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Mr. Bercow: Once again, my hon. Friend pertinently highlights the disparity between increased investment in

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public services and the failure to achieve a commensurate rise in activity. Given that the responsibility for public service delivery ultimately rests with the Treasury, does he agree that it is a matter of very considerable concern that the Chief Secretary, when challenged to identify the structural reforms that will improve service delivery, was singularly unable, for the second time in succession, to do so?

Mr. Flight: I thank my hon. Friend for his comments. I am not sure whether the Chief Secretary even understood his question, but the Chief Secretary seems also to be remarkably complacent, as I commented earlier, about his commitment to reduce waste in public spending. All he can do is laugh about that, so it seems.

Mr. Redwood: On that very point, can my hon. Friend tell me what advantages commuters from his part of the world have got from the £15 billion so far wasted by the Government on "Notwork" Rail? In my constituency, there has been no improvement whatsoever from Network or "Notwork" Rail, and it is £15 billion down the drain.

Mr. Flight: My right hon. Friend makes an interesting intervention. I am afraid to say that my constituents' trains either get cancelled or do not even stop. There is a desperate need for infrastructure investment on the Brighton line, for which the Strategic Rail Authority has no money. The lease that the SRA has granted to the operator is too short; as a result, the operator will not make the necessary investment. The service is declining dramatically, much to the fury of those who live in the area and commute to London.

I asked a well-known economist, who has participated in the deliberations of the Bank of England, for an opinion on the Finance Bill. The comment that I received was that the micro-measures in the Finance Bill were typical of the economic distortions that third world economies pursue, of which it is the job of the International Monetary Fund and the World Bank to get rid. [Hon. Members: "Who was it?"] The Government sought accolades for a number of minor measures that will simply interfere with the economic process.

The Finance Bill adds to the measures taken last year, together with the council tax stealth tax, to raise taxes this year by a staggering £26.5 billion—by 7.1 per cent., as set out in the Red Book. Last year, the tax increase was 1.9 per cent.—a mere £6.8 billion—so this year's tax increase is nearly four times last year's total. The major burden of the extra taxation will fall on individuals, £19 billion of which will come from increases in income tax and national insurance. Of that, £8.8 billion will come from income tax, which is 7.8 per cent. up, helped by the freezing of personal allowances, which are worth £700 million. Furthermore, we must bear in mind the wider knock-on effect, with nurses and policemen now finding themselves in the 40 per cent. tax bracket. The council tax stealth tax will raise £2 billion. Stamp duty is forecast to yield 4 per cent. more—up to nearly £8 billion—and it has doubled in the past three years. The national insurance yield is to increase by 16 per cent. to

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£10.2 billion, and the VAT yield will go up by 4.8 per cent. to £3 billion—the one positive measure, as most of that is forecast to come from getting rid of VAT fraud.

Kali Mountford: Is the hon. Gentleman seriously asking the House to accept that people's increased earnings, and the commensurate increase in tax payments, is somehow undesirable?

Mr. Flight: I am sure that those whose earnings have increased, particularly those in the public sector, where increases are running at twice the level of the private sector, will be very pleased with those increases. Of course, if people's earnings increase, their tax goes up. I am talking about a far greater increase, however: an increase in taxation four times the increase in the year that has just finished, and an increase of nearly 8 per cent. in the tax take in a single year. If the hon. Lady is not surprised by that, and is not worried by what might be the economic effects, I suggest that she spend a little more time looking through the Red Book to see where those effects will bite.

Vehicle fuel and excise duty are to increase by £1.1 billion. That reflects a mixture of vehicle excise duty increasing by more than inflation, and the 38 per cent. increase in red diesel. Landfill tax revenue is to go up by 40 per cent., with rates rising to 14 per cent., 15 per cent. and 16 per cent. in the coming years.

Mr. Andrew Tyrie (Chichester): The hon. Member for Colne Valley (Kali Mountford) referred to fiscal drag, but the Institute for Fiscal Studies pointed out that two thirds of the tax increases cannot be attributed to fiscal drag but are caused by measures, which is exactly what my hon. Friend is pointing out from the Dispatch Box.

Mr. Flight: I thank my hon. Friend for his comments. My point was that last year's tax increases were roughly in line with fiscal drag, whereas this year's increases are enormously higher.

The Chancellor claimed virtue from the freeze on the rate of insurance premium tax, although it will yield a further £325 million this year. That is a windfall increase as a result of the massive ratcheting up of employers' liability insurance premiums. Chambers of commerce believe that the Government have missed the opportunity to use the windfall to relieve serious problems that they said they would address. Indeed, a review by the Department for Work and Pensions was due this spring, but it has so far failed to appear, and nothing in the Bill will address the problem. Clause 191 will merely block the use of protected cell companies to avoid the higher rate of insurance premium tax. A recent survey showed that as many as 210,000 small and medium-sized businesses operate without cover. I hope that in her winding-up speech the Paymaster General will say how the Government propose to address that serious problem.

Mr. Love: The hon. Gentleman has produced a litany of so-called tax increases, although many of them lie outside the scope of the Budget. If he opposes the increases, his alternatives are either to allow borrowing to rise, which I assume he would condemn, or to cut public expenditure. Where would he make those cuts?

Mr. Flight: For the third or fourth time, our criticism is about the failure to deliver. If delivery had succeeded, the financial arithmetic would look much better.

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I want to make a further point because the more one digs the more one finds little stealth taxes. The Inland Revenue is reversing a decision on changes to the corporation tax treatment of depreciation in stocks following a Hong Kong court case. That will lead to a further £25 million to £30 million bill for the Scottish spirits and distilling industry because corporation tax will effectively have to be paid at the time of production rather than the time of maturity.

Mr. George Osborne: In response to the intervention made by the hon. Member for Edmonton (Mr. Love), surely it is true that a low-tax economy is also a buoyant economy with successful businesses, which causes tax revenue to flow to the Government.

Mr. Flight: That is what makes an economy successful, and we need only compare the poor performance of continental Europe with the performance of the UK over the past 10 years for proof of that.

The reality is that there has been a 50 per cent. increase in taxation since 1997. The tax take has risen from £270 billion per annum to £403 billion, which equates to £5,500 per household per annum. The rise has not been matched by anything like a similar improvement in the delivery of public services. Those who will be hurt most by the Chancellor's increased taxes will be the savers of today, who are the pensioners of tomorrow. The Government do not seem to be concerned that people who retire today will receive half the pension that they would have received in 1997, despite the fact they saved the same amount for the same time.

The Labour Government are losing hearts and minds among British business. As Digby Jones said,

Last April the Chancellor predicted that he would have to borrow £13 billion this year, but we all know that that has more than doubled to £27 billion. Just two Budgets ago the Chancellor told the House that he would need to borrow £35 billion between 2002 and 2006. He has now admitted that that has increased to £98 billion. The deterioration in Britain's finances has been worse than that in the moribund EU economies. We are swinging from a 1.5 per cent. surplus to a 2.5 per cent. deficit; the eurozone average is moving from a 1 per cent. deficit to a 2.5 per deficit. The UK has also increased taxes as a proportion of gross domestic product by more than any other EU country since 1997.

Geraint Davies: Will the hon. Gentleman give way?

Mr. Flight: No.

The reality is more taxes, more spending, more borrowing, more promises, more failure, more excuses and no delivery. The Chancellor's micro-economic policies are taking Britain back whence it came, to high taxes, high public spending and third-rate public services.

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