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Mr. Christopher Leslie (Shipley): I appreciate that the right hon. Gentleman is now trying to set out his stall and paint an awful picture of the Government, but if the Government are that bad, what did the right hon. Member for Henley (Mr. Heseltine) mean when he said that he was in a dilemma?

Mr. Heathcoat-Amory: We are in no dilemma at all; it is the Government who are in a dilemma, and not just the Government, but their figures. We cannot tell from what the Government say whether they are putting up taxes or expenditure; we have to examine the figures, and that is where the dilemma arises. It is the job of the House to find out what is happening and to tell the truth. If the hon. Gentleman is to have any chance at all of retaining his seat at the general election, which I rather doubt, I urge him to start to tell people the truth; otherwise this pervasive air of cynicism will see the back of him as well as the Government.

Exactly the same subterfuge is apparent over borrowing and debt. Again, the Chancellor made it clear yesterday that he was reducing debt. He made a great deal of that, but it is a pity that he did not describe how it will go up again. I refer hon. Members to page 188 of the Red Book. It shows that the burden of debt will rise by £58 billion during the next four years, but that, too, was not referred to by the Chancellor in his statement.

All that means that the Government are taking a colossal risk. They are vulnerable to any downturn in the world economy, but there is more to it than that: even if there is no hiccup or downturn in world growth, they are eroding the competitiveness--the performance--of the British economy, on which all the expenditure depends. Again, that shows up in the figures. Business investment has pretty well collapsed. [Interruption.] These are the Government's own figures. If anyone wishes to dispute them, we have a problem with the Treasury figures.

In the Conservative Government's last year in office, business investment rose by 7.75 per cent. It has now slowed to a crawl--to little more than 2 per cent. a year. The savings ratio, referred to by my right hon. Friend the Leader of the Opposition yesterday, was 11 per cent. when we left office, but it has now more than halved to 4.75 per cent. The start of that collapse coincides with the withdrawal of dividend tax credit for pension funds, which is still taking out of the private pension sector more than £5 billion a year. Is it any wonder that almost mortal damage was done to the propensity to save, which is showing up in the savings ratio? That is building up serious problems for the future.

Mr. Edward Leigh (Gainsborough): Does it not follow that it is essential to remove all taxation of savings?

Mr. Heathcoat-Amory: How right my hon. Friend is, and that just happens to be the policy on which he and I will fight the next election. Instead of gimmicky little give-aways, we will remove savings taxation at a stroke below the higher rate.

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Mr. Jonathan Shaw (Chatham and Aylesford): Is the commitment to abolish tax on savings guaranteed, or will that policy be changed tomorrow?

Mr. Heathcoat-Amory: Good Lord, cannot Labour Members do better than that? Yes, it is.

I am glad that the Secretary of State for Trade and Industry is to speak in the debate. Perhaps he can answer some of the questions about competitiveness and productivity. The Department of Trade and Industry has missed out again. During recent months, we have observed how it is usually ignored or overlooked by the Treasury, and the Budget is yet another example of that. That is not to overlook the welcome modest simplification of the VAT system and the promised--again, jam tomorrow--research and development credits for larger companies. However, set against the incredible increase--layer upon layer--in business taxes and regulation during the past four years, that brings practically no comfort for the business world.

For example, yesterday the Forum of Private Business said:

"On balance, the Budget is likely to make life more difficult for small firms, because of previous stealth taxes . . . and increased complexity in the PAYE regime."

The Institute of Directors said:

"Insufficient has been done to simplify the ever-more complex tax regime or lessen the burden of state interference and regulation in the business environment."

The London Chamber of Commerce said:

"the Chancellor was more interested in delivering a second term for Labour, rather than a Budget for business."

It again drew attention to the problems of tax complexity and the burden that that puts on businesses of all sorts, and their resulting loss of competitiveness in world markets.

Mr. Nicholas Winterton (Macclesfield): Does my right hon. Friend intend to refer in any detail to the climate change levy? Would he be interested to learn from me that a textile company that I know well, which employs some 300 people and has invested more than £1 million in energy saving and in reducing any output of pollution into the environment, is likely to be faced with an annual tax increase from 1 April of £60,000 to £80,000 as a result of the climate change levy? Is that a way to make British manufacturing industry more competitive?

Mr. Heathcoat-Amory: My hon. Friend is spot on. The tax is completely unnecessary and could easily have been withdrawn yesterday. The Finance Act 2000 does not require the Government to introduce it; it merely permits them to do so. They could have announced that they had recognised on mature consideration the damage that the measure would cause, especially to British manufacturing industry, and withdrawn it. Instead, as my hon. Friend said, in four weeks' time, all businesses, whatever their size, will be paying a surcharge on energy bills that are already rising. For example, gas prices have doubled for business in the past year.

For that reason, the new surcharge is likely to be entirely counter-productive in environmental terms. If businesses do not invest here or if they migrate from this country to other tax jurisdictions in countries with lower environmental standards, the global environment, which is supposed to be what the charge is all about, will suffer

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as a result. The tax is amazingly complicated. Any reductions that are required by international conventions can be met far more easily and cheaply in other ways. That is how the Conservative party has always achieved such reductions. We met the Rio targets and we will meet those set in Kyoto, but we will do it by other means. We take seriously our environmental responsibilities, but we do not agree that it is necessary to create an industrial desert in order to fulfil them.

That is why I agree with my hon. Friend the Member for Macclesfield (Mr. Winterton). Indeed, he is in extremely good company, as the Confederation of British Industry has also drawn attention to this damaging levy. Mr. Digby Jones, its director general, said again in a press release yesterday that it

"is seriously damaging UK competitiveness."

Furthermore, the Engineering Employers Federation said that

"the Climate Change Levy remains one of the most badly designed and ill-conceived economic instruments of recent times, a device for raising revenue rather than a serious attempt to encourage energy efficiency. Manufacturing will be bitterly disappointed the Chancellor has failed to address the anomalies of this tax."

I entirely agree with those points. Any pretence that the Government are pro-productivity or pro-competitiveness is completely contradicted by their persistent introduction of such measures. They did the same with IR35, which, as I think the House will know by now, was the 35th press release issued by the Inland Revenue in respect of the 1999 Budget. It was never referred to in the House or announced by the Chancellor, but the measures that it set out turned out to be among the most damaging ever conceived for the IT sector.

The Government have the gall to publish a leaflet called "Productivity in the UK: Progress towards a productive economy", which contains a section about business skills, when they are driving people abroad with their policies. One of the most lively websites on the internet is called GoAbroad.com. It is used by people who will not put up with these conditions and are taking their skills elsewhere. Consequently, companies telephone the Home Office and say that they are short of skills, and the Government decide to relax immigration controls in respect of IT specialists, thus denuding the third world and poorer countries of skilled people so that they can replace people driven out by this mad measure called IR35. That is not what the Government say that they are doing, but it is what they practise in reality.

The House will remember the fiasco regarding double taxation relief, which was announced in last year's Budget and was another ill-thought-out measure. A prominent accountant from PricewaterhouseCoopers, Mr. Peter Wyman, pointed out that it was not going to work. The Chief Secretary to the Treasury insulted Mr. Wyman in the House, but he turned out to be absolutely right. Indeed, the Government have now admitted that he was right and have withdrawn all the measures. They amended them in the Finance Act 2000 and then announced more amendments in the pre-Budget statement. Now we learn from the Budget statement that there are to be even more amendments. That is three to Mr. Peter Wyman and zero to the Chief Secretary.

A little more humility is required from a Government who have been warned persistently about the damage that is done by such measures, but still they persist with them.

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The erosion of our competitiveness is now beyond dispute and is doing much damage to our international reputation. On productivity in the United Kingdom, The Wall Street Journal reports:

"Real economy-wide output per worker rose at an average annual rate of 2.4% from 1992 to 1997"--

the period of the previous Government--

"but grew by only 1.4% annually over the last three years, only half the rate achieved by the US."

People reading that report in the United States and elsewhere will realise what has happened in this country: the productivity record inherited by the Government has now also collapsed.

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