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Mr. Doug Henderson (Newcastle upon Tyne, North) (Lab): First, I draw the attention of the House to my entry in the Register of Members' Interests.

While the hon. Member for Runnymede and Weybridge (Mr. Hammond) was making his straightforward and fairly analytical contribution I thought that he would avoid mentioning the macro-economic background that his party articulates. I was somewhat surprised by that, as I cannot recall a debate on a Finance Bill where the official Opposition spokesperson managed to speak for 25 or 30 minutes without mentioning macro-economic policy. However, the hon. Gentleman let me down, because in the last two or three minutes of his speech he could not resist the chance to make a point about the macro-economic background, which gives me the opportunity to refer to those issues, too.

As my right hon. Friend the Paymaster General mentioned in her introduction, it is always difficult to deal with a Finance Bill after a general election. When part of a Bill is taken before the election and part afterwards, most of us forget which part has already been dealt with and which part remains, so we are indebted to the guidance notes for keeping us right on those points. But when people voted at the general election they knew what was in the first Bill.

People recognised the importance of measures that would improve the economic situation, especially the economic well-being of poorer families. After the tax changes in the first Bill, a family on £400 a week with two children was £25 a month better off. That was a telling statistic, which people understood during the general election. They also understood the provisions in that Bill about council tax assistance for pensioners. There were many other aspects, including some of the changes to the industrial context in which our manufacturers and service providers operate.

We are debating the second Bill today. Those on both Front Benches have said that it deals with a lot of complex, technical issues, but some important principles are involved, and we will consider them further in Committee. A section of part 2 that is of interest to me is formed by clauses 7 to 10, which raise the important principle of having a flexible approach to taxation on pensions. That will become an ever more important issue, which the House will have to face as the years go by. Choice and flexibility will be more important in pensions, and our tax law must reflect that, so it is right to include those clauses.

Clause 13 deals with the important principle of providing assistance to those who will invest in research and development. I have always believed that continually pressing home technical know-how and continuing to invest in future science and technology are what the core of this country's manufacturing and service industries are based on. Although small, such changes are important in establishing that principle. That is also the right thing to do.

Clauses 16 to 23 deal with the regulatory reform of various forms of investment vehicle, and it is right that the tax system should respond to changes in their structure. There is a lot of detail on which, no doubt, those who are fortunate enough—or unfortunate
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enough—to serve on the Standing Committee will receive many submissions from industry. Those are important clauses.

Clauses 24 to 31, in chapter 4, are also of particular interest to me, as they deal with tax arbitrage—something that has bedevilled Governments for many years in trying to achieve a fair taxation system, so that an institution or individual pays tax fairly in at least one country's tax regime. Again, it is important to deal with that issue not only to improve fairness and justice in the taxation system, but, quite frankly, as a matter of revenue raising. It is important that we get our share of revenue from economic activity that has been based in this country or has been generated by the people of this country. Those clauses are important—that is the right thing to do—and, taken together, they will have the effect of helping us to maintain high revenue, which allows us to do the things that we want to do as a nation.

As I have said, the people of this country have clearly supported the macro-economic background on which the first Bill was based. They have recognised that stable economic policies, which have led to the lowest unemployment for 30 or 40 years and the lowest interest rates, have been not only socially desirable—they have given jobs to people who previously did not have jobs—but economically essential to raise the revenue that was necessary to invest in health and education, which all hon. Members believe are important aspects of expenditure. That macro-economic context was the background to the first Bill, on which the public have already had the opportunity to express their views.

When the public know of our deliberations on the second Bill and when we have simplified, if we possibly can, some of the complexities, they will again show their support for the provisions that have been included. The public of this country want a fair and just taxation system in both the private and the corporate sectors. They want to ensure that what the law says people should pay is actually paid, and it is incumbent on all of us who deal with the Bill to ensure that that happens.

Although the hon. Gentleman was wary of entering into macro-economic policy until the last few minutes of his speech, the same wariness has not been as notable from many of his colleagues, who have argued that the Government's revenue expectations in their financial plans will not be met for several reasons, such as getting the sums wrong. I believe that the Government have taken the right approach. Governments can never be perfect in this regard because things happen that cannot be predicted at the time when plans are drawn up. However, for the past eight years the Government have tried to achieve stability in economic policy, fiscal expectation and monetary policy. They continue to do that, which will be absolutely crucial if we are to be able to continue on the course of raising revenue so that we can achieve the expenditure patterns that we all want. I was pleased that that approach was continued in the Budget and that it has been carried through into both this year's Finance Bills.

My right hon. Friend the Paymaster General would not expect me to go the whole way with her all the time—[Laughter.] If I thought that it would help me to rephrase that comment, I would. My right hon. Friend
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would expect me to raise a cautionary note. Although plans and designs are drawn up to bring about economic stability, we all recognise that things can be blown off course. The situation in the middle east is a problem that faces that whole world. If there is political instability, it usually follows that there is economic instability, so if we do not maintain political stability throughout the middle east and Iraq, there is the danger that economic instability could flow through across the world, the effects of which one economy of 60 million would not be able to avoid. I thus urge the Government to continue to press for political solutions in the middle east and Iraq.

My second cautionary note relates to what is happening in the European Union. Political instability has been created due to the events in France and the Netherlands, so I fear that that will bounce over into economic instability. I said in the House yesterday that I welcomed my right hon. Friend the Foreign Secretary's statement because he realised that we should not rush into anything premature on either the political or the economic agenda to deal with the situation facing us in the European Union. I am pleased that he intends to try to get as much agreement as possible to build political stability at the Council of Ministers next week, rather than trying to exploit matters on which there might be disagreement among members of the European Union.

A great onus will be laid on this nation from 1 July when we take over the European presidency. I cannot remember a more difficult time at which any country has taken over the presidency—certainly in the past 25 or 30 years. The challenge will be maintaining political stability. Many economic arguments will be put that could affect the European economy and thus our economy.

There must be some change. People in France were not really voting on the detail of the constitution, but the political situation in which that constitution was put before them. They were worried about the apparent failure of the European Union to respond to the country's 10 per cent. unemployment. We will have to tackle such issues during our presidency so that we can help to contribute towards greater stability. Other EU members can probably learn from this country's success on supply-side issues and they might be prepared to consider changes, but other macro-economic issues cannot be avoided. The stability pact has not brought about success throughout the European Union. The pact has led to recession in Germany and France, and in some of the other nations. Before the votes on the constitution last week, the Germans and French recognised this point and minor changes were made to the stability pact in March this year. I believe that there is a responsibility on our Government to take forward those discussions during the presidency and to look at how changes might be made to the pact so that it brings greater stability to the other economies in Europe. Without that, I fear that there could be serious repercussions for our economy.

I have said what I intended to say. There are many technical issues in the Bill and those who serve on the Committee will attend to them. There will be many submissions from interested parties. We can be thankful that the Opposition have recognised that these important changes need to be made and are demonstrating that by not voting against Second Reading this evening.
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4.51 pm

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