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Mr. Flight: My hon. Friend makes an extremely important point. Does he not think that, if we have a society where people do not know what their tax rates are, and where what they receive in their pay packet bears no relationship to the job that they are doing, it is a huge demotivation to increase their skills and productivity and to take the whole economy forward?

Mr. Djanogly: I thank my hon. Friend for making that important point. This area needs a lot more study, because there are many implications from mixing the dependency culture with income tax and with corporation tax. Companies are viewing the three together. There is a new mind-set coming into play that, whichever way I look at it, works to the negative. I agree with my hon. Friend's point.

Mr. Bercow: My anxiety is that the Government are plundering the pockets of the people but, to put it mildly, it is not at all clear to the people that they are getting a fair return for that which is levied upon them. I say in all candour to the Paymaster General that she has a responsibility to abandon the insider mentality that is increasingly characterising both the decision making and defensive pronouncements of Ministers.

It is natural that Ministers will think, "Let us just increase tax a bit. It will not cause appreciable harm. People may not notice. We seem to have been able effectively to con them thus far and it may boost our finances somewhat." My warning to the hon. Lady is that the legendary patience and stoicism of the British people when confronted with additional imposts could soon be wearing thin, if it has not already done so. I invite her to reflect on a number of considerations.

Mr. George Osborne: My hon. Friend talks of the legendary patience of the British people. However, I have noticed that they are growing very impatient with the council tax increases. Of course, with the fuel tax increases, their patience broke and there was a tax strike.

Mr. Bercow: One of my hon. Friend's great qualities is his prescience and it has not failed him on this occasion, for he has precisely anticipated my thought process. The reaction to the incidence of exorbitant council taxes could soon be mirrored in a public reaction to the incidence of exorbitant direct taxation flowing from the Treasury and the Inland Revenue.

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The hon. Lady has a responsibility to reflect on a number of considerations. First, at what point does the incidence of higher taxation both on individuals and on the corporate sector threaten to undermine individual incentive and competitive industrial performance? If we have not reached that point, we must be very near to it. In the light of the Chancellor's downgraded forecasts for the performance of the economy in the years to come, it would be sensible for her and her colleagues to take stock of the consequences of that burdensome taxation. That is the more powerful a consideration in the light of the fact—which no amount of Treasury casuistry can gainsay—that over the past six years we have sacrificed two thirds of the competitive tax advantage that we have enjoyed relative to other member states of the European Union.

The second consideration on which the hon. Lady should reflect seriously and which she should discuss with her colleagues is the likely incidence, to which I referred in my intervention on the hon. Member for North Norfolk (Norman Lamb), of higher tax rates, fiscal drag and national insurance contributions on people working in key posts in the public sector. One cannot continually clobber those upon whom we critically depend for the effective discharge of public services without there being an impact on recruitment and retention. In the words of the late Enoch Powell, that point is so blindingly obvious that only an extraordinarily clever person could fail to see it.

Mr. Djanogly: Take-home pay has fallen for the first time in over a decade this year and that is not to be forgotten, but in relation to the public sector my hon. Friend will be aware that this is the first time in the history of this country that benefits-included average take-home pay in the public sector is higher than in the private sector. That says little for our productivity.

Mr. Bercow: That is indeed a bad sign, and a worrying portent of the likely development of the two economies of the private and public sectors in the months and years to come.

Mr. Osborne: Will my hon. Friend give way?

Mr. Bercow: I will give way once more, but as you will readily discern, Mr. Gale, I am itching to make my third point. Whether the Committee is itching to hear it is of course another matter.

Mr. Osborne: Has my hon. Friend made any calculation of the amount of churning that will result from the clause? The state will be paying those who work in the public sector, who will then pay it back with tax. My hon. Friend may not be able to answer my question, but perhaps the Paymaster General will.

Mr. Bercow: I am grateful to my hon. Friend for the deft shoe-shuffle with which he ended his intervention. He is absolutely right. If I were a Minister, I would feel it incumbent on me to provide the answer. I am not, so it is not; but it is the Paymaster General's responsibility to give a satisfactory reply. What merit is there in an arrangement whereby the middle man takes the money and gives it back again, with all the bureaucracy that

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such a process entails? It would have been sensible to take account of those considerations in policy formulation at the outset.

My third point is very simple. It is easy for Governments to think—as my party did when in office—in terms of sums raised and inputs made, while focusing far too little on outputs. I have noticed, not just in the Paymaster General's words but in those of her right hon. and hon. Friends, an increasing tendency to stick to the brief and to assume that the House and, more important, the country can be fobbed off with a continuing regurgitation of statistics relating to what is being raised and spent.

That is understandable, but misguided. Let me say in all sincerity that, ultimately, the public are not much interested in hearing from any of us about inputs. They are interested in outputs, and if the words that they hear from Ministers about the level of inputs do not resonate with them because they are not reflected in local service delivery, they will come to regard Ministers' pronouncements first with cynicism and then with contempt.

The fact that the Government are spending £50 million an hour makes it incumbent on Ministers to demonstrate that improved services on a substantial scale are resulting from that level of expenditure of the public's money. The effect of the higher taxes is very real and painful for those—often on modest incomes—who must pay them, while the effect of the Government's increased expenditure, often poorly distributed and untargeted, is much less beneficial. The pain is clear, but the gain is frequently either insubstantial or non-existent.

Mr. Redwood: Will my hon. Friend give way?

Mr. Bercow: How can I resist my right hon. Friend's entreaties?

Mr. Redwood: Does my hon. Friend think that the ministerial reluctance to speak from the heart rather than sticking to the brief is connected with the fact that Ministers are benefiting greatly from the increased taxes? We see that in the ministerial travel bill, the ministerial drinks bill, the ministerial entertainments bill, the ministerial aides bill and the ministerial press support bill. I think that that is where a lot of the money is going, which may explain why Ministers are not prepared to say much here. They know that they are robbing the British people for no good reason.

Mr. Bercow: My right hon. Friend is usually right, and he is right on this occasion. I believe that money raised from the taxpayer should be used for the taxpayer's benefit. I bear the Paymaster General—who trounced me in Bristol, South in 1992, but with whom I have enjoyed cordial relations ever since—no personal ill will, as she knows; but I do not want her, or her colleagues, to benefit at the centre from increased imposts on the public. I want the British people to benefit, and above all I want my Buckingham constituents to benefit. They are not currently doing so. They are getting restless; they are increasingly angry; they are about to vent their spleen on the Government, and their reaction will be mirrored nationwide.

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1.15 pm

The Paymaster General (Dawn Primarolo): I am grateful to the right hon. Member for Wokingham (Mr. Redwood) and the hon. Member for Buckingham (Mr. Bercow) for giving me the benefit of their views and advice. Both made it clear that it was for political parties and individual Members of Parliament to decide on the policies that they advance, and to take responsibility for them.

I was greatly encouraged by the reference of the hon. Member for Buckingham to the 1992 general election campaign in Bristol, South, when he was my very able Conservative opponent. On that occasion he put to the people of Bristol, South the views that he and the right hon. Member for Wokingham have advanced today. He is right: the voice of the people of Bristol, South was pretty substantial. There was an 8.5 per cent. swing to Labour. While I greatly enjoyed the campaign, I am sure that the hon. Gentleman is more safely tucked up in Buckingham now than he would ever have been in Bristol, South.

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