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6.28 pm

Mr. John Redwood (Wokingham): I have declared my interests in the register.

This debate is about the biggest tax bill in history ever presented to Parliament and the British people. The Government have the audacity to bring before us today a claim for an extra £26 billion of taxation this year in comparison with last year. They have the audacity to field the Chief Secretary to the Treasury, who made a speech as if he were presenting a tax-cutting Budget by highlighting two or three morsels from a table that had otherwise been denuded of good dishes, for which a huge bill had been sent to the starving diners in the private sector. The Government have perfected the art of rip-off government and found 100 new ways to pillage the purses, tills and wallets of the nation, but still found it impossible to hire the teachers necessary to secure the improvements in schools, and the nurses and doctors necessary to get operations done, that we all so desperately want.

The background to the debate is a teaching profession in uproar and against the Government. I had always thought that many teachers were sympathetic to the Labour and Liberal Democrat view. It is fascinating to see that Ministers are now unable to face a teachers' conference and unable to answer criticisms coming from the teaching profession. Ministers must know that they have bungled it and that so much of the extra £26 billion that we are asked to approve in the Bill is going walkabout and being wasted. It has not gone to hospital operating theatres or classrooms where it is needed and could be better used.

This mighty Bill includes so many tax increases that the Government wished the Opposition and others had not teased out. Most people have understood the massive hit on national insurance rates, which was heralded many months ago, but we are still to count the costs. The Government told us that the shadow Chancellor was wrong to dub it a tax on jobs. We will see, but I support my right hon. and learned Friend; it is undoubtedly a tax on jobs. It is a simple rule of economics—one that even this Government cannot duck—that if one increases the price of something, the quantities that can be bought decline. In this case, the Government have deliberately increased the cost of

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labour by a swingeing increase in employers' and employees' national insurance. The result will be job losses and fewer people employed.

Mr. Love: Exactly the same argument was used about the national minimum wage. We were told that it would increase costs, yet employment has increased since the introduction of the national minimum wage. How does the right hon. Gentleman explain that?

Mr. Redwood: The forecasts that I and others made about the national minimum wage were absolutely spot on. We said that it would have a particularly damaging impact on low-paid work in manufacturing, the sector most likely to be exposed to its impact. It was in that sector where the world market was highly competitive and where there were some people on too little money in terms of the income paid by their employer who were then exposed by the national minimum wage to job loss. We recommended not that we should leave people with inadequate sums of money for their family needs, but that we should carry on with the benefits top-up system for those in work so that jobs would not be destroyed and families had a reasonable income to live on.

The Government decided that they knew better. As a result, under this Government, there have been 600,000 job losses in manufacturing industry. It is a disgrace. The Chief Secretary regaled the House with a story, he said, of economic success. He did not mention the tragedy of manufacturing. He told the House that the Government had not yet presided over a recession. He failed to tell the House that the Government have already presided over three manufacturing recessions; boom and bust, boom and bust and now bust and bust for manufacturing. We cannot see how manufacturing can be lifted out of the mire and the gloom. Day after day, we see factory closures and job losses, statements from companies that cannot pay the bills and the transfer of massive numbers of jobs to cheaper labour markets.

Kali Mountford: The right hon. Gentleman is correct in terms of textiles and steel, where there has been a definite slow-down, but does he really want to compare that with any period of Tory government, when it was not a question of thousands of jobs going, but millions? For example, the city of Sheffield faced almost total collapse and in one year lost more jobs than the coal industry did under the Conservative Administration. Textiles fell into almost complete disarray under his Government. Would he really like to compare the records?

Mr. Redwood: It is not our task to compare the records of Governments, but if the hon. Lady wishes to draw me in that direction she would be right to say that there was one short but unpleasant period under the Conservatives, when too many jobs were lost. Let me remind the House why that was; it was because the Conservative Government foolishly accepted the advice of Labour and the Liberal Democrats to join the exchange rate mechanism. It was because we did what the hon. Member for Bexleyheath and Crayford (Mr. Beard) now wants us to do on an heroic scale: join the euro. We joined a European exchange rate project, and we were told by all and sundry—including the Labour

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party—that it would be good for jobs and would get rid of exchange rate unpredictability. It was, of course, a disaster. The euro would be a disaster that we could never get out of.

Mr. Beard: Does the right hon. Gentleman recognise that the ERM was a disaster, first, because the Government went in at far too high a rate; secondly, because they had not negotiated with colleagues in the ERM, so when difficult times came, they were not ready to bail the Government out; and, thirdly, because the ERM left cracks into which speculators could get, as happened on Black Wednesday?

Mr. Redwood: The whole thing was negotiated with partners and was welcomed broadly by the Labour Opposition at the time. The hon. Gentleman should recognise that the rate at which we went in is very similar to the rate now. He says that he wants us to go in to the euro now, so I presume that he wants us to go in at the same rate. Why is the rate that was clearly wrong and a disaster then now miraculously right? There is no right rate for the pound in perpetuity against the European currencies. Our economies are very different.

I give one piece of praise to the British economy under Labour, as well as under the Conservatives. It is great news that we run our economy with such a lower rate of unemployment than that of France or Germany. The last thing I want to see my country do as a result of this Budget and a move to the euro, as recommended by the hon. Member for Bexleyheath and Crayford, is to converge with the continent by creating the joblessness and the job destruction machine in place there. How do the Europeans do that? They do it by combining the wrong interest rate, through a rigid single currency scheme, the wrong monetary policy and very high taxation.

The burden of my criticism of the Bill and of the Government's policy is that this rip-off Government are proposing taxation that will be extremely damaging to British individuals and business. It is part of the process by which they would erode the most important competitive advantage that this country and our economy have built up—under several years of Conservative government and the first couple of years of Labour government—by keeping taxes well below those on the continent and staying well clear of monetary union, which would be a bodge and a mess on an heroic scale; a scale that would make the ERM look like a rather pleasant interlude in our economic affairs.

In his rose-tinted survey, the Chief Secretary—ignoring all the realities facing business and hard-pressed British families—failed to mention the way in which high taxation imposed by the Government in recent years has demolished the telecoms and internet industry by taking £22 billion out of it through the auction of licences. That procedure took money out of the industry at the very point it needed to expand and make new investment. It destroyed jobs, investment and success and helped the stock market to crash.

The Chief Secretary made no reference to the £5 billion a year sandbagging of British pension funds, which has led directly to part of the stock market crash; it is one of the reasons why the stock market has fallen

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further here than in the United States. It led directly to those funds being chronically short of money. As my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said, it is a disgrace that many people now face the prospect of retiring on about half the pension they were looking forward to in 1997–98, before the tax on pension funds and before the stock market crash. That loss is a direct result of a Labour Government, who inherited the most successful pensions industry in Europe by far and thought that they could use it as a ready source of money without people noticing. If we wanted any proof that stealth taxes do enormous damage and end up costing the country rather more than they gain in extra revenue, surely it is the pension funds. It will now be extremely difficult to meet all the bills and make good the deficits and trouble created by that hated tax.

Mr. Love: Does the right hon. Gentleman accept that the imposition by the previous Government of employers' contribution holidays from pension schemes was a major contributory factor in the so-called halving of pensioners' current incomes?

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