p tax rate, the billion-pound tax on high-tech entrepreneurs and the £2 billion addition to corporation tax were all introduced in the Chancellor's Budget, but never described--and in some cases never even mentioned--in the Chancellor's speech. So he will understand that people will be suspicious about some of the claims that he has made today.When the Chancellor says that he will simplify corporation tax for small companies, people will remember that the last time that he said he was going to simplify something for the self-employed--national insurance contributions--they ended up with a £475 million tax increase which he did not mention in his Budget.
When the Chancellor talks about helping women and children, people will remember that he abolished the married couples allowance and left a gap for a year before introducing the children's tax credit, so that, in the current financial year, families--including many women and children--have been the victims of his stealth taxes.
When the Chancellor talks about what he has done for savings, people will remember the penalising of savings in his previous Budgets. For some reason, he omitted to mention--this is at page 170 of the Red Book, which was published a few minutes ago--that the forecast for the savings ratio has been revised downwards again, and that what was going to be 6 per cent. of the national income being saved--compared with 11 per cent. under the previous Government--has now been revised down to 4.75 per cent.
On a rapid reading of the Red Book, it is quite instructive to discover, on page 473, that the Chancellor's forecast for the balance of trade is a £27 billion deficit, which is £8 billion worse than the outturn for this year; that his forecast for a manufacturing output increase has been revised down from his previous forecast; and that although he said that he was increasing his forecast for investment, his figures show that the actual outturn for fixed investment for 2000 is 2.25 per cent., against the 3.25 per cent. that he forecast in the previous Budget. Therefore, as ever with his Budgets, all is not what it seems.
We also know that so many of the claims that the Chancellor makes on Budget day turn out to be false. For example, he said today that the tax burden on the average family will fall to its lowest level for 30 years. However, in saying that, he included only direct taxes and left out all of his stealth taxes on petrol, pensions, cars, alcohol, cigarettes and council tax. His statement was watched by millions of people, and some of them may even have believed it, but it would be true only for people who never drive, never smoke, never drink and do not have a pension or even a local council. In other words, it does not apply to anyone in the country.
Based on previous experience, therefore, no rational person can sit here and believe the Chancellor's assertions. It is just as well that the Prime Minister is sitting next to him. Labour Members cheer in ignorance of the detail, which proves that one cannot fool all of the people all of the time, but one can fool all Labour Members of Parliament on Budget day.
The second thing that we know for sure about the Chancellor's Budget today is that his every pronouncement is set against the massive increases in tax
that he previously introduced. Taxes are £25 billion higher this year than when Labour came to office. In the four previous Budgets, the Chancellor introduced 45 stealth tax increases. Taxes have gone up on marriages, mortgages, pensions, petrol, diesel, cars, homes, medical insurance, savings, small businesses, large businesses and the self-employed.The Chancellor turned up today with tax reductions as part of a cynical election Budget. It gives back to people for a limited period only a tiny part of what he has taken from them. He is like the thief who steals one's car and comes back the next day to return the hubcaps. That is the story of the Chancellor's five Budgets in this Parliament.
The Chancellor's extra taxes on families, drivers and businesses are already equivalent to an extra 10p on income tax. Today he announced tax reductions that would be equivalent to about 1p off income tax. It is therefore a 10p up, 1p down election Budget. What the right hon. Gentleman gives with one hand, he has already more than taken away with the other.
Because of this Chancellor's tax increases, the increase in people's real household disposable income--the amount of their own money that they can keep after taxes and inflation--has fallen to its lowest level for a generation. Under the Government of my noble Friend Baroness Thatcher, disposable household income rose at 2.9 per cent. a year. Under the Government of my right hon. Friend the Member for Huntingdon (Mr. Major), it grew at 2.5 per cent. a year. Under this Government, it has grown at 1.6 per cent. a year. The Government promised that they had no plans to increase taxes at all. The lowest increase in disposable income for a generation has been produced by a Government with the highest increase in disposable promises.
As ever, there are a variety of tax increases that the Chancellor has decided not to mention in the Budget. No doubt he thought it a minor detail, but he omitted to mention yet another stealth tax increase--the decision to impose from 1 June, for the first time ever, the full cost of VAT on the purchase of spectacles. That will add about £10 to each purchase.
Customs and Excise has written to the optical profession saying that local officers will apply that decision to all opticians businesses with effect from 1 June 2001. I received a letter from one of my constituents, Mr. Alan Brown--at least one Mr. Brown can be straight about taxation--who said about the Chancellor:
- "The above 'TAX ON EYESIGHT' I suspect will not be mentioned in his budget speech this Wednesday, however, I feel it is of sufficient national importance for you to mention it in your budget reply as it high-lights the snide and underhand way in which the Government introduces these stealth taxes."
How is it that the increases in council tax were not referred to in the Budget speech? We now know that the council tax cost for the average band D property will rise by 7 per cent. this year--three times the rate of inflation. That means £60 more in tax bills for hard-working
families and brings the total increase in council tax since the Government came to power to £220 on band D properties--a tax hike of a third.Council costs are rising because of the Chancellor's other stealth taxes on fuel and pensions and because of extra regulations and bureaucracy. The right hon. Gentleman's best-value scheme has added £125 million to the cost of councils. Under this Government, council tax has become the ultimate stealth tax, piled on to taxpayers without any improvement in services. The Chancellor hopes that individual councillors will get the blame instead of him.
We also heard nothing in the Budget speech about double taxation relief--which was much vaunted in last year's Budget--by which the Chancellor was going to raise hundreds of millions of pounds. This must be somewhere in the Budget measures because the pre-Budget report said that the Government would be acting through the 2001 Finance Bill.
Today sees what should be the end of a saga of muddled thinking and failure to listen that has involved the Government in no fewer than three retreats from their original plans. They consulted on two options for changes to double taxation relief in 1998. The first retreat was when the Chancellor adopted totally different proposals in last year's Budget. So much for listening. He then slipped out those proposals in a Budget press release without mentioning them in his speech. So much for open government. When I asked the Prime Minister about the proposals at Prime Minister's Question Time, he insisted that the problems raised by PricewaterhouseCoopers were based on a misunderstanding of the tax position and that he knew more about double taxation than the accountancy profession. So much for knowing one's limitations.
Then came the second retreat. The Government admitted that they had been mistaken and changed the proposals in the Finance Bill Committee. Yet they have still not got the details right. The Chancellor is having to change them again in this Budget, but has not told us how--that is the third retreat. So, double taxation relief has turned into a triple taxation retreat and the details should have been in the Chancellor's Budget speech.
The Chancellor announced a change in income tax, widening the 10p tax band from £1,500 to £1,880. People will remember that the abolition of the married couples allowance adds £300 a year to their income tax bill. The abolition of mortgage interest relief adds £326 to their income tax bill. These more than cancel out the increases in thresholds and reductions in allowances announced in previous Budgets. The widening of the 10p tax band will produce in most cases £38 a year, or 75p a week. The right hon. Gentleman has got into trouble over 75p a week before, and I think that he might get into trouble over it again.
The Chancellor announced proposals on business taxation and said that he had to make it easier for businesses to compete. Who has been bringing about all the increases in business taxation over the past four years? The Confederation of British Industry says that the United Kingdom tax take from business has already gone up by an estimated £5 billion a year over the course of this Parliament.
The Government are steadily destroying Britain's competitive advantage. While they have been playing politics with the British economy, our competitors have been sharpening up their act. While other countries have been reducing their taxes--France, Germany and Italy are all proposing substantial business tax reductions--the Chancellor is going to produce a White Paper on economic reform in Europe. He will lecture other countries on what to do, when he has been increasing taxes in Britain while they have been reducing theirs.
Over the past four years, the UK's productivity growth has averaged 1.4 per cent. and the Red Book, just published, refers on page 162 to subdued productivity growth since 1997. What a coincidence. Who came to power in 1997? Over the previous five years, productivity grew 50 per cent. more quickly. No wonder the International Monetary Fund has said that the United Kingdom's productivity performance in comparison with other major industrialised countries is an area of weakness.
We will look at the detail of the Chancellor's business announcements, and where they reduce the tax and regulatory burden--if they do--they will be welcome. However, the right hon. Gentleman would have done better to tackle business burdens head on, to have stopped forcing businesses to act as unpaid tax and benefit administrators, and to have scrapped the IR35 tax that will drive people overseas. He should have set British business free to compete.
The Chancellor talked about simplifying tax arrangements for some businesses, but the director general of the British Chambers of Commerce has said:
- "The CGT system is now so complex as to be almost unworkable. Many businesses say they and their accountants are just unable to work out their CGT liabilities."
The Chancellor talks about improving savings, while silently revising downwards his estimate for the savings ratio. Savers have borne the brunt of his stealth taxes--£5 billion a year has been raided from pension funds. In his Britain, there is no reward for people who do the right thing and save for themselves and their families. It is the double-take economy: "You take responsibility and the Government take your money." As a direct result of the right hon. Gentleman's policies, the savings ratio has fallen sharply--by more than half since he became the Chancellor of the Exchequer.
The Chancellor announced new money to increase recruitment in public services, including the national health service. When will the Government understand that such an announcement is not enough to repair the morale--so cruelly undermined over the past few years--of teachers, nurses, doctors and police officers? Why did the Government not tell people in the public services that the Government would get off their backs? Ministers
should realise that there is no point in spending one day a year making helpful-sounding announcements if they spend the other 364 days piling on extra regulations and extra bureaucracy.Last week, in an open letter to general practitioners, the chairman of the general practitioners committee stated:
- "General practice in the UK is in crisis. Morale within the profession has plunged to new depths . . . Quite clearly, this government's interest in the problems of general practice is superficial. It has complacently shovelled more and more work on to general practitioners . . . Now we are saying that we have had enough."
- "For GPs across the UK struggling to cope with government initiative after government initiative whilst facing the daily reality of trying to deliver high quality patient care"
That is the reality of trying to recruit and retain people in public services. That is why the chairman said that 60 per cent. of respondents said that they were
- "thinking of retiring early or changing career and 54 per cent stated they would not recommend general practice as a career."
The Chancellor announced an increase in the children's tax credit. Despite our deep misgivings about the organisation of the tax credit, we welcome that increase. But, as ever, the right hon. Gentleman did not give us the whole story. He glossed over the fact that 5 million of the married couples who lost their married couples allowance last year will not benefit from the new credit at all. The Chancellor's endless tinkering--creating a cat's cradle of overlapping benefits and credits, chock-full of inconsistencies and contradictions--means that a family with two earners, both on £30,000, earning £60,000 between them, will receive the children's tax credit in full, but that a family with one earner on £40,000 will not do so. That is the clearest example of the muddle that passes for welfare reform under the Government.
We know that we will have to sort out the mess that the Government are leaving behind, but we are not alone in having to do so--astonishingly, the Chancellor has already drawn up plans to sort out the mess that he will leave behind. He is already making new plans to change the plans that he yet to put into effect. That has been further confirmed in his statement today. What an admission of failure. He killed off the married couples allowance before he had a replacement ready, and now his new system is so full of holes that he is already planning its successor. He is creating a more and more means-tested society.
- "I want the next Labour Government to achieve what in 50 years . . . has never been achieved. The end of the means test for our elderly people".
People have to fill in an extraordinarily long form, with 323 different items of information, on which pensioners are even asked whether they are pregnant. That shows the extent of the means-testing and the information required, as the Chancellor creates a more and more means-tested society. He tries to con people into thinking that he has suddenly been converted to tax reductions, so he must think that the people of this country are stupid. He must think that families are too stupid to notice that the typical family pays £670 more tax a year since he became Chancellor. That calculation allows for increases in child benefit and the cut in income tax rates, which are more than wiped out by the abolition of the married couples allowance and MIRAS, the pensions tax and the increase in duties on tobacco and petrol. He must think that people on low incomes are too stupid to notice that his stealth taxes have hit the poorest fifth of households the hardest because they are so regressive.
The Treasury figures show that the tax burden on the richest fifth of households--the kind of people who get invited to the Lord Chancellor's dinner parties--has increased from 35 per cent., when Labour took office, to 36 per cent., but the tax burden on the poorest 20 per cent. of households has increased from 37 to 40 per cent. of their gross income. The Chancellor goes around posing as the friend of the least well-off, but he hits them even harder.
The tax reductions in the Budget are entirely motivated by the onset of a general election in the not-too-distant future. In the Chancellor's first Budget, he increased taxes left, right and centre. Tax credits were abolished, MIRAS was restricted, vehicle excise duty was increased and the fuel escalator was accelerated. In his second Budget, he had the top rate extended to travel insurance, married couples allowance restricted, gaming duties increased, company car tax increased, reinvestment relief restricted and the fuel escalator accelerated again. That has gone on, Budget after Budget, with 45 taxes, until we reach this Budget, when suddenly some taxes come down. What could be happening in the next few months that could explain that bizarre change in behaviour? What could persuade a man who is so committed to taxing people more and more to do something so utterly out of character?
We know that those election tax cuts are for a limited period only. We know that the petrol tax cut is for a limited period only because the Prime Minister himself has told us that he thinks cutting fuel tax involves cutting the money that goes to vital public services. He told me:
- "If the right hon. Gentleman is telling us that he would cut fuel duty, that means that he would also cut the money that we are putting into schools, hospitals and transport."--[Official Report, 28 June 2000; Vol. 352, c. 899.]
The Prime Minister complains about cynicism in politics. Does he not think that everybody who has paid through the nose since he came into office will be cynical about a Government who raid their pockets every year until the election is in sight, decide to give a little back just in time for polling day, and then plan to take it all back after the election? The stealth tax on pensions alone raises £6 billion for the Chancellor this year, more than outweighing all the announcements that he has made today.
There are so many things that the Chancellor should have done in this Budget. He could have reversed the spiralling cost of running Whitehall; he could have proposed real welfare reform and tackled benefit fraud; he could have reformed legal aid and student loans; he could have made billions of pounds of savings and given the money back to the hard-working people of this country; he could have abolished taxes on savings; he could have raised the tax allowances for pensioners by more than he did and taken a million pensioners out of tax; he could have introduced a transferable married couples allowance that recognised the value of marriage, which he has removed from the tax and benefits system; he could have cut petrol tax for more than a limited period only; and he could have given the people's surplus back to the people. But he did none of those things; instead, he has produced a cynical election budget--the 10p up, 1p down Budget--that gives with one hand when far more has already been taken back with the other.
It is a Budget for a limited period only and, given the chance, we know that the Chancellor will take it all back. Only the Conservatives will give people back their money; only the Conservatives will tax less and look after people's money.
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