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Mr. Redwood : I have declared my interests in the Register of Members' Interests.
I, too, join my right hon. Friend the Member for Fylde (Mr. Jack) in paying tribute to those Opposition Members who have worked hard in Committee—I have read of their progress—and to my hon. Friend the Member for Arundel and South Downs (Mr. Flight) who has done sterling work, as a result of which there have been improvements to the legislation.
I am glad that my hon. Friend is asking the official Opposition to vote against the Bill on Third Reading in principle. We have heard Labour Members explain that the Bill presents a series of tax measures that they say are necessary to fund our health service. If only it were so. But when I have sought promises from Health Ministers that the taxes in the Bill would lead to the provision of consultants, nurses, doctors and other personnel whom I need in my local hospital, I can get no guarantee. I have every fear that we shall not get them quickly or in the numbers that we need.
When I read in my papers and hear in the House from time to time of the massive losses being built up in the Post Office, the financial catastrophe that is Railtrack and the massive increase in budgets for the Government's burgeoning welfare bills, I see that this legislation is part of the Government's policy of tax and waste. It is the high taxation side to pay for large bills, many of them going on things that the public does not want, or just reflecting bad management.
I am not just voting against the Bill because I object to the whole strategy; I am also voting against it because some of the taxes embedded in the legislation are especially damaging.
Paul Farrelly (Newcastle-under-Lyme): Will the right hon. Gentleman give the House the benefit of his wisdom in relation to the Conservative party's policy on funding the NHS, or would he admit that we still await that?
Mr. Deputy Speaker: Order. I hope that the right hon. Gentleman will resist that invitation while we are debating the Third Reading of the Finance Bill.
Mr. Redwood: I am grateful, Mr. Deputy Speaker.
We need to spend money on sensible things and to raise taxes for that, but I believe that the Government are raising far too much and that a lot of it will not be well spent, which is what the public thinks.
The first tax in the legislation that I am worried about is stamp duty. Some amendments have been made, but the Bill does nothing for an area such as mine, with high and rapidly rising house prices, in which many people who are seeking to buy for the first time will be paying rather high levels of stamp duty compared with the modest sums that they have been able to save in their short careers so far.
That should matter to a Government who want more teachers, nurses and junior doctors, the very people who will have to pay those penal stamp duties when they are struggling to get together a deposit to buy their first flat or small house. In many parts of the country now where house prices are high and when the duties and thresholds incorporated in the legislation leave such people cruelly
exposed, it makes it so much more difficult to populate the public sector with the good young talent that we need. Stamp duty is becoming one of the substantial barriers to their successful mobility and employment in places of high cost.
Mr. Edward Davey: I have just spoken to my hon. Friend the Member for Sutton and Cheam (Mr. Burstow) and he agrees with me. Is it right that one pays stamp duty on one's first house purchase? Does not one pay it when one sells?
Mr. Redwood: I have always had to pay it on purchase. I do not know where the hon. Gentleman has been, but it is a tax imposed when one buys a property. It is particularly hard for someone with a big student loan, who has tried to save for two or three years and put together a small deposit, to then discover that the biggest cost that they will have to face in addition to the legal bills and other necessary expenses will be stamp duty to a Chancellor belonging to a Government who say that they want such public sector workers to be able to work in expensive parts of the country as well as in cheaper parts, and then weep crocodile tears about the housing problems that they face.
The second tax that I wish to express concern about is the one highlighted by my hon. Friend the Member for Arundel and South Downs as his principal reason for opposing the legislation—that is, the taxation that is likely to be enacted for the oil industry. Here, again, one would hope that the Government would listen and learn from their own experiences if not from those of Governments in other parts of the world. Surely they can understand that the decision to impose a large one-off tax on the telecoms industry a few years ago was one of the main reasons for the precipitate collapse in investment expenditure and employment in that industry. What was once the proud growing industry that led the renaissance of the British economy in the 1990s is now a disaster area that is leading the economy down. We hope that that will not spread to every part of the economy, but it was a very big chunk of it to hit so heavily. Please will the Government understand the damage that will be done by taking that much money out of a high-investing industry? Will they recognise that their oil taxation, which is on a smaller scale and is therefore unlikely to do so much damage will, none the less, do some damage to the investment and employment prospects of that industry?
Mr. Tom Harris: I intervene on a point of clarification. The right hon. Gentleman mentioned the one-off tax on telecoms. Was he referring to the auction of digital bandwidths? We must be very clear that an auction is not a taxation policy. The Opposition have made mistakes about that many times before. The process was freely and voluntarily entered into by the telecoms industry.
Mr. Redwood: It certainly was not. It was a tax on staying in business, because if the companies wished to stay in business, they had to buy a licence. The Government did not offer enough licences, of which they were the monopoly supplier, so the measure acted in exactly the same way as a tax and they were taking huge sums out of a very successful industry. Surely the hon. Gentleman can at least grasp the very simple point that if
£22.5 billion is taken out of the pockets of companies that were going to invest a great deal, they will spend less and get into financial difficulties. Indeed, some of them went bankrupt or needed financial reconstruction.
Rob Marris: The right hon. Gentleman seems to be setting out a very curious scenario that does not at all accord with my recollection of history. Companies were bidding for licences, and the Government were selling a state asset—access to the airwaves—for a decent price, in contradistinction to what happened when his party was in office. In Italy, for example, where a similar process was undertaken, some of the telecommunications companies simply dropped out of the bidding or failed to bid, as some in the United Kingdom did. He is trying to blame the Government for the commercial decisions and mismanagement of telecoms companies in the United Kingdom.
Mr. Redwood: Labour Members protest too much. The policy was a tax and it did a lot of damage. I am warning the House and the Government that they are now imposing a less dramatic tax on the oil industry, but one that will have a proportionate effect on investment and jobs in the oil industry. The danger in the oil industry is that if even a marginal increase in taxation coincides with a lower oil price or some other worsening of the terms of trade of an oil company, it could lead to a very big cancellation of investment programmes.
The Government are therefore in a paradox. If they are lucky, the oil price will increase a lot, which will conceal the impact of their taxation, but have all sorts of other unpleasant consequences for the economy. If they are unlucky, the oil price will go down, which will magnify the impact of their tax increases and lead to the cancellation of projects or to a desire in the industry not to pursue marginal North sea projects that will be very damaging. A previous Labour Government found that out in the 1970s, so one wishes that the current Government had some folk memory of those experiences and had learned from them.
Ruth Kelly: Does the right hon. Gentleman not accept that, by introducing a 100 per cent. first-year capital allowance, it is the Government who are taking the risk of lower oil prices and not the companies?
Mr. Redwood: One must consider the impact of all the oil tax measures that the Government are proposing, and not just the capital allowances. As the oil industry has made clear to the Government, the overall impact will be negative, and if circumstances deteriorate further on the demand or price side, further cancellations will result. I am surprised that the intelligent Minister cannot understand that.
Mr. Flight: My right hon. Friend might also be aware that large numbers of new participants in the North sea have not got any profits on which to use a capital allowance.
Mr. Redwood: My hon. Friend makes a very valuable point. Of course, that is exactly what I had in mind when I was saying that if other conditions deteriorated further,
more companies would find themselves in that position, which reinforces the fact that the overall balance of tax measures will be negative in the industry.My third worry about the Bill is the measures that my hon. Friend the Member for Arundel and South Downs highlighted in relation to Jersey. I think that the offshore Crown dependencies that are part of the Great Britain island group have done an amazing job for their people and demonstrated that good honest businesses that generate many well-paid jobs can be run by keeping corporate and financial taxes low and keeping regulation within bounds. I regret that the Government are not standing up for that important set of principles and for the offshore islands within the European Union in the way that they should.
I fear that the measures in the Finance Bill are only part of a series of measures that are going to be taken gradually to make it more difficult for the offshore islands under the Crown to pursue their legitimate and decent businesses with the benefits of lower taxation and lighter regulation that are essential to their well-being. These islands are great success stories. They have little other natural advantage, but they have attracted talent and now have home-grown talent. They have good levels of employment and income as a result of concentrating primarily on financial services, and encouraging them through lower taxation and light regulation.
The Bill is another step in the wrong direction. It may not be the killer step, but it is part of a process in which the terms are going to deteriorate for the offshore islands. It may also spark more political opposition on the islands to their continuing relationship, in its current form, with the United Kingdom. That is something that I rather regret, and we ought to be very worried about it.
My fear about the Bill is that, when it targets specific areas or places for extra taxes without understanding the impact that it will have, it is too draconian. In other ways, however, it does not measure up to the growing storm clouds here and elsewhere in the world that might have benefited from a rather different response from a Government concerned about our future prosperity, the value of our savings, and our livelihoods.
The Government would be well advised to take the message of the United Kingdom stock market a little more seriously. It has now been falling solidly for two and a half years. It has been falling not just because of the world background, and it is certainly not just because a few big companies in the United States of America have made mistakes, or worse, in their accounting practices and undermined confidence recently on Wall street. It is falling partly because too much tax has been taken out of companies by the Government, and partly because the Government are moving towards greater hostility to the idea of making a profit on enterprise and being able to reinvest it.
The savings rate is too low, and our pension funds are in a state of crisis, as we debated recently in the House. The Finance Bill reaffirms the £5 billion a year tax hit on those very pension funds, which should be providing a better future for many of our constituents than they are now going to do, because of this continuing tax raid.
The Finance Bill is the product of a tax-raiding Chancellor who really believed that British business was so successful and so profitable that it did not matter what taxes he threw at it. I fear that we are going to discover
that mistakes have been made in the Bill in its taxation of savings, its taxation of the housing market, its taxation of profits and, in particular, its taxation of the oil industry. Times are tough and different out there now. The Bill does not recognise that; it is part of the Government's policy of tax and waste, when we need a policy that promotes savings and enterprise.
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