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Mr. Prisk: My right hon. Friend, who is, as always, giving an excellent exposition, mentioned the stealthy nature of the council tax increases. He may not have had the opportunity to consider page 250 of the Red Book, where the third column shows that the council tax revenue that the Government are already planning to draw out from the hard-working families of this country will be 11 per cent. more next year than this year—£20.9 billion. Does he share my concern that they are already planning how to take even more money from people?
Mr. Jack: I am grateful to my hon. Friend for pointing that out. A 75 per cent. increase in council tax over the lifetime of this Government is testament to their addiction to taxing in this particular way.
The IFS continues with its analysis and makes this telling point:
"The income of the household in the middle of the income distribution—the median—rose by just under £2 a week in 2003/04 to £336 a week. This 0.5 per cent. increase was much smaller than those seen in previous years under this government."
So they are now not only clobbering the average, but hitting the middle. The IFS goes on to say:
"The drop in average take-home income . . . in part reflects measures announced in Budget 2002, Mr Brown's biggest tax-raising budget to date."
It then goes on list the points that my right hon. Friend the Member for Charnwood made.
Mr. Timms: I just want to make sure that the House did not miss an important point that the right hon. Gentleman slipped past. Even according to the IFS survey, median take-home pay has increased.
Mr. Jack:
Indeed. We can trade statistical minutiae to make our debating points, but the Financial Secretary might also care to interrupt me to explain about Christmas trading on the high street and the subsequent warnings that many retailers have given, showing the squeeze on retail spending. Why is that happening? It is because people have not got the money to spend.
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The situation can be expressed in very simple terms. The pinch has come and people now understand what a tax-and-spend Labour Government mean to the pocket. It is painful and they do not like it, and at the ballot box they will have the opportunity to express an irrevocable opinion on this Government.
This Government have spent much of their time trying to encourage initiative, but the IFS has observed that the measures in this Finance Bill and preceding Finance Bills have contributed to a
So much for Labour's attempts to boost the entrepreneurial economy.
Mr. Prisk: I hesitate to interrupt my right hon. Friend for a second time, but as someone who used to be self-employed, I have grown despairing of this Government's attitude. Did my right hon. Friend notice that when the Chancellor of the Duchy of Lancaster—rather than of the Exchequer—was interviewed about this very point, he tried to suggest that the self-employed were somehow irrelevant to the figures and could be swept to one side? Is that not wrong?
Mr. Jack: Not only is it wrong; it also shows blind ignorance of the national insurance class 2 and class 4 payments that self-employed people make. I am surprised that a former Chief Secretary to the Treasury should make such a glaring error, which perhaps underscores a lack of real understanding of what is going on in the economy. That should make people seriously question the credibility of Labour policies as they affect businesses in this country.
Table C5 of the Red Book should be required reading for anybody who wants to see the unexpurgated version of Labour's tax proposals. In the current financial year, current receipts account for 39.3 per cent. of gross domestic product. This Government project that that figure will have risen to 40.6 per cent. by the time that the next Parliament comes to an end, so by their own admission the tax burden is rising. The point is illustrated in visual form in chart C3 of the Red Book, which, interestingly, shows that tax as a percentage of GDP fell in 1994–95. But like a ski-jump in reverse, it has risen and continued to rise under this Government.
I have remarked on many occasions about my disappointment with the Government's level of fiscal encouragement for biofuels. I draw Ministers' attention to a parliamentary answer to me from the Department for Environment, Food and Rural Affairs, which confirmed the dearth of a UK biofuels industry. So far as I can see, the only plant currently manufacturing biodiesel—it uses animal fats as a feedstock, rather than oilseed rape—opened this February in Motherwell. The rest of the plants are under construction and have projected modest production levels. The exception is a UK bioethanol plant, for which a planning decision is pending.
If the Government can give a 40p duty discount for liquefied petroleum gas, they should look again at the duty derogation on biofuels and make a real effort to get the industry moving. If they really want to meet their inclusion targets under the European directive and help us to meet our greenhouse gas emission targets, they must, by definition, have UK-manufactured biofuels. The lack of such biofuels is a notable omission.
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Clause 86 deals with double taxation relief. The Chartered Institute of Taxation is concerned about this clause, and I hope that the Financial Secretary is on "receive" mode as I point out to him the following observation on the construct of the clause, which the CIOT made in the briefing helpfully sent to Members before the debate started:
"What this potentially means is that legislation could have a far wider impact than is suggested by the guidance"—
the notes on clauses to the original Finance Bill—
"imposing significant restrictions on the foreign tax credit relief available to most UK companies owning foreign subsidiaries and investments."
I hope that Ministers will deal with that point in the wind-ups, because it is clear that the CIOT feels that in effect, this clause could adversely impact on every company in this country with overseas interests.
I conclude with a brief comment on a tax that I wish had gone up by more, and with some observations on inheritance tax. The increase in landfill tax for which clause 99 provides is not sufficient rapidly to progress the Government's agenda of meeting their European recycling criteria. Although the three-year indexation proposal for inheritance tax is welcome, because of the increase in house prices it will not be welcomed by the many thousands of estates owners. These are people of modest income whose lifestyle is also modest, yet they will be sucked into paying inheritance tax. It amazes me that a socialist Government can allow a tax that people of means can avoid paying some or all of by buying the professional advice that they need, but which those of modest means, or none, end up paying. Is it not about time that the Treasury re-examined the entire structure of inheritance tax? This industry of avoidance is complex and expensive. It benefits only those who can afford the advice, and it does not help those who are innocently caught up in the house price spiral.
For all the Treasury's pontificating about the number of estates that escape inheritance tax, the number paying it has increased. In 1998–99, 6,295 estates in the £300,000 bracket paid inheritance tax, but according to the figures for 2001–02, which were updated in July 2004, the number doing so had risen to 9,661. The tide is running and the wave is getting bigger. It is time for this Government to address some of the iniquities caused by inheritance tax.
We shall have the opportunity during this general election to debate all these matters, but there is no doubt that people are learning exactly what a tax-and-spend Government are all about.
2.58 pm
Mr. Quentin Davies (Grantham and Stamford) (Con): I remind the House of my interest as declared in the register.
There are a number of things that need to be said about this Finance Bill, but the overwhelmingly most immediate and important needs to be said strongly and several times, and I therefore make no apology for following on from the excellent speech on this subject by my hon. Friend the Member for Sevenoaks (Mr. Fallon). The point is that we simply should not be legislating in this fashion in this House—indeed, it is a complete disgrace—and least of all should we be doing
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so in respect of a Finance Bill, which goes to the heart of the relationship between the legislature and the people whom we represent. We are talking about the process through which we take away their money and property. Of course, it was around the issues of how that could be achieved fairly that Parliament emerged from the constitutional conflicts of the 17th century.
We are now being asked to take a view on a Bill of 106 clauses, yet they have been available for scrutiny for only a few hours. They have been abstracted from another Bill that was printed last week. A few hours is far too short a time to examine the difference between the earlier Bill and the Bill that is now before us. How can we take a view of the merits of the Bill on that basis? Serious scrutiny cannot take place and the tragedy is that no one expects Parliament to do a serious job. That is the extremely sad position that we have reached in this country.
All that is part of the erosion of Parliament's role—not just in the matter of Finance Bills, but more generally—as a result of the bad habits that the Executive have picked up steadily over the years. I admit that there were traces of it during the period of the previous Conservative Administration, but it has become infinitely worse over the last eight years. Parliament just provides a rubber stamp—it has become part of the ceremonial and decorative part of the constitution. Decisions are taken in No. 10 or Whitehall and it is assumed that Parliament will do what it is told within whatever time scale the Executive are gracious enough to grant. Whether it is convenient for the Executive branch to allow us four hours, two and a half hours or two and a half minutes does not really matter. Our role in legislation is no longer taken seriously—[Interruption.] I am not exaggerating at all. That is precisely the situation in which we find ourselves this afternoon.
It has been a convention for generations that, if a general election is called and a Finance Bill is pending after a Budget, Parliament allows the Executive branch some emergency powers required to keep the revenue of the state flowing during that period. That is the convention and, as recently as 1992, when the position arose under a Conservative Administration, the Conservative Government lived up to that principle and brought before Parliament only the minimal Bill necessary to ensure that the Government could go on functioning during the subsequent month or so before a proper Finance Bill could be introduced in the next Parliament. That principle has now been discarded and thrown in the waste paper basket.
The Government have introduced a Bill containing many complex and technical provisions and some new ones. As my hon. Friend the Member for Sevenoaks said, in a way, it does not really matter whether those provisions have been consulted on with the relevant professional bodies. I am glad, of course, that the Government consult in a formalised way but, unfortunately, they tend to consult only on matters that they feel it is convenient for them to consult on. The consultation system is good, but it is in no way a substitute for proper parliamentary scrutiny.
In that light, what we are doing here this afternoon is not that serious. I would not like to describe a parliamentary procedure as a farce, but we are moving down that road. We have not had the time to do the
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necessary homework and, on this occasion, we have not been physically able to consult all those affected by the Finance Bill or all those who have views on it. That is simply unacceptable.
I am sure that it will soon change, but at the moment, Conservative Members are a small minority in the House. The Government have an overriding majority and believe that they can get away with anything. That is an unhealthy position from which the democratic process in this country has suffered for too long. I would like to appeal to the democratic consciences of Labour Members. I know that many of them do have consciences about these matters and the fact that they are in a position of enormous power with such a great majority should make them very reticent about abusing that power. That, however, is what they have been doing in many contexts and they are certainly doing it this afternoon.
Labour Members should reflect on how far the process will go. What would happen if there were another Labour Government or, God forbid, a Labour Government for another eight years? Where would we find ourselves eight years further down the line when we know that we have already moved from a position where a Government tentatively introduce a minimalist Finance Bill to ensure the continued flow of Government expenditure to one in which the Government feel that they can get away with bringing 106 clauses before the House with four hours to debate them? If we extrapolate from that process, where will we find ourselves eight years later? We might be debating an entire Finance Bill in 10 minutes with no warning at all. In other words, our parliamentary procedures would have become a complete travesty. That is why I invite Government Members to reflect on these matters much more seriously than they have so far.
That is far and away the most important point that I want to make about the Bill, but I have attempted to examine this new Bill as conscientiously as I can in such a limited amount of time and I have noticed some problematic aspects. I have noted the tendency—it started under Conservative Governments but has got steadily worse under the present Government—to use the negative procedure and legislate by order or statutory instrument. More and more taxes find themselves on the statute book on that basis. The Government are giving themselves a blank cheque and we all know how thoroughly inadequate statutory instrument procedure is for examining legislative proposals. We all know that hon. Members turn up for such Committees without any preparation, often not even understanding what issues are at stake. They have no opportunity to amend the orders, so why should they make the effort to understand them? There is little that they can do, which is demoralising and demotivating in itself.
I shall use one particular example to bring the matter home. Let us examine clause 102, which deals with the Pension Protection Fund. It states:
"The Treasury may by regulations make provision for and in connection with the application of the relevant taxes in relation to—"
and it then refers to various pension protection funds. The relevant taxes are subsequently defined in subsection (3) as income tax, capital gains tax, corporation tax, inheritance tax, value added tax and
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stamp duty land tax—virtually every major tax. Thus the funds will be taxed by the Government in a way that we cannot predict and whenever they want to do it. They will simply write their own tax laws, which is wholly unsatisfactory.
The Committee considering Finance Bills always faces that difficulty and it is getting progressively worse every year. What is more, the Government are not in the least ashamed to proceed in that manner. Instead of producing a minimalist, emergency Bill to deal with the electoral period, the Government have introduced this 106-clause Finance Bill.
I have to say that clause 102, which I have already cited, is a less-than-honest provision. It starts in the way that I have already described and continues with a number of subsections. Being conscientious, I felt that I should read them. When I did, I found that the subsequent subsections in no way constrict the right given to the Government to make whatever tax laws they want for these funds by regulation. They merely state that the power "includes" this or that. For example, subsection (2) states:
"The provision that may be made by regulations includes provision imposing any of the relevant taxes".
Clearly, what might seem at first glance to be defining subsections are, in fact, tautologous and unnecessary. They say what the regulations may include, but the provisions are unnecessary because the Government's power to write whatever tax laws they want for these particular funds is already granted in subsection (1).
I draw two conclusions from that. First, the Bill contains a lot of unnecessary verbiage. Finance Bills are always much too long and complex, but there was no need to encumber this Bill with such unnecessary wording. Secondly, there is no intention to make the Bill clear or transparent so that taxpayers can know what the rules are. I can assume only that 90 per cent. of the clause to which I have referred is intended to be obfuscatory. Civil servants and parliamentary draftsman have spent hours and days producing what is completely unnecessary rubbish. The powers granted to the Government require only the first sentence of the clause.
That is another but more minor illustration of the direction that tax law is taking in this country. It is a very bad tendency.
Of course, we know that this Bill is designed to hide the nasty truth of what will happen if there is a new Labour Government. My hon. Friend the Member for Tatton (Mr. Osborne) and all the independent commentators have made it clear that the Government's fiscal policy is out of control and that there is a structural deficit. The Government will have to increase tax revenues and the only question is how they go about it.
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Moreover, the Government have a record of promising before elections that they will not increase taxes and then of breaking those promises. At Prime Minister's questions, it was notable that the Prime Minister avoided responding to that accusation and tried to talk about something else. He knows that the accusation is all too true.
There is great concern in the country about the Government's secret tax-raising plans. I hope that we will be able to draw them out on these matters during the election campaign. That is very important and it is better to get an untrue declaration or statement from the Government than nothing at all.
In the interests of an honest election campaign, we should ensure that we ask the right questions. For example, the newspapers have reported considerable concern that the Government have a secret plan to extend capital gains tax to owner-occupied property. That would be a devastating blow to millions of home owners and an economically stupid mistake. It would place an enormous cost on labour mobility, which is an essential part of a successful economy. The labour force is our most important resource and it must be used efficiently. People must be able to move from one part of the country to another to take up new jobs or promotions. They will not do so if that incurs a tax penalty and the economy will suffer enormously.
Another suggestion is that the Government will increase national insurance contributions. We all know that they long ago abandoned the idea that national insurance was anything other than a tax. The Chancellor has increased contributions, contradicting undertakings given before the last election, but without making a corresponding change in benefits. The Government have abandoned the idea that the national insurance fund has any authentic status. They like to work by stealth and dislike being straightforward. They have never said openly that national insurance is a tax and that the fund is merely a fiction, a bogus concept that does not really exist, but it would have been more honest of them to do so.
The Government will try to bamboozle people by raising national insurance contributions and pretend that that is different from increasing income tax. In fact, the only difference is that higher national insurance contributions have no corresponding reliefs. Raising national insurance contributions would be an enormous mistake. The Government think that they got away with it last time and there is no doubt that they will be tempted down that road again if they are returned to power.
It is very important that we expose the Government's record on this matter during the election campaign. We must also make clear the great risks that the country will face if there is a Labour Government after 5 May.
I turn now to pensions. Several Opposition Members have mentioned the enormous damage that has been done to our pensions industry and I spoke on that subject in the Budget debate a few weeks ago. It may be a cliché to say that our pensions system was the envy of the world but, with the exception of the Netherlands, where the system is very similar, all our EU partners used to envy it.
Ironically, in their first few years in office, the Government used to tell our EU partners that they should set up a funded pension system like ours. Until
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1997, the system was successful, but that is no longer true. Not one defined benefit pension scheme has been created since this Government came to power. About one third of such schemes have been closed down in that time and another third have been closed to new entrants. That devastating attack on the security of retired people and on the prospects for succeeding generations is due entirely to this Government's policy.
I do not accept that what happened was the inevitable result of rising life expectancy or of the 1998 stock market fall. There have been much more serious crashes in the past 50 years, including the devastating collapse in 1974 and 1975 and the small falls in the early 1980s and early 1990s. Moreover, the increase in life expectancy has been steady—[Interruption.]
I see that the Chief Secretary is leaving the Chamber. I thought for a moment that he was going to defend himself against my complaints, but like the Prime Minister earlier he has no defence. I suppose he is leaving out of shame at the exposure of the record of the Government that he has represented. Whether he goes to South Africa or not, he will have a more comfortable time than has been his experience in trying to defend the Government's fiscal record.
The damage done to our pensions system has caused people to worry that the Government will come back for a second bite, like a shark that bites off a person's leg having previously bitten off his arm.
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