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Mr. Bercow: My hon. Friend referred to a £60 million loss to the Exchequer. Does that calculation reflect merely taxation forgone and benefits paid, or does it also take into account--I fear that it probably does not--the obvious loss of purchasing power that has been experienced in the process?

Mr. Ross: The calculation does not take account of the second point at all.

I am disappointed that the Government have not taken the problems on board or acted on them. Their tax policy in two of the areas that I have mentioned has failed to deliver the benefits that we hoped for. It will also fail in the third area, as it will do great damage to the Northern Ireland economy. Heavy taxation of fuel has not led to a reduction of car use in Northern Ireland, whose rural nature means that people have to use their cars. It has simply become a source of terrorist funding. Those are two very good reasons for doing something serious about it.

With regard to tobacco, taxation has greatly increased law breaking and smuggling; that is positive proof that one cannot make people good by passing laws that it pays them handsomely to break. I have demonstrated that the policy on fuel and tobacco does help pay them handsomely to break the laws. I fear that smoking reduction has become a matter of education and not of exorbitant taxation. I have also rehearsed in some detail the danger to the quarrying industry. I hope that the Chancellor will listen to my comments on that issue, as he can improve the situation without much difficulty and without causing any great damage to similar industries on this side of the Irish sea.

7.35 pm

Mr. David Kidney (Stafford): Before my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) leaves the Chamber, I should like to say that I greatly enjoyed his speech. His performance, which is best described as emollient, provided a neat counterpoint to the speech made by the hon. Member for West Worcestershire (Sir M. Spicer). I much preferred my hon. Friend's analysis of the future, as he spoke about consistent and adequate investment in core public services and targeted spending for the rest of the public services. That contrasts with the vision presented by the hon. Gentleman, who spoke of a future in which, as I understood it, even health and education services would be accessed only in accordance with the size of a person's wallet.

I want first to speak about the happy situation of my right hon. Friend the Chancellor in making his statement, perhaps in the shadow of the next general election, and

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the strong position that enabled him to make his announcements. I should like to illustrate that position by comparing his speech to the past three speeches made by Labour Chancellors in the shadow of general elections that Labour went on to lose.

Initially, we must go back to April 1951, when the late Hugh Gaitskell, who has already been mentioned, delivered the Budget of the then Labour Government. He was wrestling with two huge problems that were exercising the minds of all hon. Members. First, there had been a huge--30 per cent.--devaluation of our currency, which had made it impossible to balance the Budget. Secondly, he had to find the finance to wage a war in Korea--which some might forget today.

Those two demands made his position hopeless. His Budget set a starting income tax rate of 3 shillings in the pound, which is 15 per cent., and an intermediate rate of 5s 6d in the pound, which is 27.5 per cent. The standard rate was 9s 6d, or 47.5 per cent. The maximum surtax was another 10 shillings in the pound for people with incomes of more than £20,000 a year. That is another 50 per cent., which makes a maximum payable income tax rate of 97.5 per cent. It is no surprise that Mr. Gaitskell mournfully observed:

Those who had to respond instantly for the Opposition--a very difficult job--were a great deal politer than today's politicians. I do not make a party political point; it is merely the passage of time. The late Sir Winston Churchill had that duty in 1951 and he was politeness embodied. He said:

Before he sat down, he thanked the Chancellor again for a gracious speech, but politeness did not get in the way of trenchant political criticisms. His summing up of the Government's performance reflected the difficulties that they faced at the polls shortly afterwards. He said:

Mr. Hayes: I believe that, in 1951, Winston Churchill voted in half the Divisions in the House. That starkly contrasts with the current Prime Minister's performance. The hon. Gentleman should consider the difference between that Labour Government and the current Government in their methods of taxing the British people. The hon. Gentleman spoke of tax at 97p in the pound, but the 1951 Government were not taxing by stealth. He should compare the honesty of the 1951 socialist Government on tax policy with the dishonesty of the current Administration, who tax by the back door and do not tell people of their real intentions.

Mr. Kidney: I disagree with the hon. Gentleman. On dishonesty in modern taxation, I shall shortly consider the great shift from direct to indirect taxation. I should be interested to know how taxes that are announced in a manifesto for a general election can be labelled stealth taxes. The hon. Gentleman makes an odd criticism that I reject.

Mr. Boswell: The hon. Gentleman claims that the Labour manifesto for the general election announces

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several taxes. Doubtless he will tell us more shortly. However, does not he recall that, when the Prime Minister was Leader of the Opposition, he said in an article in The Sun--an authoritative publication--on 14 April 1997 that the Labour party planned no increases in taxes?

Mr. Kidney: That has been explained many times. The Prime Minister was referring to the rates of income tax. Let me demonstrate the inaccuracy of the hon. Gentleman's criticism. He claims that the Labour party said that there would be no new taxes. That is not true; the manifesto stated that there would be a windfall tax on the excess profits of the privatised utilities. The Opposition claim that the Labour party said that there would be no increases in taxes. Again, that is inaccurate; the manifesto stated that the fuel duty escalator would continue. I am happy to continue the debate.

Mr. Hayes: I do not want to test the hon. Gentleman's patience, but will he comment on some of the other taxes that have been introduced by stealth, such as the pensions tax that I mentioned earlier, the changes to national insurance contributions for the self-employed, holiday tax and insurance tax? The list is almost endless; there are 45 such taxes. How many are included in the manifesto?

Mr. Kidney: The hon. Gentleman makes a good point: not all the changes to which he refers appeared in the manifesto. Policy evolves; that applies to every Government.

Mr. Bercow: Will the hon. Gentleman give way?

Mr. Kidney: I would have been surprised if the hon. Gentleman had not asked me to give way.

Mr. Bercow: I am grateful to the hon. Gentleman, whose constituency I recently had the great pleasure of visiting. The Prime Minister specifically said that there would be no increase in taxation at all. That obviously referred to the overall level; it was not a decision to rule out the introduction of any specific tax. To argue the contrary is to argue about the number of angels dancing on the head of a pin.

Will the hon. Gentleman acknowledge that there is an innate contradiction between the Government's attitude to public finances at Government level and at local authority level? What assessment has he made of the effect of the change in the rules for the use of capital receipts from the sale of council houses on the size of interest repayments on local authority debt?

Mr. Kidney: I am happy to stand toe to toe with the hon. Gentleman on the head of that pin, and to continue to argue that the Prime Minister referred to income tax rates. I shall not be diverted by the hon. Gentleman's second point.

Let us move on from 1951. For a long time after that Budget, there was no Labour Government. However, we were back in power in the 1960s. Let us consider 14 April 1970, when the Chancellor who delivered the Budget speech was Roy Jenkins. He perceived an improvement in his position. He said:

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He continued:

What were the problems with which Roy Jenkins had to wrestle? In 1970, Hansard included headings and subheadings for the Budget speech. One was, "The record since devaluation". That Labour Government were struggling with the aftermath of a devaluation and its terrible consequences in 1968, when debt had peaked. The current account debt was the largest ever, as was the country's total indebtedness. The then Chancellor found time to single out a Staffordshire Member of Parliament, the late Sir Hugh Fraser, whose tenacity of criticism of the financial position especially irritated Roy Jenkins.

People mainly remember the decision not to make the 1970 Budget a giveaway Budget. Roy Jenkins was determined to avoid blatant electioneering and to be thoroughly decent. He explained his intentions thus:

Hansard then records "[Interruption.]" In my imagination, the interruption consists of Labour Members shaking their heads, gnashing their teeth, weeping into their handkerchiefs, beating their heads against the wood on the back of the seats and begging the Chancellor to go further.

Roy Jenkins also said:

A clear difference today is the welcome decision in 1997 to give independence to the Bank of England to set interest rates without reference to the political cycle and the difficulties of the day.

What had happened to income tax rates by 1970? Roy Jenkins continued the standard rate at 41.25 per cent; he also applied surtaxes, which could total another 40 per cent. That gives a top rate of 81.25 per cent.

In 1970, Leaders of the Opposition continued to be polite in their responses. On 14 April 1970, the duty of replying to the Budget speech fell to the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), who is now Father of the House. He began by "warmly congratulating" the Chancellor on his speech and said that the Budget was

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