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The Government have invented 45 stealth taxes on everything from holidays to pensions. If people are married, smoke, drink or drive a car, they feel it in their pockets. The irony is that those taxes are being introduced by, of all things, a Labour Government. They are regressive taxes, hitting those on the lowest incomes and hitting worst of all in the Labour party's heartlands.
With the election imminent, those of us who have been on doorstep know what the public are saying. There is a sense of unease about what the Government have done. Labour voters from 1997 have their doubts and Millbank spin doctors warn us of apathy among the voters. It is not apathy; it is dissatisfaction among the very people whom Labour were voted in to look after.
In a cynical step, with the election weeks away, the Chancellor has started to give a fraction of that money back. He has widened the 10p tax band; he is going to give people an extra 69p a week. That, on top of last year's 75p increase to pensioners, illustrates that the Government have lost all sense of relativities. All that they are doing is earning the anger of the British people.
However, while the Chancellor is trumpeting his tax cuts, as in most of his Budgets, reading the small print reveals much more. The rises in national insurance contributions mean that 2.5 million taxpayers will be worse off; the climate change levy will start to clobber business; the increase in company car tax continues the right hon. Gentleman's relentless assault on the motorist; and the aggregates tax will hit the cost of construction.
However, it gets worse. Deep in the small print of the Red Book, it is revealed that the increase in corporation tax this year will be more than £5 billion. The Chancellor may have trumpeted a modest reduction in the headline rate of corporation tax but, since he came into office in 1997, he has not adjusted the threshold at all. Furthermore, he has left IR35 untouched. No wonder business feels unfairly treated.
However, most contemptible is the imposition of VAT on spectacles. It will particularly hit the poor and the elderly. Just what do the Government think they are doing? The elderly in our society are the most vulnerable. That is why we will cut taxes for the over-65s, eliminate tax on savings and substantially increase the age-related allowance, which will take 1 million pensioners out of the tax system altogether.
What a contrast with the fiddly changes to the rules on individual savings accounts and personal equity plans. As my hon. Friend the Member for Sevenoaks (Mr. Fallon) said, those changes illustrate the central features of any of the Chancellor's Budgets--the complexity and dramatic extension of means-testing and the use of tax credits reflect his tinkering, meddling, fiddling, interfering, intruding, prying, snooping and tampering. All that from a Chancellor who, in 1994, told the Labour party conference that he would eliminate means-testing from the benefits system.
To qualify for the tax credits, people must fill in extensive forms, so they do not bother. It comes as no surprise that millions of people who are entitled to receive the children's tax credit probably do not know about that. The Inland Revenue does not know where the children are--it does not keep such records. The anomaly of the children's tax credit remains. As my right hon. Friend the Member for Huntingdon said, why should two earners who are both on £35,000 a year--a household total of £70,000 a year--receive the children's tax credit when a single earner on £45,000 does not. In last year's Finance Bill, the Minister said that he was looking into the matter. I suggest that he gets another pair of spectacles--if he can afford the VAT.
We recognise the need to maintain spending on schools, but that does not mean that savings cannot be made. A future Conservative Government will take the growth in the economy and increase expenditure on public services while letting people benefit from the reduction in taxes. We are proud to campaign for tax cuts of £8 billion, which the nation can afford and which it wants. That highlights the philosophical divide between the parties. Conservatives believe that people who work hard and make an honest living should be entitled to keep as much of their money as they can and spend it in the way that they wish. We will cut taxes because we believe that people know better how to spend their own money. The Budget fails to recognise that fundamental truism.
The Budget is complacent. Although the Government predict a deficit in two years' time, they plan to increase public spending at an unsustainable level. The world outlook is not that rosy. Japan's economy has stalled and the alarm bells are ringing in the United States of America, but the Chancellor claims to have eliminated boom and bust, as if it were in his gift to do so. If the American economy turns down, the surpluses of which he is so proud will disappear in the mist. The Government will face the stark and unenviable choice of cutting expenditure or increasing taxes. That sounds like boom and bust to me, and they know it.
The Financial Secretary to the Treasury (Mr. Stephen Timms): The fundamentals of our economy are stronger today than they have been for a generation. The centrepiece of our economic strategy--the establishment of a new stability in the economy--was set out before the last election, as my hon. Friend the Member for Bury, South (Mr. Lewis) reminded the House. The new macro-economic policy framework, with interest rates decided independently by the Monetary Policy Committee of the Bank of England and the rules of fiscal prudence, was needed to establish a new stability in the economy after decades of instability, compared with the record of our competitors. Having achieved that, we see it as a precious prize indeed. So maintaining it and locking it in for the long term was at the heart of my right hon. Friend the Chancellor's objectives last week.
We are enjoying clear benefits from that approach. More people are in work than ever before. The unemployment rate is at its lowest for 25 years. Of particular importance is the dramatic fall in youth unemployment. The number of young people aged 18 to 24 who are unemployed for six months or more--the group targeted by the extremely successful new deal for young people--has fallen by more than 75 per cent. since 1997. Everyone can appreciate the huge benefit to us all of so many young people becoming familiar with the habits and disciplines of having a job, especially when such a large number of them grew up in households in which no one regularly went to work. Opposition Members referred to the evaluation carried out by the Institute for Social and Economic Research. Its conclusion is that the new deal for young people will have cost £150 million a year over this Parliament and will have increased national income by £500 million a year, such is the scale of its success.
I shall respond to points made in the debate and set out the approach on productivity that we have taken in the Budget. There is still a substantial productivity gap between the UK and our leading competitors. The most recent data suggest that there has recently been significant improvement, with manufacturing productivity up by 4.4 per cent. in the past year, but we still have a long way to go to catch up on past failure, and we are determined that we should do so.
There are five key drivers of productivity growth on which we need to make progress: investment, skills, innovation, enterprise and competition. I shall outline how the Budget addressed each of those. On investment, we want to maximise the contribution of institutional investors to boost productivity. Following an investigation by Paul Myners of Gartmore Investment Managers, my right hon. Friend the Chancellor last week accepted his recommendations, which included making it easier for institutions to participate in venture capital investment. We want it to be worth people's while to move from a secure job in a large firm to a fast-growing start-up, so we are extending the enterprise management incentive, which has been welcomed in the debate. In future, tax-advantaged share options in small firms can be extended to as many employees as the company chooses, up to £3 million in total for all the options. We want a new regional dynamism to boost the economy, so we are introducing new flexibility to how the regional development agencies can use their budgets.
On skills, my right hon. Friend the Secretary of State for Education and Employment announced earlier in the debate our measures to improve recruitment and retention of teachers. We also want higher investment in work force training throughout the economy, and we are prepared to consider a tax credit for it. We need businesses and others to take complementary steps in response. Sir Gareth Roberts, the former vice-chancellor at Sheffield university who has just moved to Wolfson college, Oxford, will conduct a study of the supply of highly skilled scientists and engineers, focusing on those skills areas where shortages are most acute.
There is a great interest in sectors facing shortages in recruiting people who are currently out of the work force altogether: young people, lone parents, returners and early retirers. We will develop intensive, sector-based welfare- to-work strategies in skill shortage areas such as retail, construction, financial services and information technology.