---

Adam Price (East Carmarthen and Dinefwr) (PC): Stability has been the leitmotif of this debate. I am tempted into the heretical thought that, although it may be part of the new Labour creed, the attractions of stability depend on how one experiences it. It looks different from the top of the heap than from the bottom. It is possible to stabilise at a lower level of growth. Death confers a certain stability; it is certainly a permanent state of equilibrium—a term from micro-economics.

The hon. Member for Western Isles (Mr. MacDonald) is no longer here, but we can see a consistency in the experience of certain parts of the United Kingdom, including his part of Scotland and others, and my part of Wales. We have seen out-migration—in the case of his region, since the 1920s. We may not have stop-go any longer, but they have not stopped going from the Western Isles. We have the same problem of the haemorrhaging of the young from our communities, and there is no sustainable economic future for the long term for any community that continues to lose the best and most talented of its youth.

Amid the paeans to stability that we have heard, I offer a word of caution. The picture is diverse across the United Kingdom, as hon. Members who represent
 
20 Apr 2004 : Column 246
 
constituencies to the west and the north of these islands will know. The Bill could have contained different bands of business taxation not only for different sizes of companies but for different regions, as is done in Spain, depending on their economic performance. If we have a lower band of taxation for smaller companies because we believe that that will incentivise growth, surely the same tool could be used with even greater effectiveness in less advantaged parts of the United Kingdom.

I see the steely gaze of a hired assassin in the Chamber, so I shall give way to him.

Mr. Wayne David (Caerphilly) (Lab): I thank the hon. Gentleman for that compliment. I am provoked to rise because of his comments about different regional tax rates. Does he not agree that in some parts of our own country of Wales, particularly around Cardiff and Swansea, the economy is doing extremely well? Surely he is not suggesting that there should be different tax rates for areas that are doing extremely well.

Adam Price: If we are talking about regional taxation, it is obviously true that there is a different pattern of economic activity within every region. To some extent, the relative success of parts of the south-east Wales corner is a reflection of the pattern of economic activity throughout the whole of the UK. Indeed, south-east Wales is mirroring the greater prosperity of the south-east of England. As I understand it, it is not possible under European competition law to have different tax regimes at a very localised level, other than for local taxation. Of course, it is possible to have regional corporation tax, as is the case in the Basque country and in Navarre. I simply offer this as a possible tool for the Government's regional economic policy armoury. We have all signed up to the Treasury's policy aim of narrowing the gap in regional economic growth between northern countries and southern ones. Perhaps different bands of taxation would be a more effective tool in incentivising business growth.

I want to concentrate on two sources of instability. We have been told that the Government are confidently navigating us through calm waters, but as we have heard, there are certain whirlpools of instability.

Angus Robertson: Does the hon. Gentleman share my concern about the future of jobs in the whisky industry as a result of the Government's introduction of strip stamps, which will impact not just on the Scotch whisky industry but on the Irish whiskey industry and the renaissance of the Welsh whisky industry at Penderyn? The general manager of one of Speyside's premium distilleries wrote to me a few weeks ago. The letter said:

"We are considering turning our back on the UK market entirely and by 2006 securing other markets for our products, rather than suffer the new tax regime."

Reference was also made to the number of jobs that will be lost. Does the hon. Gentleman think that the introduction of tax stamps on spirits is a good idea, given that a workable alternative exists to enable the crackdown on fraud that every Member of this House wants to see?

Adam Price: I agree entirely with the hon. Gentleman, and when the Committee of the whole House sits next week, I hope that the opportunity will arise to strike
 
20 Apr 2004 : Column 247
 
down these proposals, which are very damaging to the Scotch whisky industry. The last Welsh distillery closed 120 years ago, and we have waited all that time to get our whisky industry back. Yet within 16 days of the launch of the first single malt Welsh whisky in 120 years, the Chancellor's iniquitous strip stamp proposal is introduced. [Interruption.] We should have kept it under wraps for a little longer. I am not sure whether there is an English whisky, but if so they can join our battalions in defeating these proposals.

I want to concentrate on two problems of what used to be called political economy—economic problems with a major policy component—that the Government face, the first of which concerns pensions. Some 120 clauses, more than a third of the Bill, are devoted to pensions. Unfortunately, the poor old members of the Pensions Bill Standing Committee are upstairs and have been unable to contribute to this debate. The other issue, which was mentioned by the hon. Member for Yeovil (Mr. Laws) in particular, is the looming fears about the state of the property market. We should consider the two problems together, because they are linked in the Bill. In pensions, we have the crash in the equity market that has already happened; in property, we have the crash that may yet happen. For one set of assets, value has collapsed; for the other set, value has risen exponentially.

It is interesting to make the contrast. Property is one of the few asset classes that has been successful. The right hon. Member for Fylde (Mr. Jack) spoke about problems in the financial services industry. We know about problems in Equitable Life, problems with the occupational pension funds of ASW and other companies and problems with split capital investment trusts and so forth. Wherever one looks in the financial services industry, there are problems, which contrasts markedly with the exponential rise in property values.

In the light of that contrast and the contra-cyclical effect of the two markets, it is not surprising that the Government are trying to achieve a more reasonable spread of investments. They are trying to create a more efficient and effective mechanism for making investment in property part of the pension funds through changing the regulations for self-invested personal pensions schemes or SIPPS and small self-administered schemes. The problem is with the timing and the means by which the Government propose to introduce those changes. There is a real fear that by trying to deal with the pensions crisis and particularly the collapse in the equity market, thereby creating a mechanism for property investment for pensions, the Government could be exacerbating the problem of speculative investment in the housing market, or even precipitating and bringing about the very crash in the property market that they tell us we have no need to worry about.

Mr. Simon Thomas (Ceredigion) (PC): This afternoon I attended the launch of a Shelter campaign that highlights the fact that a million children are living in poor housing and highlights the general lack of affordable housing within the UK. The Government are attempting to deal with the problem through some of the Budget proposals, and I am happy to acknowledge that. However, one of the facts revealed at the launch of the campaign was that since 1960, the price of bread has gone up six times and the price of housing 60 times.
 
20 Apr 2004 : Column 248
 
Within that context, does my hon. Friend believe that the Budget does enough for affordable housing in our communities?

Adam Price: My hon. Friend makes his point extremely well. To be fair, I agree that the Budget statement made some recognition of the problem, just as we have seen belated recognition of the regional economic divide. The Government have recognised the problem of affordability, but the difficulty is that the cupboard is bare of policies. Indeed, the policies in the Finance Bill will make matters worse for housing.

It is clear from reading the explanatory notes to clauses 171 to 174 and from drawing on the good offices of the Library—[Interruption.] However much the Chief Secretary shakes his head—it is, to quote a famous parliamentarian, his head to shake—it is clear that those clauses introduce changes to SIPPS. There used to be a bar on using SIPPS to invest in residential property—they applied only to commercial property—but that bar is being lifted. They can now be used for all sorts of esoteric investments, but we will not go down that road. The bar is certainly being lifted and in a way that appears very attractive to many people. Currently, about 200,000 people are in SIPPS or small self-administered schemes. Following a certain day in 2006, it is predicted that there will be an exponential rise in their number—[Interruption.] That is the view of independent pension advisers. The head of pensions at Scottish Life, for example, expects there to be very strong interest in them. He certainly knows more about pensions than me, and probably more than many Members. That view is reflected widely in the pension industry; there will be strong interest in the effect of the proposals. If the Government thought that there would be no interest, why did they introduce the changes? Can they answer that?

In the regulatory impact assessment, the Government consider the extent to which the changes in SIPPS that allow those pension funds to invest in residential property will lead to an increase. They claim that because the number of people in SIPPS is small at present—only 1.3 per cent. of people are covered by such pension schemes—the effect will be only at the margins, but they are changing the regulations. To date, the property use of SIPPS has been limited because they were not widely available, but the Government are, in effect, deregulating through creating the single pension scheme, so there will be no holds barred within the borrowing limit of 50 per cent. of the pension fund. There will be substantial interest in such schemes.

The problem is that the changes will add oil to the flames of an already overheated housing market. A survey published today by the Royal Institution of Chartered Surveyors showed that March saw the highest increase in housing prices for any month since March 2002, so the housing market has not petered out and reached a soft landing.

---