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Sir Robert Smith: Interestingly, in choosing to trot out the same lines as the Chancellor, the Secretary of State failed to recognise that he is taking away revenue, which makes an operation more expensive. On royalties relief, where a particular project becomes difficult to proceed with, exemption can already be applied for.

Mr. Whittingdale: The hon. Gentleman, who represents a Scottish constituency that is bound to be extremely badly affected by this measure, is absolutely right. Those in the industry will be alarmed to hear that the Chancellor has been talking about consulting on abolishing royalty payments, but they will be even more alarmed when they read the Red Book because they will find that figures for receipts of royalty payments continue in the projected revenues until 2007. At best, that suggests that the Chancellor does not envisage that the consultation will be carried out very swiftly.

It seems pretty clear that the only reason for the consultation period is to provide an excuse to defer abolition. It is no wonder that those in the industry have reacted extremely badly; they feel that they have delivered their side of the bargain in terms of investment and that, in return, they have been clobbered by a totally unexpected 33 per cent. tax increase, which is bound to damage confidence, investment and jobs.

Not only the oil industry, but every employer in the land was clobbered in the Budget. For 50 minutes, they heard the Chancellor distribute favours in all directions. Then, in the last 10 minutes, they got hit with a tax increase of nearly £4 billion. Even before the Budget, industry was pointing to the damage done to our competitiveness by the tax increases that have taken place under this Government.

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The Confederation of British Industry has calculated that the tax burden on business has increased by £29 billion as a result of the tax measures in the Chancellor's first five Budgets. It has said that, from having been one of the lowest taxed countries in Europe, the burden on business in the United Kingdom is now higher than that faced by most of our key competitors and that, of our five top trading countries, only France now imposes a bigger tax burden on business—and that was before the latest increase.

Dr. Stephen Ladyman (South Thanet): If the Government have rendered such huge damage to industry, can the hon. Gentleman explain why we have the lowest unemployment in the developed world and why we were the only country to weather the last global slowdown and still manage to keep our economy growing?

Mr. Whittingdale: The hon. Gentleman refers to our unemployment record; I merely ask him whether he thinks a tax on the payroll—a tax on jobs—will help to improve our record on creating jobs and reducing unemployment.

Mr. Chris Bryant (Rhondda): Can the hon. Gentleman also explain why the number of unemployed people in his constituency has fallen from 1,630 in 1997 to 720 now—a 55 per cent. cut? Does he not welcome the cut in unemployment in his constituency?

Mr. Whittingdale: Of course I welcome the cut in unemployment, especially in my constituency, but I shall also explain to my constituents and those of every other hon. Member that the Government have now put a direct tax on their jobs, which will make it more likely that they will lose them in future.

The CBI said before the Budget that the priority should be to cut business tax. Digby Jones, the director general of the CBI, said that the Budget would be a defining moment in the Chancellor's relationship with business, and he was absolutely right. Once again, the Chancellor has chosen to impose the single biggest tax increase on business and, moreover, he has done so in the most damaging way possible.

Instead of taxing profits, the Chancellor has chosen to tax jobs, by imposing an extra 1 per cent. in tax on the wages bill of every company in the land, and it does not matter whether the business is making a profit or a loss, or whether it is large or small. Even unincorporated businesses or simple one-man operations will have to pay more as a result of that measure. It is hard to think of a measure that will do more to damage industry's profitability and competitiveness.

Mr. Prisk: I am delighted to hear my hon. Friend mention the self-employed and unincorporated. Not one word about the self-employed—all 3 million of them—came from the Secretary of State or the Chancellor. Does my hon. Friend agree that that is a disgrace, especially for the Secretary of State for Trade and Industry?

Mr. Whittingdale: I entirely agree, and many self-employed people will think it particularly mean that they were also clobbered as a result of that measure. The self-employed have to bear ever-increasing burdens and none of the employment measures that go through the House helps them. They have had a steadily harder time

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under the Government and the Budget will make things considerably worse, yet the Chancellor had the cheek to say that the Budget was about building a Britain of greater enterprise. So what did those who actually work in enterprise think of the Budget? The CBI said that there will be deep dismay at a tax burden that impacts directly on the cost of employing people at a time when UK competitiveness is being put to the test. The British Chambers of Commerce, which was quoted at least twice by the Secretary of State, called the measure a step backwards, and its head of policy has said:

The Federation of Small Businesses says it is a tragedy that the self-employed will also pay higher national insurance contributions, adding that

The Forum of Private Business calls the measure a

One analyst has calculated that company profits will be cut by as much as 4 per cent. A small firm employing 10 people will face an increased national insurance bill of about £25,000.

Mr. Bryant: Will the hon. Gentleman give way?

Michael Fabricant: Will my hon. Friend give way?

Mr. Whittingdale: I will give way to the hon. Member for Rhondda (Mr. Bryant) first, then to my hon. Friend.

Mr. Bryant: Such generosity—I thank the hon. Gentleman. Would any of those whom he is quoting prefer to pay for the national health service through American-style private insurance or French-style social insurance, which would probably be far more expensive for business? What does the hon. Gentleman himself think?

Mr. Whittingdale: Once again, the hon. Gentleman displays the wholly closed mind of Labour Members. They believe that the only way in which to put more money into the NHS is through general taxation. The reason why some other countries have better standards of health care and better standards of performance in their health services than us is that they spend more money on those services, but not money from the taxpayer. We have a lot to learn from such countries, and I shall not follow the Chancellor of the Exchequer by closing my mind and refusing to accept that anything could be improved.

Michael Fabricant: Does my hon. Friend realise that the national insurance premium is a double whammy? I am told by the leader of Lichfield district council that it will cost an additional £78,000 to employ people in that small district council. Such increases across the country will inevitably cause an increase in council tax payments.

Mr. Whittingdale: My hon. Friend is right. My local authority, Essex county council, estimates that the measure will add £4.5 million to its wages bill, which will inevitably lead to an increase in council tax next year. Council tax payers will pay twice as a result of the Budget. Of course, businesses and local authorities are not the only ones affected: the health service, police

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authorities and local education authorities all face a huge increase in their wages bill as a result of the Budget, which will deprive the public services that the Chancellor claims he wants to help.

Ms Meg Munn (Sheffield, Heeley): Has the hon. Gentleman read the Institute of Directors' comments on the Budget which describe it as having laudable aims and containing several worthwhile tax measures? The IOD is one of the organisations that he appears to have missed out.

Mr. Whittingdale: I do not disagree that the Budget has laudable aims; I just do not think that they will work. The IOD also says that without fundamental reform of the NHS, simply pouring in more public money will not lead to any improvement. On that point, I entirely agree with the IOD.

Mr. Kevan Jones (North Durham): I agree that the reason why Germany and France have better health care is that they spend more money. How would the hon. Gentleman produce the extra resources that the health service and other public services require?

Mr. Whittingdale: The difference between this country and other European countries is that they spend more on their health services but the money does not come from the taxpayer. They have a far greater private sector and more private money going into their health services, with the result that they are able to spend more overall on health care. That is a model that we might do well to emulate.

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