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The Financial Secretary to the Treasury (Mr. Stephen Timms): I wonder whether the right hon. Gentleman saw the point made by Goldman Sachs last month, which was that there is no black hole.
Mr. Dorrell: I have seen a wide range of published material on this subject. If the Financial Secretary will allow me to make this point, it is entirely fair to say that the overwhelming majority of published opinions from the IFS and all the other independent commentariat employed in the City, and the overwhelming weight of that judgment, is that there is a structural deficit in the Government's plans. It is not difficult to see why they reached that conclusion. It is because the Government's published plans report a rising share of national income accounted for by Government expenditure and, as the hon. Member for Twickenham pointed out, a rising share of national income accounted for by tax yield, without any plausible explanation of how the money will be produced. I have seen no analysis of the figures for tax yield that supports the Government's view that they can secure the specified level of tax income out of the economy without having to change the tax rates.
Mr. George Osborne:
The Financial Secretary mentioned Goldman Sachs. He did not mention the Institute for Fiscal Studies, Ernst and Young, the Organisation for Economic Co-operation and Development, the International Monetary Fund, the CBI, the British Chambers of Commerce, the Centre for Economics and Business Research, Numerica, Lehman
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Brothers, HSBC, Barclays Capital, Gerrard, PricewaterhouseCoopers, Deloitte and Touche or Lombard Street Research.
Mr. Dorrell: I am grateful to my hon. Friend. I regret to say that I have not committed that list to memory, but perhaps it might now be obvious to the House why I did not attempt to do so. My memory is failing me and I do not have that ability.
Almost nobody who has examined the Government's financial plans believes that the Government can deliver on tax and revenue through the next Parliament without resorting to precisely the same expedient that they used in 2002—a post-election tax increase. When the Chancellor says that he wants to put the economy at the centre of the election campaign, I say, "Hooray!" Conservative Members must argue to the electorate that the meaning of a re-elected Labour Government is entirely clear—it is clear in the figures and evidence and, if one does not want to look into a crystal ball, it is clear in the Red Book. A Labour Government means a further substantial tax increase.
Labour has delivered tax increases. In recent times, it has also delivered falling living standards, because government has grown faster than the individual's capacity to pay for it. This year, the IFS published two studies, one considering the Government's future plans and the other examining the Government's record in office, which demonstrate that when Labour raised taxes in 2001 and, as my hon. Friend the Member for Hertford and Stortford rightly pointed out, in 1997, it had the effect of cutting living standards. The IFS said that we must expect a re-elected Labour Government to do the same again. The choice for voters in this election could not be clearer, and I cannot wait to explain it to them.
2.31 pm
Mr. Michael Fallon (Sevenoaks) (Con): I shall speak briefly, simply to register a complaint. If discussing 11 clauses in 1992 was a constitutional outrage, what is discussing 106 clauses and 203 pages of legislation in four hours?
I do not doubt that my hon. Friend the shadow Chief Secretary was faced by an unenviable choice—he did not have the whip hand in those negotiations—but it is extremely unsatisfactory that more than 100 clauses, and more than 200 pages of financial legislation, will pass into law without their being properly scrutinised. If those clauses are not scrutinised in Committee, they will not be scrutinised in the other place.
As my hon. Friend the Member for Tatton (Mr. Osborne) said, some of those clauses may be welcome and others, which have been subject to consultation, may raise no serious dispute. However, the purpose of the Standing Committee on the Finance Bill is to go through those clauses in detail—the process is familiar to all of us who have served on a Standing Committee on the Finance Bill—and to consider representations that emerge after the final text has been published. Such representations do not always come from bodies that the Revenue or the Treasury have consulted directly. The Chartered Institute of Taxation, for example, has already made representations about a number of the clauses, and the Law Society has sent me,
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and I am sure other hon. Members, a catalogue of suggested improvements. Such amendments will not even be considered, and we will pass ill-considered and badly judged legislation into law.
If the clauses have already been partially consulted on, there is no rush. I am sure that my hon. Friend the Member for Tatton would be happier to reconsider those clauses and include them in his own finance Bill, which I look forward to his presenting to the House in the summer months. Even in the unlikely event—a catastrophe—of this awful Government being re-elected, it would be perfectly possible for them to seek to re-enact the clauses in just two or three months' time. Even those clauses that the Government claim are necessary to tackle tax avoidance would not lose from being delayed by a matter of weeks, if not a couple of months.
Mr. Prisk: My hon. Friend and other hon. Members know that rushing through legislation is part of this Government's pattern of behaviour. Two Budgets ago, the Chief Secretary himself told us that the Government intended to spend two years correcting stamp duty land tax legislation. Does my hon. Friend share my concern that the Government legislate first and think second?
Mr. Fallon: Having served on the Front Bench in a Standing Committee on the Finance Bill, I believe that the Government legislate far too rapidly on tax. I would like to return to some of the schemes and reliefs to measure their effects—perhaps that is a role that the Treasury Committee should perform—which is a role that no one seems to perform. We simply have the Government's word for it that a particular tax relief is either not working as originally alleged or is being seriously abused and must be stopped at midnight. We need a more considered way to audit tax changes—I am not discussing the re-write process or anything like that—two, three or five years after their implementation, so that all hon. Members can measure their effects.
Given today's situation, however, we must take the wording of the clauses on trust. We are setting a bad precedent by passing so much legislation on to the statute book without proper scrutiny. If it was a constitutional outrage in 1992 to consider 11 clauses in four hours, the outrage is far greater today. In the end, hon. Members and other bodies outside this House will regret what we are doing this afternoon.
2.36 pm
Mr. Michael Jack (Fylde) (Con): I suppose that I can count myself as a Finance Bill veteran. I start by reminding the House of my declaration of business interests, which is properly recorded in the Register of Members' Interests.
In today's debate, my hon. Friend the Member for Tatton (Mr. Osborne), to whom I listened with interest, quickly sped past the question of life assurance taxation. I had hoped that I might hear from him that an incoming Conservative Government would examine that area. I, for one, am disappointed that this truncated Finance Bill contains no measures to re-examine how the internal rates of return and taxation are calculated on life assurance products and to try to improve the
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rates of return for such financial devices. Those rates of return are particularly important to, for example, pensioners and those on endowment mortgages, who have seen substantial drops in the performance of those products, which are part of their long-term financial security.
One of the many missing themes from this Finance Bill is a lack of attention to detail on long-term savings. One of the interesting features of the current financial press are articles pointing out the slow uptake of ISAs at the end of the financial year, one reason for which is that the Chancellor has slowly but surely stripped out many of the initial starting benefits of ISAs.
If the Chief Secretary decides to go to South Africa, I wish him well. He may decide to go South Africa anyway when he is in opposition, because he will have plenty of time on his hands.
ISAs and other financial products have not closed the savings gap in this country, and savings have fallen substantially under this Chancellor. Although it is entirely correct to examine tax and revenue issues, which I shall discuss in a few moments, savings are important in terms of capital accumulation in this country. Under this Government, savings have fallen, and this Finance Bill contains no measures whatsoever to address that important point.
I want to examine a number of measures in the order in which they appear in the Bill. One of the first measures to which we are invited to agree is the
The Chancellor has had to postpone his revaluation of those rates in the light of turbulent conditions in the oil market. But there is a more important conclusion that comes from the question of oil pricing and upon which the Government should be reflecting. The Prime Minister has made it clear that matters connected with climate change are one of his top priorities, and they lie at the heart of the G8 priorities. As a result of the markets, there has been a substantial increase in the cost of hydrocarbon fuel, but no proportionate decline in the use of motor-powered vehicles. The market price increases, notwithstanding the revalorisation that the Chancellor still has up his sleeve, represent an important challenge to the Government's environment agenda, because they will have to look for other measures to try to reduce the output of greenhouse and other associated gases from motor vehicles if their targets for climate change are to be met. When I asked a question at the last Treasury questions, the Economic Secretary responded by talking about improvements in air quality, which I accept have occurred, but did not wish openly to acknowledge the fact that greenhouse gas emissions from the transport sector have been rising substantially. Government measures have been inadequate in dealing with those issues.
In the same context, I draw the House's attention to the table that goes with clause 7, which deals with the Government's proposals on vehicle excise duty. Ministers have trumpeted the success of the proposals to lower the level of vehicle excise duty for cars with low CO 2 emissions. Picking up on the point made by my hon. Friend the Member for Sevenoaks (Mr. Fallon), the Government have provided no analysis whatsoever of the real-world sales effect of those proposals in terms of the differentials in vehicle excise duty. I am surprised
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that a Government who have rightly put climate change at the top of their agenda have been so unimaginative and lacking in boldness in terms of looking again at whether their proposed structure for vehicle excise duty rates is the right one to achieve a greater and quicker uptake of vehicles with low CO 2 emissions. Why, for example, is not there a nil rate band for hydrogen-powered cars? Prototypes of those have been tried in the United States; where is the encouragement to bring them into the United Kingdom? Where is the substantial discount for petrol and diesel equivalents for mixed electric and hydrocarbon-powered vehicles? The Bill lacks boldness. If the Government do not address that, they will continue to underperform against their own targets in relation to the Kyoto priorities. I say that as the Chair of the Select Committee on Environment, Food and Rural Affairs, which recently produced a report on the Government's performance in that respect. There is some suggestion that even meeting the Kyoto targets could be in doubt.
Let me move on to air transport. The Bill contains nothing to deal with emissions from aircraft. There is one thing that the Government could have done in relation to aircraft, motor vehicles and any other sources of emissions. As the Chief Secretary and the Financial Secretary are aware, the Government have at their disposal the use of capital allowances, and if they had wanted to accelerate still further the pace of the introduction of more environmentally-friendly systems, they could have introduced an enhanced rate of capital write-down. As you will know, Mr. Deputy Speaker, from your experience of Stansted in your constituency, there is a need to introduce the most modern aircraft as quickly as possible. They pollute less with noise and are more efficient in terms of fuel, yet the Government are silent on providing any mechanism to enhance the write-down rate for aircraft to encourage the uptake of more modern air vehicles. The same principle could be applied right across industry to try to add some carrots to the sticks on which the Government's environmental policy relies.
The Bill moves on to invite us to confirm the rates of income tax. Following the interesting observations of my right hon. Friend the Member for Charnwood (Mr. Dorrell), I want to pose a question to Ministers: can they give an unequivocal guarantee that the 10 per cent. starting rate for tax that is confirmed in the Bill would, if Labour were re-elected, remain for the duration of the next Parliament? I would be interested to know whether that structural configuration of the tax rates remains part of Treasury thinking.
My right hon. Friend the Member for Charnwood rightly drew the House's attention to the work undertaken by the Institute for Fiscal Studies. He could have focused on another factor that affected the institute's findings—the rise in council tax. That is the ultimate stealth tax, which the Government do not overtly increase except by starving local authorities of the necessary resources to meet the mounting costs of the responsibilities that the Government keep putting on them.
When the right hon. Member for Blackburn (Mr. Straw) was a Treasury Front Bencher in opposition, he and subsequent Opposition spokesmen
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used to ask the Government of the day this awkward question: what is the impact on incomes by decile of all tax changes, both direct and indirect? That was sometimes an embarrassing question to have to answer when we were in government because the news was not always good. It is interesting that when that difficult-to-answer question was first posed to the incoming Labour Government, they refused to answer it, saying that the assumptions did not make for a meaningful answer. The latest findings by the IFS have brought that particular pigeon home to roost, because they provide us with the answer that
"average . . . household incomes after tax and benefit payments fell by 0.2 per cent. in real terms between 2002/03 and 2003/04".
What a record for the Government to take into the general election. They are able to boast that since the 1990s—the period when they were always criticising the Conservative Government for their economic performance—they have managed to create the first fall in average household incomes.
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