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The hon. Gentleman takes an interest in such matters, and will therefore remember the
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introduction of ISAs. He knows that a transitional period was always intended, which is precisely what has happened. His proposal is over and above the initial ISA scheme, and, although I hear his point, it does not commend itself to the Government.
The Government aim to maintain the UK's position as a low-tax environment, and that ambition is enshrined in the Finance Bill. The Bill builds on and develops the macro-economic stability that is essential for our future productivity, growth and prosperity. It supports business while ensuring fairness, which will enable this country to match its new-found economic stability with the confidence to excel in the future.
The dividing lines between the Government and the Opposition are clear, and the choice of two futures for Britain is plain: either sustained economic stability or a return to the Opposition's economic stop-go and recession; either investment and reform in health, education, transport and tackling crime, or cuts, charges and privatisation; either expansion of the new deal to build on the success of helping more than 1 million people move into work and getting unemployment to its lowest levels since 1975, or, under the Conservatives, the abolition of the new deal and a return to high unemployment; and either investment and targeted help to develop science, innovation and enterprise in our universities and in communities across Britain, or a Britain of Tory laissez-faire, where the fortunate few succeed and everyone else's potential is simply written off.
In the competitive global economy of the future, the intellectual capital of our country will drive its economic growth, and it is therefore imperative that we invest in our children's education, in adult skills and training, and in science, innovation and enterprise. Those investments will enable us to reach our potential as individuals and as a nation, and make Britain a world leader of the future global economy.
Our plans enable us to meet the needs of this country's future. The Conservative party has made its decision, which is to cut spending and privatise and run down our public services. While the Labour party will invest in skills, science and enterprise, the Conservative party would slash spending in all those areas. Conservative Members laugh, but they are committed to axing the new dealthey would weaken the economy and return us to an era of boom and bust. We will invest in those areas that will enable the UK to grow and ensure prosperity not only for some but for all, while the Conservative party would put that at risk and cut public spending by £18 billion.
That this House declines to give a Second Reading to the Finance Bill because the provisions contained in its 574 pages increase the burden and complexity of taxation, particularly on
First, I refer hon. Members to my declaration in the Register of Members' Interests. Secondly, I congratulate the Chief Secretary on a better performance than that in the recent Budget debate, but his promotion of his own Finance Bill lacked both conviction and enthusiasm.
This is, perhaps, the dullest Finance Bill for a long time, but I imagine that the Chancellor is proud of himself for adding another 574 pages of tax complexity for businesses and citizens to cope withadmittedly, 158 pages deal with the new tax regime for pensions. The reforms were supposed to simplify arrangements and, as the Chief Secretary said, to create a single new system, but if he read through the 158 pages he would find that the Bill sets out six new systems to replace the eight old systems.
If the Government were in listening mode, they would find that pension professionals are offended and outraged that this massive piece of complex legislation has been introduced without prior consultation, which permits no more than three months of digestion, analysis and criticism as the Finance Bill moves through its parliamentary stages. The time scale is unnecessary because the new measures will not become effective for two yearsGreen Papers are different from specific consultation on detailed legislation.
Virtually all economic commentators agree that the background to the Finance Bill is the Chancellor's need to raise taxation sooner or later in the face of a current structural deficit of some £35 billion with, by the Government's own measure, full capacity in the economy next year. In addition, there is an estimated £13 billion black hole arising largely from what the Institute for Fiscal Studies assesses as over-optimistic projections for corporate tax revenues.
Citizens and businesses do not face major tax increases only if Labour win the next general electionthe tax take is going up by nearly 8 per cent. this year, to £31 billion, after a 6 per cent. increase last year and before a further 8 per cent. increase next year.
Mr. Flight: Perhaps the hon. Lady might like to take a lesson in basic economics. The simple point is that if an economy is at full capacity and public spending is then in significant deficit, there is a risk that that will lead to inflation. Of course it is a good thing for economies to run as close as possible to full capacity, but it is unwise to operate a structural deficit at that stage of the cycle. Indeed, that is the very principle behind the Chancellor's fiscal rules.
The shame revealed by the Government's own Office for National Statistics figures is that the massive increases in taxation and public sector spending since 2000 have failed to deliver the improvements in public services that were promised. Rather, the spending has gone on public sector inflation, which has risen to nearly
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10 per cent. this year compared with just 1.6 per cent. in 1997. Hon. Members may care to note that the ONS data also showed that productivity in the public sector fell by 5 per cent. during the past two years.
The Chancellor himself now admits to the waste in public spending that his policies have produced. No longer can he or his colleagues make silly assertions that those seeking to make the public sector more efficient have to cut front-line services. Conservative Members hope that the Chancellor will achieve his plans for public sector savings of £20 billion a year and that the Gershon review will be more successful than the Chancellor's discredited targets regime. But like the Treasury Committee, we await further details and explanations as to how the 2.5 per cent. annual efficiency savings will be achieved.
The working draft efficiency review paper, which I have read, is a highly theoretical analysis. It highlights four main cross-cutting ways in which savings efficiencies can be achieved, but its conclusions on 2.5 per cent. savings do not follow from those four main areas. It looks as though one person wrote the first half of the report and another person wrote the second. Gershon's review is based primarily on benchmarking. It has set targets and leaves it to each Department to determine how they will be achieved. The work that is now being done by the James committee on our behalf is looking much more specifically at each Department and each area of the public sector to determine where and how improved efficiency and improved delivery can be achieved. We have also set six targets by which we will evaluate the Government's efficiency savings plans, as well as our own.
May I give the Chief Secretary a little lesson in arithmetic in relation to his earlier comments? First, he should be aware that it is delivery that matters, not spending. One can have huge increases in spending, but if delivery does not improve, it is a waste of time. Secondly, if one achieves a situation whereby inflation is 2.5 per cent., which is roughly the Government's target; efficiency savings of 2.5 per cent. are achieved, which is the Government's target; and the amounts spent are frozen, the result is that there is no actual cut in services, because the effective real spending save of 2.5 per cent. is compensated for by the efficiency gains of 2.5 per cent. That is precisely what my City Circle paper was getting at. The Chief Secretary would be welcome to join us so that he can learn a little more about the public finances and improve on the way in which he does his job.
The Chancellor's general-election-campaigning Budget speech not only failed to address the key issues facing the British economy, but omitted any reference to 48 per cent. of the measures contained in the Bill. As the Chancellor well knows, but dare not say, all his contrivances and changes to the bases of calculations in order to claim that he has met his fiscal rules avoid facing up to the fact that growth has been sustained by consumption growth well in excess of gross domestic product growth and financed by a growing mountain of personal debt; and that will now be added to by another £150 billion of Government debt by 2007, as set out in the Red Book. But the productivity growth that is needed if that is to be sustainable has declined and is half that achieved under the previous Conservative Government. The savings rate has similarly fallen to half what the Labour Government inherited from us in 1997.
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The Chancellor had nothing to say about addressing those issues. With interest rates now rising, and the Government themselves predicting zero slack capacity in the economy by next year, any prudent Chancellorparticularly one who believes so passionately in micro-managementmight have sought at this stage in the cycle, in this Finance Bill, to have increased the savings rate; but the Bill contains no incentives for savers. Rather, as contrived outside the Bill, individual savings accounts will be considerably less attractive for the 12 million ISA savers as a result of the loss of tax credits on equity dividends and the reduction in the limit from £7,000 to £5,000 a yearfrom £3,000 to £1,000 for cash ISAs. As the Treasury Committee commented, those measures appear to run counter to any policy of encouraging people to save. In particular, the major reduction in the limit for cash ISAs is bad news for lower income and younger savers. We will table a new clause to address those problems.
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