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9 Apr 2003 : Column 307—continued
Mr. Redwood: The problem with the hon. Gentleman's figures is that he is not taking the right time periods or markets. If he compares London with New York, he will see that my case is entirely made—that the American economy is run with lower levels of taxation and regulation. If he takes the time period that I mentioned, beginning from the point when the Chancellor's policies started to take effect in this country, he will see that the rate of fall is faster in Britain than in the other major markets.
Rob Marris (Wolverhampton, South-West): Will the right hon. Gentleman give way?
Mr. Redwood: I want to make a little progress before taking more meaningless interventions, which are great fun to shoot down.
The Chancellor of the Exchequer seems to believe that there can be taxes that do not do damage. Let us look at his great experiment with the telecoms tax—the £22 thousand million that was taken out of the pockets of the telecoms industry in this country. He told us that he was proud of it, and I shall give him this—he certainly found a way to maximise the take. He had a very senior mathematician advising him, and he got the sums absolutely right. He found the perfect way to mug the telecoms industry for a huge sum of money.
However, we must look at the damage that tax did, especially when the Germans followed it up with a very similar system based on the same idea. The fallout in telecoms and high tech that was beginning in Wall street and the US was multiplied many fold in Europe because the Chancellor had led the way by taking far too much money out of the lead sector that was powering the growth, generating the productivity gains and transforming the economy. The Chancellor did the most damaging thing possible at the most damaging time. The result was carnage—cancelled investment programmes and bankruptcies, with people fighting for their lives even in great companies such as BT.
Rob Marris: I am grateful to the right hon. Gentleman for giving way. I shall not be drawn into commenting on the telecommunications licences. They were bought by private companies, and were not taxation. However, the
right hon. Gentleman rather pooh-poohed the point made by my hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt). As I recall, the American stock market fell about 41 per cent. It is a bit less than the UK fall, but only a little bit.
Mr. Redwood: Again, the hon. Gentleman is not looking at the time period that I am talking about, when the Chancellor exacted a price. I can give the sums. The Chancellor decided to take £5 billion out of pension funds at a time when the market was trading on a multiple of 20. Simple arithmetic shows that stocks would fall by £100 billion as a result of the £5 billion taken in tax. That money was taken from companies, pensions and savers. It was put somewhere else, and quite a lot was wasted.
David Davis (Haltemprice and Howden): There was also the cost of regulation.
Mr. Redwood: From a sedentary position, my right hon. Friend the Member for Haltemprice and Howden says that there was also the cost of regulation. In addition, the costs of the specific taxes and of the general business taxes came to around £50 billion. Even Labour must understand that taking £50 billion away from productive and enterprising companies means that there will be fewer jobs, less investment and a big fall in the stock values of the companies losing the money. One cannot take all that money away and expect it to have no impact.
That brings me to the pensions disaster. The Chancellor thought his second most clever tax was the pensions tax. For a year or two, it did its stealthy business and the money came in. Many Labour Members really believed the Chancellor and the Prime Minister when they said, "It won't have any impact. The stock market will go on up, there will be magic money, and you needn't worry."
However, the stock market did adjust as the money went out of pension funds. Moreover, the problem compounded: the capital collapse in share values led to the collapse in the values of pension funds, and the pension funds had less income to reinvest. As a result, the black holes in the pension funds got bigger and bigger.
I was delighted that the hon. Member for Dumbarton (Mr. McFall), the Chairman of the Treasury Select Committee, was a big enough man to admit that there is a very serious problem in pension funds in this country. The £5 billion pensions tax is at the bottom of it.
It is not the only cause. The international collapse in stock markets, which happened in parallel with the process that I have described, has done damage as well, but there is a very big "made in Britain" component in the pensions crash. One of the most obvious solutions is to try and find a way to reduce spending without damaging public services, so that some of the money can be given back to the pension funds. Unless that happens, it will be almost impossible for the funds to narrow the gap between assets and liabilities, and for the stock market to make the full recovery that we desperately need it to make if our great pensions success is to be preserved for another generation.
I should have thought that the Chancellor of the Exchequer would be deeply ashamed of the single fact that my right hon. Friend the Member for Chingford
and Woodford Green (Mr. Duncan Smith), the Leader of the Opposition, brought forward on this issue. That is, that many people will now retire on half the pension that they expected, and on half the pension that they would have earned from their pension fund if they had retired in the final year of a Conservative Government.That too is the price of this Chancellor of the Exchequer. He has been on watch for almost six years, and in the latter part of that period the pensions funds have collapsed. That has the real and immediate consequence that many people retiring now are not getting as much pension as previously. The even worse consequence for members of many of the schemes that continue is that they are being told that they will either have to pay a higher contribution or get smaller benefits. However, in probably as many as half the total number of cases, people are being told that their pension fund is being shut down, and that they no longer have the opportunity afforded to the previous generation to make a contribution, to receive an employer's contribution, and to look forward to a decent pension in the future.
After the two disasters of the telecoms tax and the telecoms boom and bust, and the pensions tax and the pensions boom and bust, it is heroic of the Chancellor to settle this time on a tax on jobs. Labour Members must understand that the imposition of a very large tax on jobs in the form of the increases in employer and employee contributions, hitting this month, will have a serious impact on the number of surviving jobs. One would have thought that the 300 jobs a day that have gone in manufacturing for every day of this Government so far would have warned the Chancellor, but no. The jobs that are most vulnerable to the Chancellor's jobs tax are those in companies that are not earning good margins, are struggling, are loss-making, or do not pay particularly good wages. Those companies cannot afford such an imposition. The biggest danger of the tax on jobs is that it will destroy many more jobs in manufacturing. I hope that jobs will be created elsewhere to offset some of that impact, as has happened in recent months. However, most of the jobs that are being generated at the moment are in the public sector. The Government are destroying the productive jobs in companies that used to pay their way and pay taxes, and creating jobs in the public sector that unfortunately do not reach the right areas or deliver the improved services that we all desperately want.
The hon. Member for Dumbarton rightly said that we have a big productivity problem. The Chancellor has spent six years lecturing the private sector on how it should raise productivity. He has spent six years imposing targets, interventions, directives, warm words and cold words on the public service, but he has not yet got anywhere near to creating higher productivity in the public service. We have a productivity-destroying machine called taxation and public spending. We take money away from the productive sectors that could invest and create new jobs if they kept it, and tip it down the drain on the wrong kind of public service spending, even succeeding in lowering productivity there in the process. On both sides of the account, we are doing damage to our productivity record at a time when the Chancellor rightly points out that we are still well
behind some of our leading competitors, particularly the United States of America, and when we should be reinforcing success by leaving the money to a greater extent in the private sector, which could invest in the new technologies and new jobs that we need.
Mr. Bercow: My right hon. Friend referred to the inadequacy and deterioration of public services. Does he agree that for the Government to fail to meet targets for the public services that were set by independent experts would be disappointing, but for them to fail to meet their own targets—notably, but not exclusively, on literacy, numeracy and truancy—requires incompetence on a truly spectacular scale?
Mr. Redwood: My hon. Friend is absolutely right. Meeting targets for numeracy clearly challenges the Chancellor himself, because practically all the numbers that he put into last year's Budget documents were works of fiction. He will need a refresher course in numeracy, and I hope that the Education Secretary is working on that as a priority. Having had a quick look at the Chancellor's Red Book today, I suspect that he still has not learnt to be as numerate as he should be, and I have a nasty feeling that his productivity figures and growth figures will prove too optimistic, and that therefore his borrowing figures and tax revenue figures will prove too optimistic. This Chancellor of 53 tax increases will prove that the more one taxes, the less one raises.
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