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Mr. Christopher Leslie (Shipley): The right hon. Gentleman is talking about burdens on business. I understand that one of his proposals for savings is to privatise industrial injury compensation benefit and make businesses take out insurance policies against disease or injury that may befall their employees. Is that not a burden?

Mr. Portillo: When we announced that proposal, we said that we would relieve the burden for business elsewhere, and we have a series of proposals to do so. [Interruption.] Ministers crow and groan because they have never heard a straight answer before. [Interruption.] That is right; things must add up. The Chancellor of the Exchequer would always talk about the national insurance reduction without talking about the climate change levy, for example. I say that if a change is made, an offsetting change must be made elsewhere. I believe that it is absolutely responsible that employers should be obliged to insure their employees against industrial injury, because then they have an even greater incentive to ensure that their employees are safe. If the hon. Member for Shipley (Mr. Leslie) thinks that it is wrong to do that, let him get up and campaign. I am sure that his opponent in Shipley will be happy to take him on on that exact territory.

Mr. Patrick McLoughlin (West Derbyshire): May I take my right hon. Friend back to the points that he made on the countryside? He said that many people would have been very disappointed to have heard nothing about

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the countryside in the Budget. Why should they be disappointed? After all, as far as the Government are concerned, the crisis is over.

Mr. Portillo: Ministers have made a series of very unwise statements that are reminiscent of the Prime Minister's statement during the fuel crisis. The House will recall that he said that it would all be over in 24 hours. That leads us to a broader point. The whole of the Chancellor's strategy is based on never-ending economic growth. Ministers as a group put themselves in a very precarious position when they make such predictions--when they commit themselves to controlling things that are inherently uncontrollable--but the Chancellor is an example writ large of what my hon. Friend the Member for West Derbyshire (Mr. McLoughlin) has just pointed out in relation to agriculture.

Mr. Matthew Taylor (Truro and St. Austell): The shadow Chancellor has just clarified the extra costs involved in industrial injuries benefit--incidentally, this year's pay-out is £750 million, which is a burden on business. Will he clarify whether the abolition of the energy levy will be paid for by increasing employers national insurance, the tax on jobs, under his plans?

Mr. Portillo: The Chancellor of the Exchequer has promised to reduce people's national insurance in return for the energy levy. The energy levy is an absurd, bureaucratic tax, which will make no difference to our environment. However, it will be extraordinarily damaging to manufacturing, farming, small businesses, newsagents, pubs and all sorts of businesses in this country. Yes, I proudly say that I would reverse it absolutely.

The Chancellor is raising spending much faster than the economy's underlying growth rate. He is doing so just when caution would suggest that we should be prudent, given the slow-down in the United States and as other Governments around the world are being prudent. It is no wonder that the European Union and the International Monetary Fund have criticised the Government for their lack of prudence; nor that the Financial Times has said that the Chancellor's self-advertised prudence is now much more a matter of faith than of fact.

The Chancellor's policy is based on being able to increase the tax burden without limit. He has made a lot of his so-called golden rule that the Government should borrow only to invest, but he offers us no definition of the word "investment". Indeed, he daily abuses the word "investment" and now uses it as though it were absolutely the same as the world "spending", even though we all know that the Government waste much of the money that they spend. We all know how much money was invested in the dome, and we all know what we have to show for it. If the Chancellor's rules have any effect at all--

Mr. Giles Radice (North Durham): What are the right hon. Gentleman's rules?

Mr. Portillo: I am coming to my rules; they have all been set out, and I shall set them out again in this speech.

If the Chancellor's rules have any effect at all, it is merely to impress on him that if he is to spend a lot, he must tax a lot--a point fully demonstrated by his first four

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years. His rules allow him to spend and tax any proportion of gross domestic product. Irrespective of whether the figure is 40 or 50 per cent., or whatever, it fits his rules so long as taxing and spending increase together.

The Chancellor is committed to a path of Government spending that will require further tax rises, if he wins the next election. As the Institute for Fiscal Studies said:

That is undeniable, and because it is undeniable we can expect the Chancellor to deny it with ever-mounting bluster. Perhaps he would like to begin his denials now. No, apparently he would not, but in due course he will, no doubt, deny what the institute says and plain common sense. Increasing public spending relentlessly faster than the growth rate of the economy means that he will have to raise taxes again. Again, they will be stealth taxes, directed at the poorest members of society.

It is clear that the Chancellor will need to raise taxes further because he can take one of only two positions: either he continues on his current spending path, which means higher taxes; or he admits that Conservative policy on spending is right and he reduces his spending after the three years of his plan. I am absolutely confident that he has put behind him his days of Tory prudence, so I have no doubt that he wants to increase taxes.

The Chancellor may resemble his Labour predecessors in his addiction to tax and spend, but there are differences between him and his predecessors. Previous Labour Governments prided themselves on taxing the rich; this Government pride themselves on mixing with the rich and taxing the poor.

The Chancellor has been too cunning to raise income tax rates, so he has adopted every sneaky means of raising revenue, most of which have fallen most heavily on those least able to pay. There have been 45 stealth taxes. He patronisingly believed that his tax increases were too complicated for most people to understand. He does not care that the tax on pension funds will make people much poorer in their retirement than they would otherwise be. All that matters to him is that people should not find out that that is the case before the election.

The Prime Minister betrayed the Government's real cynicism in answering questions last week. He chose to defend his Government's attack on our pension funds on the ground not that his policies are in any way morally defensible, but that, as it happens, the stock market has risen. That speaks volumes for this Government. They do not think that they have to explain to people why they have the right to take away their hard-earned money; they assume that people should give them a good reason why they should be allowed to keep it. That, in a nutshell, is the difference between the two parties.

The Chancellor's stealth tax policy was rumbled last September with the fuel protests. He had been too clever by half. No pensioner could overlook--I do not believe that any pensioner will ever forget it--the cynicism with which the Chancellor raised the price of petrol by the rate of inflation, which he calculated at 3.4 per cent., and raised pensions by the rate of inflation, which he calculated at 1.1 per cent. When he was shadow Chancellor, he told a Labour conference that he would do away with the means-testing of retired people, but what he has actually brought about is the most massive increase in dependency. Well over half our pensioners--56 per

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cent. of them--will be required to reveal their intimate details to the state in the hope that they may be granted an income sufficient to pay the Chancellor's 45 stealth taxes. The form that they are asked to fill out runs to 40 pages and it even asks pensioners whether they are expecting a baby.

There is a better way. We should leave people with more of their own money. This is not just about economics; it is about creating a better society--one in which people are encouraged to save for the future and are rewarded for doing so. People who save have more choices, can face the future with more confidence, and are better able to take responsibility for their families and to recognise their wider obligations to society.

The Conservatives recognise that the money politicians spend is not their money. We do not believe that we know how to spend it better than the people who earned it. We do not adopt a tone of moral superiority when we take hard-earned money from parents, who would have spent it on their children, and, instead, hurl it into the bureaucracies of the state.

The Conservative party will campaign on removing savings from income tax. Why should people who have paid income tax on the money that they have earned then be taxed again if they decide, instead of spending their money straight away, that they will put some of it into savings? We want pensioners who have saved to enjoy independence in their retirement, because that was the very reason for which they saved in the first place. We want them to be able to look back on a lifetime of savings and believe that they did the right thing and that they were rewarded for doing so.

The Chancellor boasts of 7 million pensioners who will pay no tax or pay only at the lowest rate. There are two ways of increasing that figure of 7 million. The Chancellor's way is to tax pensions funds and discourage saving. In that way, the majority of people reaching retirement will have incomes too low to pay income tax, and the Chancellor can gloat as, year by year, the figure of 7 million increases.

However, there is a different way--our way--which is to encourage saving and to reward those who have saved by a massive increase in the income that they can have before they pay tax. In that way, pensioners will be better off and fewer of them will pay tax. We shall take 1 million of the pensioners who currently pay tax out of income tax altogether and, for many of the remainder, the weekly tax bill will be reduced by £8.50 a week.

The Chancellor boasts of helping families. Again, there are two ways to do that. The right hon. Gentleman has created hugely complicated systems of dependency, which trap more and more people in the indignity of the means test. The Conservative way is to simplify the system and leave people with more of their own money to spend or save as they wish.

We shall also remove the tax from the widowed parents allowance and give married couples more choice about whether to work or not to work, enabling a man or woman to transfer his or her allowance to the spouse. Each of those two reforms will be worth about £20 a week off parents' tax bills.

After the Budget, we should perhaps be grateful for small mercies. I do not mean the crumbs that the Chancellor has handed back, but the collapse of most of the Government's economic arguments. Until recently,

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they claimed that it was impossible simultaneously to cut tax and spend more on services. I think that we will hear rather less of that economic illiteracy from now on. In the late summer, the Prime Minister claimed that petrol tax could be reduced only if hospitals and schools were closed. As he now claims to have cut the price of fuel, we should expect to see the list of closures.

Over the winter, the Labour Party spent millions on advertisements that referred to the Tories alleged £16 billion of public spending cuts. In his Budget speech, the Chancellor was forced finally to abandon that false claim. In fact, our policy is to raise Government spending in line with what the country can afford, which is by very large amounts.

The Conservative campaign, "You've paid the tax, so where are the improvements in public services?", has been rather more successful. The Government spend money with extraordinary incompetence. How do they manage to tax so much and end up with 2,500 fewer police officers? How could they take so much money from retired people in extra taxation and in return ask those same elderly people to wait still longer before they can have an operation that will transform their quality of life?

On education, I received a letter today from a head teacher in Wales, who says:

I know that the Government like to intimidate people and to yell down any public servant who dares to speak up, but I am quoting a head teacher. She says that

That is what people are saying.

Throughout the country, even people who voted Labour are frantically calling on the Government to improve services, not to produce meaningless statistics, to double count, to spin and to blame the previous Government. They just want them to do something that means that we can have better schools and hospitals and make our streets safer. The Chancellor's response in his pre-election Budget was to move from double counting to triple counting. He claimed to be adding £1 billion to health, but it turns out to be £290 million in 2003-04. The Secretary of State for Health did not even attempt to repeat the Chancellor's claim, which demonstrates that the deception did not survive even the first 24 hours after the Budget and merely added powerfully to the Chancellor's reputation for being unable to represent any figure accurately and fairly.

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