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Mr. Deputy Speaker (Sir Michael Lord): Order. I am reluctant to interrupt the hon. Gentleman, but he really ought not to debate today the issues that we will debate tomorrow.

Geraint Davies: I appreciate that advice, Mr. Deputy Speaker.

Put simply, this Budget is first about providing an economic framework that will deliver the quantum of resources and stable framework needed for public services. Secondly, it is about providing a distributional system that is fair and equitable. Thirdly, it is about providing new and innovative modernised delivery systems, which ensure rising standards on a continuing basis, in a fair and equitable way. We have the means of delivering more and increasing success in Britain today. Some underlying and legitimate questions need to be asked in a debate that will take place tomorrow, not today, but I very much welcome the Budget.

7.20 pm

Mr. Michael Jack (Fylde): I begin by reminding the House of my business interests, which have been declared in the Register of Members' Interests.

When I listened to the hon. Member for Croydon, Central (Geraint Davies), I thought that I was in a parallel universe. I suddenly slipped forward to tomorrow—to a debate that has yet to occur—and although you, Mr. Deputy Speaker, provided no conclusions or projections about what will happen tomorrow, I knew I had been there.

When I listened to other Labour Members' contributions, I thought I was in the same parallel universe, in which everything in the economy was rosy and wonderful—investment was pouring in, services were being provided and so on. Yet when I returned to the other universe of the Conservative Benches and I recalled what people had told me on the doorstep during the election campaign about the real economy—the problems faced by north-west manufacturing industry, the increase in council tax of three or four times above the level of inflation, and schools struggling to find enough money—I began to think that I was in a slightly different world. Conservative Members are in the real world, and Labour Members are in an unreal world. I reflected on the fact that perhaps some Labour

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Members had not tuned in to or had direct experience of business; otherwise, we would not have heard some of the speeches that we have so far heard on this Finance Bill.

I cannot claim to share the Paymaster General's record of attendance on Finance Bills, but I follow her closely for the number in which I have been involved as an Opposition Member and as a Minister. If I had to rate the vintage of the Bill on a scale of nought to 10, I would give it about five. It does not contain any seriously interesting blockbuster measures, but it has many clauses—214—43 schedules and 447 pages, largely taken up by the introduction of the new stamp duty measures and land tax. That section of the Bill has a wraparound labelled, "Anti-avoidance". When we look at other sections of the Finance Bill, we find that anti-avoidance is a theme that weaves its way through many of the clauses.

That leads me to my first point—the quality of drafting of tax legislation. It is probably right that the Government should reform a tax that is some 200 years old—in this case, stamp duty—but questions have already been asked about how the new arrangements will work and the degree of consultation that has taken place. Given that during the Budget announcement the Government made great play of an additional £66 million to tackle tax avoidance and fraud, which they claimed would bring back into tax some £1.6 billion—some of the measures to achieve that are mentioned in the Bill—I wondered, if I may tell a little story against the Government of which I was a member, how they would achieve such a remarkable rate of return. The same people who are now Treasury Ministers attacked in opposition a measure that we proposed in the 1996 Budget to spend £187 million on corporate technical review and avoidance, income tax compliance and action on the shadow economy to yield £1.9 billion. I would therefore be grateful if, at some stage, Ministers would enlighten us with more detail on how that remarkable rate of return—£1.6 billion from £66 billion—is to be achieved.

That gives rise to two questions. First, have all the loopholes been closed? The answer is no. If a yield of £1.6 billion is achieved as a result of spending £66 million, perhaps a little more expenditure could have yielded an even greater return, thereby removing the need for some of the other obvious and stealth taxes in this and previous Budgets. Equally, it leads to the question of whether the resources of the Inland Revenue and Customs and Excise are sufficient to enable them to cope with the complexity with which the Revenue must now deal, especially the additional work on tax credits. In addition, we have known for some considerable time, as the Public Accounts Committee has told us, about the failure of Customs and Excise fully to gather in all the revenue for which it is responsible.

When I considered the overall economic challenges that I had hoped the Finance Bill might address, I asked myself whether it would do anything about the adult savings gap. The answer was no. Would it do anything to address the question of the pensions crisis, which other right hon. and hon. Members have mentioned? The answer was no. When the Government advocated the ending of the payable tax credit, one of their justifications for it was that it would increase private investment because pressure would not exist to

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distribute said moneys in the form of dividends. According to the Government's data, however, two things have happened: first, private investment has fallen; and, secondly, productivity in the economy has also fallen. Both those arguments knock out one of the key justifications for the tax hit on the pensions industry. For those who have life assurance and endowment products, was there anything in the Budget to deal with that? The answer was no; there is nothing in the Finance Bill either.

I am therefore disappointed that even on this occasion the Government have sought not to adjust, as I understand it, the internal tax rates in life assurance and other similar products to visit on the holders of those collective investment vehicles the same beneficial changes that have occurred in capital gains tax for those who hold assets outside investment vehicles. When I last asked for the cost of that work, I was told that it was about £35 million to £37 million. It is always dangerous for a Conservative Member to ask for any money to be spent, but given the losses that have occurred to the value of those long-term savings vehicles, the Government are guilty of a dereliction of duty by ignoring that area.

I mentioned productivity. The Chancellor's previous Budgets have been laced with a rich cocktail of micro-managing different parts of the economy. It is interesting that we hear little about whether those measures have delivered in economic terms. On the sum total in terms of productivity, my eye was drawn to an interesting commentary in the Financial Times, in an article by Chris Giles, on what the Chancellor said in the Budget, which is reflected in the Finance Bill, about productivity:

He continued that the Chancellor's boast,

From a seasoned observer of Britain's productivity position, that is a damning critique: it is a critique of the overall use by the Chancellor, in many cases, of the numbers in the Budget, which, again, are reflected in this Finance Bill. It raises some severe doubts about many of the Budget's statistical projections, to which the Bill refers, as other right hon. and hon. Members have mentioned.

The principal aspect of the Bill is the reform of stamp duty. It raises the interesting question of how much work has been done to ensure that there will not be further innovative thinking on redeploying the use of leases, notwithstanding the question of the measure's practicality and how the complexities of the formula to calculate net present value will operate. The measure is designed to prevent the avoidance of stamp duty by ruling out the practice of creating a company and buying a share in it. Given the pressures on the Revenue, I suspect that an industry will start that will design leases to find ways around the measure. Although we know that the stamp duty land tax is a tax on an interest in land, one cannot say, practically or philosophically, that a lease is an interest in land. A lease is a way to access premises, for example, but it does not confer ownership of the land on which such premises stand. There is a

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further inconsistency: if we are to tax such specific leases, why have other leases not been similarly addressed? It would be useful to hear a more philosophical and practical explanation of why the Government have chosen to reform such taxation—many people would be interested to hear it.

There is also a question about inheritance tax. It is interesting that stamp duty and inheritance tax reflect an era in which there was not the same range of taxes under the labels of indirect taxes and taxes on income. The Treasury could get hold of such money at that time only when a capital transaction occurred. The principal asset of the majority of people in the United Kingdom is their home, but because house prices have risen, especially in the south and south-east, the £255,000 limit on exemption from inheritance tax is very low.

The Chancellor told us that 95 per cent. of estates escape paying inheritance tax but, given that the Treasury has been examining stamp duty, the Bill should, in the interests of reform, have identified a better way of dealing with individuals' inheritance tax. People use labyrinthine and complex measures to avoid paying inheritance tax, which is why 95 per cent. of estates escape paying it. However, is it right that people should have to go to such expense and use such complex methods in this day and age? Many of the system's complexities would disappear if inheritance tax provisions contained a more realistic and proper assessment of the principal private asset—the domestic residence. People would then not worry about trying to find ways to pass on to their heirs at least some of the fruits of their labours that had been accumulated by hard work and already subjected to taxation both when income was generated and through indirect taxation. There is a great need for change.

I mentioned the justification of several of the Chancellor's micro-measures, and I shall comment on value added tax. I was roundly attacked by Treasury Ministers last year for having the temerity to question whether it was right to reduce the rate of value added tax on children's car seats, which was proposed as a great measure to reduce road deaths among children. I would sign up to measures that would have a significant impact on reducing road deaths among children, but will the Paymaster General put my inquisitiveness to rest by telling me—if not today, perhaps she could write to me—how many deaths have been avoided according to the analysis that she has no doubt conducted on the measure? The micro-measure is a classic example of something that, I suspect, has had a marginal effect, if any. It is typical of the measures that have littered this and previous Finance Bills.

There are more serious matters relating to VAT. The Bill contains provisions on users of mobile phones and certain other electronic goods who are involved in a contractual arrangement in which one party does not pay VAT. It is absolutely right to clobber people if they knowingly avoid paying their dues. However, there will be innocent parties in such situations. For example, unsophisticated small firms without the benefit of complex legal advice on contracts may be caught up innocently by the arrangement. What level of proof will Customs and Excise use to determine whether there is joint and several liability? Will the Paymaster General tell us how the measure will work practically, because that would help everyone and give those who operate in an uncertain world a clearer and better idea about it?

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Clause 165 contains a worthwhile measure to tighten provisions on information technology and capital allowances. However, although that measure and the proposed change to the tonnage tax are small aspects of the Bill, they give us an interesting illustration of the quality of drafting. We are tightening measures introduced last year, although I was told that there was exhaustive consultation with the shipping industry on the tonnage tax. The existing measure is already taking on water and must be blocked up by a new provision in the Bill. I know how hard people in the Inland Revenue and parliamentary counsel work because I have worked with them, but given the amount of tax law—and tax law rewriting—with which they must deal, questions are being raised about the resources that they receive and the quality of the work that may be done.

I want to raise an intriguing aspect of the Bill: the allowance that will be given for expenses incurred if somebody is a home worker. If, for example, an extra bit of cleaning is required in the office, the Revenue calculates that £104 extra per person employed may be claimed without the need for paperwork. How was it decided that £2 a week was the right amount for the concession? It seems to have been plucked out of thin air. If we are genuinely interested in encouraging home working, such a nit-picking measure is not the best way to achieve it.

I turn to green measures because the Bill includes a measure to increase the landfill tax. The Paymaster General might find it odd to hear me say that the increase suggested in the Bill will have zero effect on reducing the amount of waste generated. That is clear from evidence from the inquiry that has been conducted by the Select Committee on Environment, Food and Rural Affairs, of which I am a member. The Government must make faster progress. I am disappointed that the Bill will not change the climate change levy, because that affects the extent to which combined heat and power is encouraged.

The Government have cottoned on to the idea that a 20p per litre derogation for biodiesel is sufficient, but I hope that they will reconsider that. The Financial Secretary wrote a letter to me that said that because a plant was being set up in Motherwell that would increase biodiesel production, the 20p reduction in duty would be sufficient. In fact, it is clear from EU guidelines that this country will need far more than the 4.5 million litres of additional biodiesel a month that the Motherwell plant can generate from waste materials. There will be a 27 million litre gap if we are to meet the EU guideline targets of 2 per cent. biodiesel by 2005 and we will need a derogation of 30p a litre if agriculturally derived biodiesel is to be the order of the day. In all earnestness, I ask the Government to reconsider that.

I end with three quick points. I hope that the Government will not ignore the fact that the competitive advantage that our corporation tax regime currently enjoys is being eroded. I am disappointed that there is nothing in the Bill on that.

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