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Budget Statement

Column Number: 49

Welsh Grand Committee

Wednesday 24 April 2002


[Mr. Win Griffiths in the Chair]

Budget Statement

Motion made, and Question proposed [this day],

    That the Committee has considered the matter of the Budget Statement and its implications for Wales.

4 pm

Question again proposed.

Lembit Öpik (Montgomeryshire): Two points have arisen from this morning's sitting. Many members of the Committee have incorrectly inferred that my poor physical condition is a direct result of my meeting with the Campaign for Real Ale. [Interruption.] There you go. Hon. Members seem unable to contain themselves before drinks this evening. CAMRA promotes responsible drinking. As my hon. Friend the Member for Brecon and Radnorshire (Mr. Williams) is no more a hardened drinker than I am, and he is fine and I am not, I can assure hon. Members that my condition is definitely due to the food.

Secondly, this morning I drew attention to the fact that the Government had included motor bikes as a key part of their strategy. I suggest to the Ministers that when they are in conversation with their opposite numbers in the Assembly, they could consider ways of promoting motor cycles as a commuting solution. I stress that it is important to think about the safety aspects, too. However, as long as there is proper training, that would be a great and positive way to implement the changes in the Budget to the vehicle excise duty on to two-wheelers.

Resolution 33 on the deduction of expenditure involving crime means that payments made abroad for activities that would be illegal in the United Kingdom, such as bribes, will no longer be tax-deductible. The Liberal Democrats argued for that in the past. Now, no one can get tax back on illegal activities abroad. It is as plain as day that that is sensible, and I am glad that the Government have introduced that resolution.

There are other elements of the Budget that I think were good. The changes to stamp duty will evidently bring in more money and have the support of the Liberal Democrats. Resolution 58 on the climate change levy, combined heat and power stations and renewable sources, and other resolutions connected with it, are really important. As climate change accelerates—and I fear that it will—we will spend more time talking about the consequences of environmental change and our responsibilities to stop it. It is a sad fact of life that human nature causes us to pay attention to things that affect us directly, although I hope that it will not come to that. I hope that we, as a truly internationalist country, will think about people in Bangladesh and elsewhere who need climate change levy legislation to bite. Perhaps we are not accelerating our environmental credentials fast enough. Time will tell.

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Of course, there are matters with which we do not agree. Let me deal with the issue that vexed the Committee most this morning: the continuing debate about whether national insurance is an acceptable way of raising money to fund the health service. The Liberal Democrats have always argued for that kind of increase in expenditure, and it would be churlish not to compliment the Government on listening to Liberal Democrat advice yet again. The issue is how, not whether, we raise the money.

I should like to make three observations, although I accept that there will be different views in the Room. Most members of the public regard the increase in national insurance contributions as an increase in direct taxation. They do not think that national insurance is very different from income tax. I understand that the Government do not want it to be thought of in that way because they promised at the general election not to raise income tax. That is a problem for them. However, it was a pity that they made that pledge, and in my opening remarks I spoke about the benefits of being straight with the public. Perhaps they missed their opportunity.

On the Divisions on the resolutions, we did not formally support the national insurance changes because we have not yet voted on them, as they have not been discussed. We voted against resolution 21 because we wanted to draw a line in the sand to show that our policy is different from the Government's. We think that an increase in income tax would be better. If we were in government, we would propose putting a penny on income tax for education, and increasing the top rate of income tax to 50p in the pound—an increase of 10p in the pound—for those who earn more than £100,000 a year.

It is a pity that the hon. Member for Ribble Valley (Mr. Evans) is not here. He needs to explain the logic of the Conservative party's view, given that for much of the time between 1979 and 1997, under a Conservative Government, the top rate of tax was 60 per cent. We do not even propose to go as far as the Conservatives did for a large proportion of their time in government.

Interestingly, a 50 per cent. top tax rate would raise an amount comparable to that which the Chancellor will raise through national insurance. We oppose using national insurance as the vehicle because that is not fair. The Secretary of State said this morning that it was reasonable to expect employers to pay. We think differently; we believe that income tax is the most transparent, sensible and fair way to raise the money. We do not need to labour the point, as it is a simple one, and ultimately it is a judgment call.

I am pretty certain that the Government have not got away with the national insurance increase with the general public. There is dissatisfaction among small businesses, as the hon. Member for Ceredigion (Mr. Thomas) said. To be parochial for a moment, many small businesses directly involved in agriculture in rural areas will be affected. I hope that I have at least clarified the difference of opinion between the Liberal Democrats and the Government on the matter, although we might simply have to continue to differ.

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A measure that directly affects some parts of Wales, but not my constituency, and that we must take seriously, is the introduction of a petroleum extraction activities levy that will raise £600 million. That move is rather a surprise, and it was made without consultation. The Government only recently completed a review of the North sea tax regime that decided against significant change. I hope that the Under-Secretary will explain in his summation why there was no new consultation on the subject, and why the Government thought it acceptable to introduce what is a pretty much a windfall tax on the petroleum industry.

The profit in the oil business is tempting to any Government, but it creates suspicion when changes are made unilaterally under a formal process. I have talked to members of British Petroleum, although I have no declarable or registered interest in the matter. I sense that they are happy to work proactively with the Government, so it is a bit of a shame that the matter slid, and that the Government introduced the tax at a time when it would be hard for the petroleum industry to respond and garner the support of the public.

I have implied what we would do had we been in Government—added 1p on income tax for education, and 10p to the top rate of income tax for health. One can see that the Liberal Democrats' and the Government's processes are slightly different, but on outcome, I can say unequivocally that the Government are on the right lines in putting significant extra expenditure into health.

I would like to explore briefly what Plaid Cymru and the Conservatives say on that matter. My remarks are intended to engender debate. Hon. Members from the Welsh nationalist Benches may answer my questions in later speeches, or intervene on me now. There continue to be inconsistencies in Plaid Cymru's approach to the economy in Welsh Grand Committee debates. I can understand that the hon. Member for East Carmarthen and Dinefwr (Adam Price) felt rather put upon earlier, when some of us were pushing him to clarify the long-term strategic goals of the Welsh nationalists. We wanted to know whether that goal was independence or something else.

The question was significant because Plaid Cymru's strategic goals are bound to inform how they would do the job if they were in government in the National Assembly for Wales. We cannot get away from that. I think that it is reasonable for them to give members of the public, who will be invited to vote in the Assembly elections in 2003, a big-picture sense of what is going on. I was left unsatisfied about whether the long-term intention of Plaid Cymru was independence, which was what the hon. Gentleman implied, or whether it has a different strategy.

I have also heard it said that Plaid Cymru wants Wales to be a nation state with its own seat in the European Union. That can happen only if Wales becomes independent. If the hon. Gentlemen would explain those core issues in a way that is clear to us all,

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it might be easier to understand the economic consequences of Plaid Cymru's plans for Government.

It is easy to make criticisms, and I am happy enough to criticise the Government when I can see a better way of doing something, but several matters were left hanging in the air, such as the loss of 40,000 manufacturing jobs. There are many complex reasons for that sort of thing, and I am not here to lecture the Welsh nationalists, but it would be easier to view their position with credibility if they explained why the problem occurred and how Plaid Cymru would deal with it.

I hope that those points of view are not too inflammatory, and I sincerely hope that the Welsh nationalist Members can reply to them.

Turning to the Conservatives, my task is even more difficult. Although I have a sense of Plaid Cymru having a direction and a commitment to Wales, I simply cannot understand what Conservative party policy is—on funding the NHS, for example. The hon. Member for Rhondda (Mr. Bryant) took part in a recent radio debate in which we sought clarification of how the Conservatives would fund the NHS. The more that was said, the more confusing it became. At one point, we heard a Conservative representative saying that money was not the main problem, but, the next moment, he complained that not enough was available and made other pecuniary points about the NHS.

Under pressure, the hon. Member for Ribble Valley did the same thing. He seemed to fall back on a belief based on fuzzy logic—that restructuring could actually win the extra money. At the same time, the Conservatives consistently criticise the Government for restructuring the health service. I am not saying that there is no strategy, but I cannot see one. Once again, if the Conservatives want to be taken seriously, they should define where they stand.


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Prepared 24 April 2002