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Mr. Jack: Can my hon. Friend give me an assurance that when he introduces his first Finance Bill and takes part in the first Conservative Budget after 5 May he will carry out a proper evaluation of the help that has been given to the film industry? Because of the difficulties encountered by the Government it is genuinely difficult to see the wood for the trees, and I would be grateful for an assurance that those reliefs have benefited the British film industry.
Mr. Osborne: My right hon. Friend is right to be sceptical. It is our view, and indeed it is the view of the industry, which has undertaken a review of these issues, that we should move from a tax relief on production to one on the distribution of British films. As I said, the film industry was particularly concerned about the uncertainty caused by the expiry of the relief in July, and made strong representations. Some of my hon. Friends have made strong representations to me on behalf of the film production companies in their constituencies—obviously the film business did a good job—and we are prepared to accept the relevant provisions.
The new schedule on the taxation of pensions includes some sensible provisions, many of which are amendments that I tabled in Committee to the previous Finance Bill. They were rejected then by the Government, but I am glad that with the passage of time and a bit of wisdom the Treasury has accepted that I made a great deal of sense. Last June was therefore not entirely wasted. The Chief Secretary mentioned the clause that ensures that homosexual civil partners are treated the same as married couples for tax purposes. Personally, I support civil partnerships for gay people, and I support the clause. That may help to increase my score of 57 per cent. on Stonewall's score chart of MPs' record on gay equality issues, about which my hon. Friend the Member for Rayleigh (Mr. Francois) is always teasing me. We very much welcome clause 19, which is a sensible provision on the payment of armed forces pensions.
Those clauses are broadly welcome, but doubtless they could have been improved by proper parliamentary scrutiny. On balance, however, we should allow them to pass into law. However, we could not allow to pass into law without any examination the dozens of clauses and
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hundreds of pages of complex tax legislation, which the Government said were necessary to counter tax avoidance and which appeared in the initial Finance Bill that was published just a couple of weeks ago. We agree with the Government about the need to tackle tax avoidance and we agree on principle with the many measures that they have introduced to close tax loopholes. However, the detail of such measures requires the closest possible examination, to ensure that we do not inadvertently damage the competitiveness of UK industry and further increase burdens on business. Indeed, many anti-tax avoidance measures are retrospective, as they would come into force on the day on which they were announced. There would therefore be no revenue implications if we considered them after the election in a Conservative Finance Bill or, in the unlikely event that Labour wins, a Labour one.
The initial Finance Bill that was published a couple of weeks ago included novel and questionable clauses on tax arbitrage that the CBI and many others fear could seriously reduce the appeal of Britain as a place in which to do business and attract inward investment. Given that inward investment has already fallen under the Government, we should pay heed to such warnings and subject the clauses on tax arbitrage to rigorous scrutiny. Indeed, many people in the industry who approached us, including the Institute of Chartered Accountants, thought that they would be ruled illegal. Given the problems that the Treasury has had at the European Court, I would expect it to look at those provisions more closely. It was never going to be possible to rush through the tax arbitrage clauses in a pre-election period, and it was wrong of the Government even to suggest that they were going to do so. The Chief Secretary described those clauses to me as the flagship of the Finance Bill. Unfortunately for him, like the Mary Rose, his flagship has been sunk, and we must wait to see what happens when it is raised.
Similarly, the Association of British Insurers voiced "very considerable concern" on behalf of the insurance industry about the Inland Revenue's plans to give itself powers to alter the key areas of taxation of life insurance by regulation instead of primary legislation—something in which my hon. Friend the Member for Buckingham (Mr. Bercow) takes a particular interest. I am glad to assure him and others that we have put a stop to those provisions and to schedule 13 of the old Bill, which was causing considerable alarm in financial circles. The Government's initial aim to ram through all those complex tax changes without any scrutiny or consultation rightly caused indignation and outrage in the financial services and business community. The Institute of Chartered Accountants wrote to the Paymaster General on 31 March to say that
"we are strongly of the view that if the provisions in the Finance Bill are not subject to appropriate Parliamentary scrutiny then this will be to the detriment of UK business and will undermine confidence and trust in the Parliamentary process".
We agree. Thanks to our actions, the most controversial and complex provisions will now be subject to appropriate parliamentary scrutiny before they are introduced, and trust and confidence in the parliamentary process has been sustained.
Returning to the Finance (No. 2) Bill before us today—as opposed to the provisions that we have pushed out over the past couple of days—it includes
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welcome moves on tax, which the Chancellor trumpeted on Budget day, including finally raising the stamp duty and inheritance tax thresholds to take account of the growth of house prices over the past decade, although the Chief Secretary is unaware that that will have little impact in his own constituency. The Chancellor did not mention in his Budget speech—and the Chief Secretary did not mention it today—that the small tax cuts about which he boasted at the Dispatch Box are more than cancelled out by the stealthy tax increases buried in the detail of the Red Book, or, in the Chief Secretary's case, given his answers today, perhaps we should call it the unread book.
Mr. Prisk: Unless I misheard the Chief Secretary, he suggested that there was a £500 million change in disadvantaged areas. Is my hon. Friend aware that the correct figure is a £340 million differential? Is he as concerned as I am that the Chief Secretary is not even aware of how much additional revenue he plans to take?
Mr. Osborne: My hon. Friend is absolutely right. I think that he is referring to table 1.2 on page 12 of the Red Book, which shows that the initial impact of ending stamp duty land tax relief in disadvantaged areas will cost £340 million. As I said, in the Chief Secretary's case, it appears to be the unread book.
As always with the Government, it is not what they say that is real story but what they do. In the Budget, what the Chancellor
Those are not my words, but the words of the much respected independent Institute for Fiscal Studies. As my right hon. Friend the Member for Charnwood (Mr. Dorrell) reminded us, raising the stamp duty threshold from £60,000 to £120,000 in clause 95—a long overdue but none the less welcome measure—is more than cancelled out by clause 96, which removes stamp duty land tax relief for disadvantaged areas. The Chief Secretary has not given us a good explanation of why he is ending that much trumpeted relief for disadvantaged areas. He said that he would replace it with another scheme, but it is worth only £300 million over three years, which is considerably less than the £340 million in the first year—and I think that the figure will rise—that is taken away by the ending of that relief for disadvantaged areas.
The Chancellor said, as though it were a mere technicality, that he was
"aligning the timing of oil companies' corporation tax payments more closely with petroleum revenue tax."—[Official Report, 16 March 2005; Vol. 432, c. 264.]
Who would have guessed that what he really meant was a £1.1 billion windfall tax on the oil industry? The oil industry, I suspect, has learned to live with that tax, but pensioners will be dismayed to discover, as my hon. Friend the Member for Chichester (Mr. Tyrie) reminded us, that the £200 payment that the Chancellor flourished as an answer to his soaring council taxes is a one-off. Page 12 of the Red Book makes that clear, even if the Chancellor and the Chief Secretary have not done so.
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Unlike every other measure in the Budget, the £200 payout to pensioners is for this election year only, whereas the hikes in council tax will go on year after year if Labour is re-elected. What a cynical pre-election manoeuvre from a Government who have lost any sense of fair play. What a contrast to the sustained year on year on year council tax discount that we are offering, which will be worth up to £500 for millions of pensioners. What a classic example from this vote now, pay later Budget.
There is a secret tax-and-spend agenda in this election. It just happens to be the Labour party's: a secret agenda to try to conceal from voters the massive tax rises that Labour needs to pay for its spending plans. Even after 66 tax increases on hard-working families, the Government have managed to create a black hole in the public finances. The Chancellor admitted as much when he was forced to concede that the current deficit is £5 billion higher than he forecast last year, and that he will borrow £168 billion over the next five years—more in each year than he forecast even 12 months ago.
It is not just our view that there is a black hole. It is the view of almost every single independent organisation and economic commentator. They are clearly thinking what we are thinking. The International Monetary Fund is thinking what we are thinking when it says that Britain's national accounts have
in other words, from the moment that the Labour Government ceased to follow the previous Conservative Government's spending plans. The Institute for Fiscal Studies is thinking what we are thinking when it says that taxes will have to go up £11 billion a year after the election to pay for Labour's spending.
The question for Labour in the election, and for the Chief Secretary, either now or as we encounter each other in the television studios over the next couple of weeks, as we will no doubt do, unless he is already off to his posting and being measured up for his high commissioner's outfit—the ostrich feathers and all that—is not whether taxes will go up, but which taxes Labour will increase in future Finance Bills. Will it be capital gains tax on homes, or council taxes, pushing bills towards the £2,000 mark, or national insurance—Labour's tax of choice? To raise the £11 billion in taxes that the IFS says the Government need, national insurance will have to go up 3p in the pound. That is £1,000 more a year in taxes for a typical hard-working couple.
Before the last election, as my right hon. and learned Friend the Leader of the Opposition reminded us earlier today, the Prime Minister said that reasonable people should not suppose that Labour would raise national insurance, then in the first Budget after the election he put it up. What does the Chief Secretary think reasonable people should suppose before this election about Labour's plans for national insurance? I am not sure whether he will have an opportunity later in the debate to answer the question, so perhaps the Financial Secretary will do so instead.
Taxes will go up if Labour is elected. That is the simple truth at the heart of the election—a truth that, as far as Labour is concerned, dare not speak its name. What will those taxes pay for? More waste, more bureaucracy, more bureaucrats—in other words, more
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of what we have seen for the past eight years. The Financial Secretary knows that all the money has been wasted, because he famously told us so. He said that
"we're going to have an election. . . when people will say 'we've paid a lot of taxes but what has really been achieved with all that money?' . . . Too often a lot of money has been spent. But very little seems to have been achieved".
What sound words from the Financial Secretary. He is right. A lot of money has been spent, but very little seems to have been achieved. After 66 tax rises and eight years of talk, average hospital waiting times are higher, cancelled operations are up, and more people die of hospital superbugs than die on Britain's roads every year. After 66 tax rises and eight years of talk, one in three 11-year-olds leaves school unable to write properly, and school truancy has risen by a third. After 66 tax rises and eight years of talk, crime has risen, violent crime has almost doubled and the detection rate has fallen.
Even on the economy, which the Chancellor of the Exchequer says he wants to put at the heart of the election campaign, after eight years of boasts and 66 tax rises, we have fallen from fourth to 11th in the world competitiveness league, our trade has gone from a surplus to a record deficit, a million manufacturing jobs have been lost, productivity growth is down by a third, as is the savings ratio, and now we discover that average take-home incomes for families have fallen for the first time in almost 15 years. Labour has taxed, wasted and failed, and hard-working families have paid the price.
So it will fall to the next Conservative Government to sort out the mess in the public finances and to deliver the lower taxes, cleaner hospitals, school discipline, controlled immigration and more police that the people of this country want to see. It will fall to the next Conservative Government to put public spending on an affordable path that avoids Labour's tax rises and delivers tax reductions for hard-working families. We will begin that task in our first Budget and our first Finance Bill in just two months' time.
2.5 pm
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