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Of course I will, Madam Deputy Speaker, but I just point out that taxation is, of course, related to the costs of the Government, and part of the costs of the Government are the quangos. The quango in question, the LSC, is about to be replaced by three more quangos. Nobody can say that that is an efficient delivery of
money to sixth forms, for which we require good education so that we can deliver the competitive economy that we will need for the future. That is the scandal of so much of what the Government have done.
Instead of creating systems, so that business can modernise, invest and take that great big step forward that it needs to take, the Bill and the Budget weigh business down with yet more bureaucracy. It is appalling that for the past 10 years, the Finance Bill has had to come in two documents, as I think that my right hon. Friend the Member for Wokingham (Mr. Redwood) pointed out. Each year, every accountant, company director and finance department has to plough through the implications of an inch of new law. That is no way to create a competitive economy. We should go back to a simplified system. The Government should not micro-manage, giving a little bit here and a little bit there as they decide which way a company should go. It is up to the business to make decisions about its direction. The tax system should support those decisions, not hinder them.
The same argument applies to issues of productivity. Instead of being able to invest in systems that help our people to become more productive, the British economy is becoming ever less productive because of the expansion of the public sector overall. Sadly, unless and until we can change that whole approach to productivity, and take the deadweight of the public sector off the backs of those people who are delivering our wealth, we will not be able to deliver better living standards for our people.
Mr. John Hayes (South Holland and The Deepings) (Con): My hon. Friend will understand that as an economy advances, it becomes more complex, which is further complicated by the global nature of trade; that means that when Government pull policy levers, the results are less and less predictable. Will she invite the Minister, specifically in relation to the Finance Bill and the changes that it introduces, to consider whether those reactions to policy levers are likely to be as speedy as economic models currently used by the Treasury assume, or whether they will bring with them large deadweight costs, and what measurement the Government have made of those?
Mrs. Lait: I am grateful to my hon. Friend. I will not reiterate the point, as the Minister has heard it. It is all part of the argument that we are putting forward about the failings of both the Budget and the Finance Bill.
The Bill does nothing to help savers and pensioners. Savers are still suffering from a 0 per cent. interest rate. There were some thoughts that savers might get some sort of help in the Budget or Finance Bill, but there is no sign of that. In a borough such as Bromley, which has the highest proportion of retired people in London, those people are hurting because they are not able to rely on any income from their savings.
Pensioners also are not helped by the Budget or the Finance Bill because they are affected by the reduction in the funds available to them, and because so many of them have to buy annuities when interest rates are so low. There is also the problem, which has been so eloquently described, of the impact of the reduced contributions that people earning more than £100,000 will be able to put into pension funds. Those contributions enhance a pension fund almost disproportionately, and
it is counter-productive to a stable society for pensions to be less good than they should be. Nobody, as far as I am aware, has referred to this: the ghost of Barbara Castle must be walking with her head in her hands through these halls, horrified at the damage that has been done to her occupational pension schemes.
We have heard many contributions on the impact of the 50 per cent. top rate of tax. We talk about the disincentive effect on those who are genuine wealth creators, and I totally agree on that point. What we have failed to recognise, if I may gently point it out, is that that also impacts on head teachers and doctorsthe sort of people on whom we rely for our public services. They have no option of moving money offshore. They will be disincentivised from trying to deliver better education and better health.
I have been struck by the number of my constituents who contacted me about the impact of the fuel duty on their lives. They live in suburban London. I am the MP with the most railway stations in my constituency of any in the country. By most calculations, we should have good public transport. However, I do not fall into the category of those who believe that we have good public transport. Cars are as necessary in suburban Bromley and suburban Beckenham as they are in rural areas.
We have an estate agent who depends for her income on commission. That commission will be eaten into in very hard times by the increase in petrol tax. No thought has been given to the impact that the tax will have on people who depend on their Motability cars, on the very tight income on which most people who are disabled have to live, or on pensioners, who are already on very tight budgets. That increased petrol tax, and the promises of more to come, will have a seriously adverse effect and help to isolate people who need to get out and make contact with others.
Mrs. Lait: I am grateful to you, Madam Deputy Speaker, but the scheme does interact with vehicle excise duty, which is in the Bill. We need to consider the impact of the two on the environment, because part of the purpose of the scrappage scheme and the vehicle excise duty changes is to try to reduce this countrys carbon footprint. Reading the Bill, it seems to me that, owing to the law of unintended consequences, the scrappage scheme and the vehicle excise duty changes have the potential to make a greater carbon impact, because there will be disincentives to buying new cars and getting rid of old ones. This Government often find themselves in difficulties with the law of unintended consequences.
When intervening on my right hon. Friend the Member for Wokingham, I briefly mentioned the law of unintended consequences in respect of the higher imposition of duty on alcohol and tobacco. It is a campaign that I have long fought; I have done so since 1994. The introduction of the single market has destabilised the alcohol and tobacco markets significantly, because of
smuggling. Obviously, there has been a reduction in the value of the pound, and it could be argued that some of that is counter-cyclical, so the attraction of smuggling will not be as great. However, there is already some evidence that the pounds value is changing, and these matters are very price sensitive. A long-standing friend, who was a very wise person and ran businesses throughout Europe, would say that, if the price differential was 6 per cent., nobody would cross borders, but that when it became 6.5 per cent. they would all cross borders. We will therefore see whether tobacco and alcohol smuggling rises up the political agendaagain as an issue of unintended consequences.
Many people have made many serious points, and I do not want to repeat them. However, I shall finish by saying that the Bill does not deal with this countrys problems in order to get us out of the recession. I shall not repeat the arguments about the levels of Government borrowing, because we all know them, they are horrific and the Government are doing nothing about them, and I shall not talk about the black hole or any other bigger issues that people who are much more expert than I am have dealt with at much greater length. However, I am very conscious that, from an incompetent Government, we have an incompetent Bill that will not, sadly, lead to a better standard of living or to hope for our people, which is what the Finance Bill should have set out to do.
Some years ago, I sat on the Joint Committee on Consolidation Bills, which was dealing with income and corporation taxes. We were chaired by a distinguished Lord Justice of Appeal. Given the vast quantity of legislation that we had to consider and having had some background in the process of legislation before I came to the House, I pointed out that we ought to address a number of aspects, particularly in respect of Finance Bills. My main point was that with Finance Bills we are dealing not only with pieces of paper but with the impact on people. There is not only the balance between spending and taxing to consider, but the impact that that has on the running of businesses.
There is one absolute in politics, apart from the fact that there is nothing more inevitable than death and taxation. One other important nostrum of which we should take account is that not a single penny of public expenditure and not a single element of public services comes from anywhere else than through taxation on private companies, partnerships or private enterprise generally. Those things come from nowhere elseunless money is printed, which has become the fashion for the Government.
An important part of the argument that we need to address as we move towards government is the fact that the key failure of the Government has been their lack of any recognition that the Finance Billhuge as it iswill, overall, do harm rather than good. It will do harm because of its complexity and over-regulation, although I am sure that it will considerably help the profits of the major and some of the minor accountancy companies.
Many years ago, my great uncle was president of the Institute of Chartered Accountants. Furthermore, I am told that back in the 1870s, the firm of Cash-Stoneor whatever it was called in those daysbecame one of the first accountancy bodies when it got its royal charter. However, as far as I am concerned, the way in which the whole accountancy profession has moved in respect of tax has been generated by successive Finance Bills. This Bill is a first-class example of the massive additional cost that will fall on business at the very time when we least want to put obstacles and obstructions in the way of successful enterprise and successful companies.
It will not surprise you, Madam Deputy Speaker, that I get irritated when I hear people saying that we have to include this or that provision because of some overarching European requirement. I do not need to dilate on that this evening, because in making the point I have already registered all my concerns in a simple sentence. I intend to speak about other things.
Mr. Jeremy Browne: A repeated theme of Conservative speeches in this debate has been how comparatively uncompetitive the United Kingdom is compared with other European Union countries. That appears to suggest that we have powers ourselves to determine these matters, and that no overarching European policy is informing the Finance Bill.
Mr. Cash: I am talking about specific measures in this domestic legislation that are based on overarching European requirements. These days, if a person picks up any piece of legislation, opens it and looks halfway down the page, they will find something based on a European provision. Clause 56 of the Bill, for example, is entitled MEPs pay, allowances and pensions under European Parliament Statute.
However, that is just one aspect of it: my concern goes much deeper. Through the aegis of the European Court of Justice, European legislation is expanding its tributaries into the tax field. That will continue to happen, because however stupid and obsolete the thinking may be, there is still the belief that we must have European integration on the scale of a political union, despite the clear requirement to comply with the convergence criteria and with the underlying economic arguments on which our taxation is basedI assure you, Madam Deputy Speaker, that I am not going to go an inch over the boundary line in this debate. The consequences of the interaction between economic criteria, and the requirements to comply with those in terms of tax and spend, are all part and parcel of the problem that we face with the massive deficit that we have built up. If one looks at the Red BookI invite you to do so, Madam Deputy Speaker, when you want some light readingone will see that in the calculations relating to the amount of money by which we are indebted, the Maastricht criteria are contained in the footnotes, whereas they should be emblazoned in the headlines.
The Office for National Statistics, because it is an honest body, stipulates the extent to which compliance with the convergence criteria is at the heart of many of the debt problems that we face in relation to the stability and growth pact. That is to do with the balance between taxation and spending. The requirements that are laid
down are all related to the extent to which, under these provisions, the Government are struggling to find enough money to fill the hole that has been created by their wilful failures in running the economy and balancing the books, and the failures of the Prime Minister since he became Chancellor of the Exchequer in 1997 and right the way through to today, when everything he does turns to dust. The Treasury Committee, which is chaired by one of his own clan, has castigated the Governments golden rule and stabilisation proposals. Its report on the Budget says, on page 48:
We believe that the Chancellor should now engage in what we regard as a crucial debate about the future of the UK fiscal framework. The majority of our expert witnesses found fault with the Golden Rule and Sustainable Investment Rule, so an eventual return to an unreformed framework would seem misguided.
There is a gap between taxation, which is supposed to be raised under this Bill, and spending, which is now totally out of control, and the public debt. My right hon. Friend the Member for Wokingham (Mr. Redwood), my hon. Friend the Member for Braintree (Mr. Newmark) and I have pursued this relentlessly for many years. On 7 October last year, in the debate on fiscal rules, I pointed outI think that I will have to use this expression, as euphemistically as possiblethat we were not merely being misled, but that people outside were lying to us about the extent of the public debt. That is a very serious charge in relation to a matter of such incredible importance, but this country is being bankrupted. That is the problem, and that is why this Finance Bill is so important. The measure of its failure to meet the requirements demonstrates the failure of this Government.
Mr. Hayes: Before my hon. Friend moves, in his terms, from a handful of dust to decline and fall, might he consider that it is entirely possible to lament Britains uncompetitive economy when examining EU neighbours? Contrary to the view expressed in an intervention by the hon. Member for Taunton (Mr. Browne), the missives from the EU are not applied equally across those countries; nor are the circumstances in which they are applied equal. Might he say a word about that?
Mr. Cash: Yes, indeed. The plain fact is that the application of tax and spend is different in each country, and countries claim in some fashion that that indicates national sovereign power. What they completely fail to tell youI do not mean you, Madam Deputy Speaker, I mean people in generalis that actually the amount of manoeuvring room within the parameters that give rise to the differentials is still based on the same criteria, so we still come back to the requirements laid down in the Maastricht criteria. It is hardly surprising that I found myself voting against them and doing my utmost to undermine the arrangements that were put in place by John Majors Government.
Mr. Jeremy Browne:
The hon. Gentleman is letting the Government off the hook. The current Prime Minister, when he was Chancellor of the Exchequer, made decisions in Britain on how much we spent on health, education, the military, social security or whatever it was, and he made decisions about income tax, corporation tax and stamp duty. All those decisions have come together to
create circumstances in which we have a massive budget deficit. Of course there are global factors that contribute to that as well, but I think that the hon. Gentleman would be better off listening to his own Front Benchers, who seek to apportion at least a large proportion of the blame to the Prime Minister rather than give him the cover of saying that this was all the fault of people in Brussels and nothing to do with the Labour Government at all.
However, I do have a little uncertaintyI hesitate to use the word criticism of such a distinguished body of people as my own Front-Bench team. I wish that they would be a little more explicit about the extent of the debt that we have been talking about. My right hon. Friend the Member for Wokingham said earlierI have a lot of sympathy with thisthat the figures can add up to as much as £4.2 trillion. I have figures from the ONS, confirmed by the Library, that show that there is absolutely no argument about the fact that there is a minimum figure of £2.2 trillion. They show also that if we include public sector pensions, which I do not believe any Government could refuse to underwrite, and private finance initiative projects, nuclear decommissioning, the banks and one or two other things, all of which are full commitments, the figure is a minimum of £3.2 trillion, which is 200 per cent. of GDP. That is truly frightening, but it is also true. That is where the problem lies.
My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) has produced an extremely interesting paper on climate change. I cannot recall the figures precisely, but the figures that we have been given and those that the ONS has given have not included the ones that my right hon. Friend gives on climate change, which run to more than £1 billion. If we add all that up, it becomes clear that we are in need of a Finance Bill that will measure up to the requirements that are being imposed on the British people and by which, I am afraid to say, they are being gravely damaged.
The other point that I want to make relates to the point that the hon. Member for Taunton (Mr. Browne) made just now about domestic items of expenditure, which include health. On paper, vast sums of money have been ploughed into the health service. I should saywe all know thisthat vast sums of money have also been ploughed into the administration of the health service. You represent a constituency that is not very far from mine, Madam Deputy Speaker. Indeed, if I may presume to say so, you were the Member of Parliament for the same area, albeit with boundary changes, that I now have the honour to represent. You will also know about Stafford hospital, because your then constituents used to use it a great deal.
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