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Mr. Letwin: I am sorry to interrupt my hon. Friend again, but he has reminded me of something. He may recall otherwise, but I believe that a member of the Treasury team said that the purpose of raising tobacco duties would be, by hypothecation, to raise more funds for the health service. Does he remember that and does he think that, mysteriously, the Government should now be cutting health expenditure if that were a genuine promise?
Mr. St. Aubyn: My hon. Friend is obviously more willing than I am to embarrass the Government at this stage of the proceedings. He is right; we were told that the additional duty would go directly into the health service. I agree that we are now told that, despite the fall in the take from tobacco duty, the Government can still afford to increase spending on health, education and other key areas. The Government themselves have detached the debate about the optimum rate of tax on tobacco from the debate about how much we spend on our schools and hospitals.
We have identified £8 billion of savings. The Chief Secretary has studied those savings carefully and I thank him for doing so. I am sure that he agrees that we have identified £8 billion of savings that will not affect schools and hospitals.
Mr. Andrew Smith indicated dissent.
Mr. St. Aubyn: I shall gladly give way to the Chief Secretary if he can tell me which part of the £8 billion
that we shall save will affect our schools and hospitals. I am sorry that the Chief Secretary is not willing to engage in debate. We must assume that the £8 billion of savings that we have identified will not affect our schools and hospitals.We have identified savings in other areas by managing the business of government better than this Government have done. That is why we can talk about measures such as abolishing the basic rate of tax on savings. We feel that it is unfair that people who, out of their earned and taxed income, have put money aside should then find that their reward--the interest on those savings--should be taxed again before they receive it. That has had something to do with the fact that the amount of savings in our economy--the savings ratio--has declined savagely since the Government took office.
It is striking that, at a time when the Government are preening themselves about the amount by which they are repaying Government debt, consumer debt has gone through the roof. Economists are worried by the prospect of debt repayment being a real constraint on consumers in the coming years. That is one of the reasons why they raise questions about the Government's sometimes absurdly confident assertion that they have abolished the economic cycle and boom and bust. That claim becomes hollow to anyone in farming or tourism, or in the other, smaller industries that support those two sectors. They know all about boom and bust under this Government. That goes to show that no Government--even one as intent on central planning as this one--can prevent the hiccups and surprises that different sectors of the economy throw up from time to time.
The Conservative party will not only abolish the basic rate of tax on savings, but will help married couples and take 1 million pensioners out of tax altogether. Above all, we must have a less complex tax system, and it is that aspect of the Bill that I find particularly objectionable. The Bill piles on the complications in our tax system. For example, there are 22 rates of company car tax; there are different rules depending on whether one takes out a mini-ISA or a maxi-ISA; the Government have introduced the working families tax credit, the children's tax credit and changes to child benefit, and baby bonuses are to be introduced.
All of those clawbacks, reliefs and tapers add to a complex system. Witnesses to the Treasury Select Committee have made it clear that the trouble with complex allowances and incentives is that, if no one understands them, they will not incentivise anybody. That is why the waste in administration dwarfs any potential gain at the micro level in the economy by stimulating people to do whatever civil servants and the Government decide is the latest fad.
Mr. Tom Levitt (High Peak): The hon. Gentleman tells us that tax credits are a waste of time, yet they are the very elements of the Government's policy that are tackling poverty--particularly by giving those on the lowest wages an incentive to stay in work. His party has said that it will scrap those tax credits. What will he do for the lowest paid?
Mr. St. Aubyn: We find complex tax credits and incentives to be self-defeating. They become so specific and obscure that no one understands them. A third of
those entitled to the minimum income guarantee for pensioners have yet to take it up. What good is that? Pensioners do not understand why they should fill out a 48-page form in which they are asked such absurd questions as whether they are on strike or whether they are expecting a baby.
Mr. Flight: Might I point out that 500,000 parents have failed to take up the children's tax credit because that is so complex?
Mr. St. Aubyn: I am grateful to my hon. Friend.
At the beginning of winter, 1 million people who were entitled to winter fuel payments from previous winters still had not received their money.
Mr. St. Aubyn: I shall give the hon. Gentleman another chance.
Mr. Levitt: First, the hon. Gentleman is criticising a children's tax credit that has existed for only three days. Secondly, is he aware that the take-up of working families tax credit is far higher than it was for family credit? His party's past policies relied on people not taking up their credits. We want people to take them up.
Mr. St. Aubyn: The working families tax credit is so complicated that the Government are reforming their own system. That says all that need be said about the complexity of their policies.
The Finance Bill gives us the aggregates tax, which my hon. Friend the Member for West Dorset has brilliantly exposed as an appalling example of the worst evils that stealth taxes bring to bear. That raises a fundamental issue. Are we to achieve a tax base through a series of insidious, invidious and stealthy measures, as has been the Government's systematic approach over the past four years? Alternatively, are we to develop a tax system based on rates that businesses and people accept are broadly reasonable? Under such a system, people could spend more of their time generating new business and paying their tax along the way, rather than having to employ an army of accountants to figure out the Government's latest wheeze and how to get round it.
We believe, fundamentally, that an internationally competitive economy needs a clear and simple tax system, in which the burden is reasonable. Quite apart from the fact that taking money from people who live and work in our country is a drain on the growth of our economy, if those people feel that the system is unreasonable, not knowing how the money is being taken but realising that it has been, the brightest and best will have a massive incentive to make their way elsewhere in the world where the climate is far more friendly.
That is an underlying reason why the Government's strategy, as exemplified by the aggregates tax, is leading us down a treacherous path. The Government will wake one day to find their economic forecasts as unreliable and unsustainable as their tax forecasts have proved to be over the past four years.
I have many constituents--perhaps more than most Members--who are consultants. They have followed with great interest court proceedings against the Government over the infamous IR35. While the Government won that case, it was extraordinary--unprecedented, I believe--that anyone was allowed to bring a case in an English court of law against the Government on a tax measure. Although the case was lost, I believe that those who brought it won the principle and the argument. In particular, they exposed a disgraceful practice that the Inland Revenue intended to employ.
The Revenue was not going to apply the mutuality of obligation test--a critical test of whether someone is employed or self-employed. It appears that the Revenue told its staff that that test was not to be mentioned unless the taxpayer mentioned it first. That is a fundamental breach of duty. If we must have the hugely complex tax system that the Government have given us, Inland Revenue civil servants should, at least, give the taxpayer a level playing field. They should bring their expertise to bear fairly on the points brought before them. The Revenue should not hold cards up its sleeve to try to deceive taxpayers into putting themselves into a category in which they pay far more tax than they were intended to pay in reason or in what the House agreed to.
I hope that there will be sufficient opportunity in Committee to investigate the Government's proposals in more detail. It is clear, however, that they have set a course on which, given the chance, they will continue. If they return after a general election, there will be more stealth taxes, more complexity and far more barriers to business. At a time when the world economy is, at the very least, uncertain, that is the last recipe that we need if our country is to survive as the type of prosperous economy that the Government inherited four years ago.
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