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6.21 pm
Mr. Peter Viggers (Gosport): I am fortunate to be called late in this debate, because it gives me a chance to follow the hon. Member for Warrington, North (Helen Jones), who, in a thoughtful and obviously sincere speech, expressed a point of view with which I fundamentally disagree. This Budget is one of the worst that I can recall. Why, oh why, do Chancellors not follow the example of Mr. Derick Heathcoat-Amory, who, in a lengthy Budget speech some years ago, changed the excise duty on chicory—and nothing else? More Chancellors should realise that, as they tinker, they do damage.
When I was a Parliamentary Private Secretary to the Treasury, I discussed with others the fact that any measure taken by a Chancellor of the Exchequer inevitably damages somebody. The then Chancellor was quite proud of his measure to reduce the duty on environmentally friendly, "green" petrol. He said, "There is a change that won't damage anybody at all", but it virtually drove out of business the main manufacturer of anti-knock additive to lead petrol. I gather that that manufacturer was a strong supporter of the Conservative party. Every change damages somebody.
Although they are probably not directly relevant to my remarks, I should declare my interests, which are properly recorded in the register.
This Budget is extremely damaging: it is damaging to employment, through the 2 per cent. increase in national insurance, and to investment. Anyone listening to yesterday's statement would have thought that the Chancellor was actually helping oil companies in the North sea; in fact, he was adding a 10 per cent. duty on profits. The Budget was far too complicated, consisting as it did of various children's benefits and working families tax credits. I gather that the take-up rate for the working families tax credit is about 31 per cent. This Chancellor simply cannot resist tinkering. We would be better off without this Budget and, in my view, without this Chancellor.
I am not the only one to think so. The "Lex column" in today's Financial Times, which refers to "Tax tinkering", deserves extensive quotation:
- "If you want to raise the rate of income tax, the simplest thing to do is raise the rate of income tax. That, however, would be too straightforward for Gordon Brown. Hemmed in by an election promise to raise neither the basic rate nor the higher rate of personal income tax, he has furtively accomplished the same thing by introducing an additional 1 per cent national insurance contribution on all earnings . . . This is evasion, not avoidance, of the election promise.
If this were the first time that Mr Brown had introduced needless complexity in pursuit of some private whim, it would be bad enough. The Chancellor is, however, a serial offender. He has turned the British tax system into a monstrous thing, riddled with complexities and inconsistencies."
The Labour view, well expressed by the hon. Member for Warrington, North in her thoughtful speech, is that the Government know best and that any problem can be resolved by Government. That is why the top rate of tax is now effectively 41 per cent., but for those earning between £28,000 and £30,000 it is effectively 51 per cent. because of the total of the national insurance payments.
My right hon. Friend the Member for Fylde (Mr. Jack), who is of course a former Financial Secretary and knows what he is talking about, made a very good point when he said that we should look globally at taxation. That is true. If someone works overtime and earns £50, half of it will go in tax and national insurance. If he then spends £25 on petrol for his car and a packet of cigarettes, more than 90 per cent. of those overtime earnings will go to the Government in revenues of one kind or another. Perhaps it is time for a study that shows the inter-relationship between direct taxation and indirect taxation. We are being very heavily taxed and little money is left with which individuals can make their own choices.
We forget also that universal benefits cost around 1 per cent. to 1.5 per cent to administer, but means-tested benefits cost some 10 or 11 per cent. on average. The increase in means-tested benefits under this Government is costing a great deal in administration. For example, in the past four years, the Government have introduced five new tax credits for families, scrapped four of them and introduced two more. That level of complexity is confusing and expensive. Occasionally I meet constituents who really know their way around the tax and benefit system and they are usually doing well. However, for most of us it is far too complex. The present tax system is beyond many people's comprehension, take-up rates are poor, it is unfair and expensive, it encourages dependency and it discourages independence.
The main theme of today is work and pensions and I wish to return to a point that I put to the Secretary of State on Monday during questions. I am glad to see that he is in his place today and I congratulate him on that. Unlike many of his Front-Bench colleagues, he is a good attender in the House and we appreciate that. My point was that the Government and the Chancellor, in his single biggest act of taxation, changed the rates of advance corporation tax on pension funds, thereby damaging them—perhaps irreparably.
I made the point that millions of people in their 30s and 40s now find that pension funds are phasing out final-salary schemes. Those people will no longer be able to make provision for their retirement. The Secretary of State responded by saying that, not for the first time, I had misled the House. He pointed out that reductions in value on the stock exchange and longevity were more responsible for changes in pensions funds and the phasing out of final-salary schemes than was advance corporation tax. That is not true, because pension fund trustees can take account of long-term variations in stock exchange values. They know that values on the stock exchange go down as well as up, and they can plan for the long term with the advice of their actuaries. They can take a view on long-dated bonds and AAA-rated bonds and invest for the long term so as to allow the pension fund to reflect the requirement for pensions to be drawn from it. Longevity is also taken into account by actuaries when they advise the trustees on the proposed benefit schemes.
Final-salary schemes are being phased out because the Chancellor, in his biggest single stealth tax, which he introduced in his first Budget in 1997, has placed a massive burden of £5 billion a year on pension funds. The cumulative effect is that many pension funds are phasing out their generous final-salary schemes and introducing instead money-purchase schemes. I repeat the point that I made on Monday: millions of people in their 30s and 40s will be deprived of the independence in retirement for which they were hoping. They will be forced into dependency. One is forced to believe that this Government do not want to encourage independence.
Mr. Hendrick: Will the hon. Gentleman give way?
Mr. Viggers: I am sorry, but I shall not give way to the hon. Gentleman, who has intervened frequently this afternoon.
I think that the Government like to have people on means-tested benefits. They estimate that between 56 and 59 per cent. of pensioners and 40 per cent. of people generally are on means-tested benefits. According to departmental estimates, 65 per cent. of pensioners will be on means-tested benefits by 2050. We on the Conservative Benches deplore that and believe that independence is the single most important thing that people seek. This Government have done a massive amount to destroy that.
6.31 pm
Mr. John Bercow (Buckingham): This has been a good, stimulating and robust debate, to which so far no fewer than 13 right hon. and hon. Members have contributed. It was opened with his usual style and incisiveness by my hon. Friend the Member for Havant (Mr. Willetts), the shadow Secretary of State for Work and Pensions, who offered the House a forensic dissection of the complexities and minutiae of the Government's tax credits policy. The Secretary of State followed, with what I must confess, by his standards, was a highly humorous and witty speech—though I am sorry to say that, in my mind at any rate, that did not compensate in any way for its relative lack of intellectual substance.
The Secretary of State was followed by the hon. Member for Northavon (Mr. Webb), who gave us a scholarly disposition on a range of Government policies. When I observe the hon. Gentleman, I am always rather worried on his account. He has so many brains that I am always a little apprehensive that at any moment one or other of them might spew forth from his head and on to the Floor of the Chamber. He made a good speech and I enjoyed listening to it, as I did to that of the hon. Member for Barnsley, Central (Mr. Illsley), who offered a penetrating critique of the Government's climate change policy based on his experience in his constituency. I am sure that it was greeted with respect and understanding on both sides of the House.
My hon. Friend the Member for West Worcestershire (Sir Michael Spicer) commented with authority and expertise on the Government's tax policies, the declining competitiveness of UK plc and the alarming problems of the productivity gap. There was a potent contribution from my right hon. Friend the Member for Fylde (Mr. Jack), who is a distinguished former Financial Secretary to the Treasury. He focused among other topics on venture
capital and the burden of corporation tax. My hon. Friend the Member for Basingstoke (Mr. Hunter) offered a general critique of the Government across the field of public policy, including their failures in respect of economic performance and the delivery of public services.The hon. Member for Lincoln (Gillian Merron) talked about energy, the health service and her particular pleasure in respect of Government policy in the Budget on community amateur sports clubs. The hon. Member for Newbury (Mr. Rendel) lamented the Government's position on student finance. We had a powerful contribution just a few moments ago from my hon. Friend the Member for Gosport (Mr. Viggers), one of the merits of which from my selfish point of view was to remind me of how moderate in my criticisms of the Government I am progressively becoming. I am grateful to him for providing a yardstick against which I must measure my efforts in future.
I hope that I have not missed out too many hon. Members. The hon. Member for Aberdeen, South (Miss Begg) made a powerful speech, but I shall not be hypocritical about it. Sadly, I was not present for most of it, but I am well aware that that was my loss and not hers.
The hon. Member for Warrington, North (Helen Jones) made a brilliant, skilful, eloquent, passionate and sincere contribution to the debate. I recall, as she will with some pain and anguish, that I lavishly complimented her in a newspaper interview about a year ago. Whether there is any causal relationship between that compliment and the inexplicable fact that she continues to languish on the Government Back Benches, I know not, but I do not wish to embarrass her any further.
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