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John McFall: As my hon. Friend points out, we get more than the amount that goes out. The hon. Member for Macclesfield (Sir Nicholas Winterton) alludes to an important matter, however. The Committee will also consider whether there is too much takeover activity and the benefits of such activity in the long term. Our inquiries will focus on the long-term interests of the country regarding economic performance.
If companies are taken over, what will be the arrangements for monitoring them? What is the incentive to monitor a company if the bulk of its ownership is made up of small shareholders? Private equity seems to be in the middle of publicly quoted companies and private companies. Many private companies in this country do not need to report on a quarterly basis and are doing a fantastic job. An example is JCB diggers. I hear that it does not receive advice from City accountants and investment managers about things that it should do be doing, but focuses on the quality of the product that it is selling. I would like to see more of that in our countryI am sure that the hon. Gentleman agrees.
Mr. Mark Field (Cities of London and Westminster) (Con): I endorse the right hon. Gentlemans robust support for the private equity and venture capital industry. Does he agree that one of the main concerns arises from the sheer level of debt involved and the complex debt instruments that could create the possibility of a collapse? Obviously, we hope that that will not happen. In many ways, those complex instrumentsmany people, even in the City, do not fully understand their implicationsare at the heart of a possible longer-term problem.
John McFall: The hon. Gentleman makes a relevant point. Although, we have a benign economic environment and low interest rates at the moment, the Committee will examine what could happen in the future. The debt and leverage that the hon. Gentleman mentions could have implications in an environment that was less benign.
I said that we would be examining hedge funds. The main issue is whether a systemic risk is involved, given that it is difficult to determine where the risk is. The Amaranth hedge fund went down and lost £6 billion, but that did not create a systemic shock in the financial environment, so perhaps the situation is robust and there is a spread of risk. However, I know that quite a number of people are worried about that spread of risk.
The Committee will also consider insider trading. When the Financial Services Authority examined the matter, it painted a fairly bleak picture. The FSA has not made great progressit is difficult to do sobut we should consider it when we examine transparency.
Rob Marris: My right hon. Friend might be aware that I have attempted to find out how many prosecutions have been brought. The FSA estimates that between 20 and 25 per cent. of takeovers and deals might be tainted by insider trading, yet there have been fewer than two dozen prosecutions. Does my right hon. Friend find that extraordinary, as I do?
I noted reports on the front page of todays Financial Times about the Barclays-ABN Amro amalgamation, which throws up quite a bit of interest, especially from the point of view of the FSA. Barclays says that it will have its headquarters in Amsterdam and that it will have a Dutch person as its chief executive. Such a big merger across European frontiers will mean that negotiations about supervision will need to take place in both countries, although there will be supervision in each jurisdiction. Given the pivotal role that Barclays plays here and that it will play in Holland, there is a need for the Committee to discuss the matter with the FSA because such a path has not been travelled down too much previously.
The Financial Secretary has produced a consultation paper on unclaimed assets. The Treasury Committee went on an enjoyable but hard-working visit to DublinI think that the hon. Member for South-West Hertfordshire (Mr. Gauke) would agreeon which we worked from early morning until late at night and just fed ourselves in between. The Irish Government have passed legislation on dormant accounts, so the information that we discovered on our visit will help the legislative process as such a measure goes through here. There are two issues involved in dormant accounts, the first of which is reconciling individual savers with their accounts. The Irish Government put a 15-year limit on that, so if anyone comes back within 15 years, they can get their money straight away. Indeed, even if they come back after 15 years and have the relevant proof, they can get their money. Any measure will need to build peoples confidence that we are aiming to reconcile savers with their accounts.
The second issue is that if the accounts are not reconciled, they are given to an independent body that distributes the money for the sake of the community. I suggest to the Government that the Irish Government have undertaken that task very well, and there are many lessons to be learned there. I can also tell the Government that the amount that has resulted from that scheme is eight to 10 times the original estimate of the financial institutions in the Republic of Ireland. That is a lively issue, and the scheme could benefit communities in our country, as well as individuals. If the Government go about their business in that sensitive way, they will certainly have the support of the Treasury Committee. I can tell the Paymaster General that the Committee will ensure that it raises some very good issues for her to consider. I am sure that she, if not others, looks forward to coming back before our Committee, as she always does.
I thank you, Mr. Deputy Speaker, for the opportunity to comment on the Budget, which will be welcome to families, young people, and business.
Businesses told me that they needed a simpler system, but more than anything they need a commitment to the long term. With the corporation tax reduction announced today and the reduction in personal income tax, business has that commitment. We have a long way to go on that particular agenda, but we have heard encouraging statements from the Chancellor today, and I end by congratulating him and the Prime Minister on the past 10 years of financial and economic stability.
Mr. John Redwood (Wokingham) (Con): I have said in the Register of Members Interests that I hold non-executive directorships, and I draw that to the attention of the House, but of course I am not speaking on behalf of those companies today. It is with pleasure that I welcome a measure that the Chancellor is taking: it is excellent that he is to increase asset sales and privatisations in forthcoming years. When I was able to persuade a previous Conservative Government that that was what we needed to do, it never occurred to me that, some years later, I would stand up in the House to welcome a Labour Chancellors acceptance of the wisdom of privatisation. It is often better to return assets, sometimes to the families from whom they originally came, because those families can look after them and the state can have the proceeds, which relieves some of the burden on the taxpayer. I give one cheer for that part of the Budget.
I had hoped, when I listened to the bravura performance at the end of the Chancellors Budget, that I could also welcome him to the ranks of the tax-cutters. As many hon. Members will know, I have often had a sneaking inkling that tax-cutting is a good idea, and have had a certain preference for it. However, it is not a cut in income tax that the Chancellor is offering today, but a con. It is a small tax rise on income. If Members look at page 208 of the Red Book, they will see that what the Chancellor gives by cutting the standard rate from 22p to 20pnaturally, I welcome thathe more than takes back by seizing the 10p band and removing it, and by raising the thresholds for national insurance. Commentators outside the House who are studying the detail will have to say that most people will be worse off, once they combine the changes to income tax and national insurance.
Obviously, there will be some complicated calculations, because the Chancellor is trying to prevent some of the poorest people from being worse off by tipping some money back in through the tax credit system. However, that will mean that every family will have to spend a lot of time poring over the figuresthose who are rich enough will do so with their financial advisersto see how great a reduction in available income they will have to absorb, and to find out whether there are offsets that might make them slightly better off.
Mr. Mark Field: My right hon. Friend is a good-natured man, as we well know. I entirely agree that many of the changes are regressive, notwithstanding the tax credit situation, but will he at least give some, if only very little, credit to the Chancellor for simplifying the tax system in a small way, after 10 years of ever more complication?
Mr. Redwood: I am all heart, but I am not sure that I can go quite that far on this occasion, because although there may be simplification as a result of removing the 10p band, there is probably additional complication in the way in which the benefit system is trying partially to compensate those on lower incomes. What worries me most of all is the situation of those people who are doing well and are making a big contribution, such as senior teachers or junior head teachers, who are near or about to go above the threshold for 40 per cent. tax. Looking at the figures, I suspect that they could be particularly badly off. I think that it could be another Budget that taxes those who work hard and do not make claims on benefits, and those whose income is a bit above the level at which they get reasonable support from the complicated tax credit system.
Rob Marris: The right hon. Gentleman kindly referred the House to table A1 on page 208 of the Red Book. My reading of those figures is that the Government give up slightly more revenue by moving from 22p to 20p than they gain by abolishing the 10 per cent. starting rate, and that is contrary to what I understood the right hon. Gentleman to say. Secondly, he has not referred to the gains, set out on page 208, for those at the lower end of the scale. For example, there are increases in age allowances and child tax credit, and the threshold of the working tax credit is to be raised. [Interruption.] No, he had not referred to those gains in terms of the overall gain at the end of the scale.
Mr. Redwood: I mentioned all three things, because I am being scrupulously fair in representing what the Chancellor has put before the House in written form; he failed to present any of that in oral form, when the cameras were here and the spotlight was on. It is a disgrace that the Chancellor announces an income tax cut when it is a con trick, and when most people will be worse off in terms of income. I said that people on lower incomes would get some benefit from the changes in the benefit system. We cannot be sure from the general figures in the Red Book who will win and who will lose, but clearly some people will lose. The hon. Member for Wolverhampton, South-West (Rob Marris) is mischievous, because he has left out the very big increase in tax that will result from raising the threshold on national insurance. If he adds the increase in the threshold to the loss of the 10p band, he will see that that raises an extra £8.4 billion, but only £8 billion of that is given back by cutting the rate from 22p to 20p.
Does the right hon. Gentleman accept that because of the big increase in pensioners personal tax allowances, pensioners, particularly those who pay
tax, will be better off, and will be taken out of tax altogether? Forget about the 10p ratethey will not pay any tax at all.
Mr. Redwood: It is quite possible that some pensioners will be better off, but as the hon. Lady indicates, they will not all be better off. It is a complicated Budget. The Chancellor would clearly love to give some money back, because he knows that he is rightly being criticised for over-taxing everybody, but he does not have any money to give back, as he is spending so much in his other public budgets, and he is reluctant to bring those budgets under proper control.
I would like to put this Budget in the context of the past 10 years, because there is a farewell feeling to the Chancellors performance today; at least, it is farewell to one job. We were reassured to learn from him that he is not planning to combine being Prime Minister and Chancellor of the Exchequerin name, at least. We will wait and see how it works out in practice. Pity the poor right hon. Lady or Gentleman who is Chancellor when he is Prime Minister. However, that is a story for another day.
If we look at the 10 years during which he has been Chancellor, we can see that he, like Gaul, has been divided into three parts. In the first part, from 1997 to about 2000, he was happily married to Prudence. I was upset to see him make such a big increase in tax on pension funds in that period; he began the damage that has characterised his 10 years. We now have much more enfeebled final salary pension schemes, and many people no longer have access to them. However, in fairness I confess that the rest of the Chancellors work from 1997 to 2000, while he was married to Prudence, was not too bad. He started to bring down deficits and he kept public expenditure under reasonable control. He did not increase the relatively attractive tax rates that he inherited from the outgoing Conservative Government, and the economy performed reasonably well during that period.
In the Chancellors second phase from 2000 to about the middle of 2006, we saw the tax-and-waste Chancellor, who tried to reassure all his Labour colleagues that he believed in tax and spend. He took a phenomenal personal interest in all the details of public spending in many of his colleagues Departments, which they did not always welcome, because he wished to associate himself with the Treasurys largesse to different departmental budgets. So big was the tax and waste under the Chancellor that he did quite a lot of damage to what had been a fundamentally strong economic position. In those six years, Britain started to fall further and further behind our international competitors, whom we outshone in the last decade of the previous century. He introduced a large number of stealth taxesthose are the 99 tax increases to which my right hon. Friend the Leader of the Opposition sensibly referred. Britain fell down the competitiveness league tables, losing about 11 places. In particular, we fell down the tax competitiveness league table, because the Chancellor needed to keep tax rates up and find back-door ways of increasing the tax take from companies and individuals as he went about his task of tax and spend.
Sir Nicholas Winterton:
I am deeply concerned about fiscal drag and the indexation of tax allowances. Will my right hon. Friend indicate in his splendid speech
just how much additional taxation the Chancellor has raised by failing to increase tax allowances in line with inflation, and tell us what the Chancellor has done this year, as it appears to be nothing?
Mr. Redwood: My hon. Friend makes an extremely good point, which I endorse. Off the top of my head, I do not have the numbers about how much fiscal drag amounted to, but the overall totals were colossal, and we know that the average family pays £1,300 a year more in tax than they did when the process began. Quite a bit of that is the result of fiscal drag, but some is the result of policy decisions made by the Chancellor.
That period also illustrate that all clouds can have silver linings, because over the Conservative years, we had been driven deaf by Labour spokesmen and Labour Back Benchers telling us that there was very little wrong with Britain that a big increase in public spending would not put right. We also were led to believe that there was somehow something in us that made it impossible for us to shower enough money on public services, and if only Labour could take over from us, it would shower enough money on public services and all our problems would miraculously vanish. The Chancellor has conducted a bold and historic experimentunfortunately, at the British taxpayers expensebut over the six years, he has proved conclusively that it was not Conservative parsimony that got in the way of really good public services. No one can now deny that huge sums of money have been tipped into health and education, and several other services, but nor can any fair-minded person deny that there are still real problems with those services, many of them reminiscent of the problems for which Labour used to criticise the outgoing Conservative Government in the 1990s. I hope that it is common ground across the House, at least between the Front-Bench teams, that tipping lots of extra money into those services without reform or change, and without asking for something for that money, is not the right way forward. We need to find preferably a consensus way of improving public services that absorbs less cash and delivers more for the money.
We now come to the third and probably final phase of his Chancellors tenure. There again he is trying to prove an extremely important Conservative adage for us, and I admire him for doing so. He now is trying to prove that there is indeed waste in the public accounts, and that it is possible for a Government to tease out that waste and redeploy the money more sensibly and profitably in the public services. He has not quite got to the point yet where he would like to share that with the taxpayer, but he has certainly got to the point where he would like to give the taxpayer better value for money. The Budget is built on the proposition that £26 billion a year by 2010that money is currently spent wastefully and unnecessarilycan be spent more productively and sensibly by strengthening front-line services, primarily in health and education. I should be delighted if the Chancellor succeeded in doing that. I think that it is quite a modest ambition, given the scale of waste in the public sector, but I suspect that he will find it difficult to do so.
I felt that the Chancellor learned an important lesson when, in a previous Parliament, Conservatives
were making the argument that we would run things better and take waste out of the public accounts. The Chancellor suddenly shifted from saying that that was impossiblethat had always been his response in previous yearsto saying that, yes, it was a very good idea and of course, he had thought of it first. He set up the Gershon review, which identified £22 billion a year of wasteful and unnecessary expenditure in the public accounts that the Government intended to tease out and redeploy. We now learn that Gershon underestimated a bit, and the Chancellor thinks that the sum could be at least £26 billion. We also know from the very good work of the Treasury Committee and others that the Chancellor is finding it difficult to secure all the £22 billion of the Gershon changes, but there is a simple way for him to do so, as he could strengthen his control over the public sector pay roll.
I was pleased that in the last quarter of 2006, the numbers on the public sector pay roll in aggregate fell by 22,000. That was the first time that we have seen a move in that direction after a big explosion of posts. Before Labour Members make their usual silly points, I think that we need all the nurses, doctors, teachers and police officers that we currently have, and we need to recruit more in the years ahead. The good news is that they are a tiny fraction of the huge public sector pay roll, and with efficiency and natural wastagenot by being nasty or sacking peoplewe could make big changes to the numbers that we need to employ across the public sector.
Stephen Hesford (Wirral, West) (Lab): I am interested in what the right hon. Gentleman is saying. When he was in government, he could not untie that particular knot, in the sense that there are 80,000 more nurses and 20,000 more doctors than there were then. Does he agree with the public spending that brought about the advance in those numbers, or does he think that there should be cuts, which would damage that complement? Those increases did not take place under his Government, but they are in evidence now. How does he unscramble that?
Mr. Redwood: I wish that the hon. Gentleman would try to listen to what I am saying. Of course, I welcome the extra teachers, nurses and doctors who have been hired on the Governments watch. It is not the first time that that has happened. A lot of extra teachers, nurses and doctors were hired on the Conservative watch, too. It is called growth, getting richer and living in a more civilised country. I hope that Governments of all persuasions will carry on doing that, just as the Conservatives did, although Labour has always denied it, and just as Labour is doing, and we always welcome it.
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