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3.47 p.m.

Lord Peston: My Lords, I thank the noble Lord for repeating the Statement. I do so most sincerely. But I am bound to say that responding to a Statement, sight unseen, is an absurd way for me and the rest of your Lordships to go on. All of us will respond as best we can. But there is an overwhelming case for dealing with these matters in a different way.

There is certainly an overwhelming case for your Lordships to have some time, as I understand the other place will have, to debate these matters before Christmas. I know that we always say that this is a matter for the usual channels, who will take your Lordships' views into account. But too frequently they do not. Thus even on an important matter like this today, as I understand it, the Back-Benchers will be limited by our usual rule on Statements to 20 minutes after the Front-Benchers have had their say. That will not do. There are great events occurring in our country and your Lordships are placed on the sidelines as spectators. It is about time that we asserted ourselves a bit more and demanded the right to discuss problems like this when they occur and not when the relevant events are history.

We start from a different position from that of the Government because we believe that this policy was mistaken in the first place. What I have not heard from the noble Lord—and I must ask him this question among others—is this. Do the Government still believe

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that the tax on domestic fuel was a good thing? There has not been a word of withdrawal on that. Do the Government believe that they were right to have had the second tranche of that tax, which they have now had to withdraw, or can we at least be told that in future there will not be a further increase when they feel that they can get away with it? Is that the end of at least the second tranche? We need to have an answer to that.

Before turning to the detail, the other thing that I have to say, very unhappily, is that this is nothing to do with economics or finance; it is all to do with politics. It is all to do with the noble Lord's right honourable friend papering over the cracks in a totally split party. It is also to do with the Government desperately trying to think of a way of taking income away from the public by means of taxes and then giving people a bit back later in order to try to get a few people to vote Tory at the next election. The Government are taking with one hand and giving back with the other. I believe that neither of those political moves has any hope whatever of succeeding. I do not believe that the cracks have been papered over or that the Government can pull off that confidence trick yet again. The Chancellor would have been better advised throughout to stick to serious economic and financial policy-making.

Perhaps I may say en passant, since this is my only opportunity that, as I said yesterday, I believe that raising the short-term rate of interest was a mistake. It was a panic measure. It is disturbing to read in the newspapers today that at least some people believe that it is a preliminary to further such increases. To do that would be another example of misplaced policy. Indeed, the whole matter is puzzling because the noble Lord has said, and the Government have claimed, that the economy is doing very well. However, with respect to interest rate increases we have a paradox because the Government are saying, "Yes, we are doing well so we had better stop that and make sure that we do not do too well". To use an expression that we came across not too long ago, the Government are saying, "We can see some 'green shoots' so we had better make sure that there is a bit of winter frost to destroy them".

I shall ask questions in a moment about the details—in so far as I can grasp them—but the other thing that puzzles me is that this whole matter is to do with very little or almost nothing. The way in which we approach the Budget in our country makes it a crisis if any attempt is made to amend it or to deviate from what the Treasury wants. Other countries manage these matters quite differently. Other countries do not regard it as a crisis or a catastrophe if the legislature endeavours to change fiscal proposals. They are discussed rationally and the legislature often get its own way. The Government seem to be placing themselves in peril. Indeed, they are in peril for a good many reasons, but it is absurd for the Government to place themselves at risk in this way.

I believe that if there could be a free vote in your Lordships' House on this matter, a similar view would result here as in another place, but we are not allowed to have such a vote because of our predecessors' misdemeanours in 1911. There is nothing that I can do about that. I cannot even blame any Member of your Lordships' House for what happened in 1911, but I

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would certainly like the opportunity to exercise that kind of power. However, unlike what happened in 1911, if I could exercise such power, I would then defer to the other place in due course. As I was saying, it is absurd that the Government should be placed in peril simply because, in my opinion, some sensible people rightly thought that it was a stupid tax.

I turn now to the detail, although it is immensely difficult to do so at the moment. Related to the question of whether the Government really still believe that what they were doing (until they failed to do it) was right is the question: Are the Government now telling us that they truly believe in what they are now doing? Or are the Government about to tell us that if they had the chance they would like to be able to impose the extra VAT on domestic fuel? Are they saying, "We are only doing these things because we can't do what we want"? What is the Government's position? Are they going to defend the tax increases because they believe that they are intrinsically correct or because they do not know what to do?

I ask that because I would certainly prefer one or two of the propositions to increasing the VAT on domestic fuel. Noble Lords opposite know my views on smoking. I believe that one of the best ways to reduce the incidence of smoking is to raise the excise duty on tobacco. I have no difficulty whatever with that. Indeed, I preferred that to what was proposed. My own view is that if we could have approached such matters sensibly, we would never have gone down the path of putting VAT on domestic fuel; instead, we would have done something about tobacco duty.

I know that the alcohol question is a little more difficult. On the one hand, I believe that the Treasury should raise as much revenue as it can from drinking but, on the other hand, I know that there is the problem of competition in a free market in Europe. It is a difficult technical problem. Does the increase in alcohol duty include the reduction in the duty that is being reversed on champagne and other sparkling wines? Perhaps the Minister can tell us about that very important matter.

Lord Stoddart of Swindon: My Lords, what about the champagne socialists?

Lord Peston: Exactly.

I turn to my next point. In taking £200 million away from pensioners, I take it that the noble Lord is saying that pensioners were to get that £200 million to offset the second tranche of the increase in VAT and that he is now saying that, because there is no increase in VAT, the Government are taking back whatever the sum is just to show how generous they are. I take it that it will amount to about 35p per pensioner. Are the Government saying, "Just to show what a caring government we are, we are taking that 35p away from you"? Can the noble Lord confirm that?

I have referred to sitting on the sidelines and I know only what I learn from sitting on the sidelines, but we are told that a great deal of extra money was found as part of a package to buy off the noble Lord's honourable friends who opposed the increase in the second tranche of VAT. I thought that the sum was £100 million. Can

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the noble Lord tell us what has happened to that £100 million? Has it just disappeared? Indeed, from where was it being found in the first place? It is not for me to advise the Government in their pathetic attempts to try to recapture some popularity, but having got the Treasury to agree to that £100 million, I should have thought that it would be sensible not to let the Treasury pinch it back again. I would have found a way of not taking that sum from the pensioners at least. But that is up to the Government.

Although I am keen to have a debate on this matter, I do not feel that this is the correct time to go through, as did the noble Lord, the main suggestions put forward by the Opposition. There is no hurry for me. Only the others will be made to hurry. The noble Lord did us the honour of telling us that he had considered seriously all the suggestions that had been made by the Labour Party. I must advise him that I am shocked by the Treasury's rejection that it wishes to rule out any intensification of the way in which we deal with loopholes. I am unhappy about that. If we have an opportunity to debate it, I shall explain to the noble Lord how we can deal much more seriously with loopholes than is the case at present.

I take a similar view of executive share options. I am amazed to discover that there is a new Treasury doctrine that we do not care for windfall taxes. I should like to know the date of that Treasury doctrine. The rule in the Treasury used to be, "We'll tax anything we can and keep what we can get away with. The fact that it was a windfall will not bother us at all". Perhaps the noble Lord could reflect on that and tell me whether he would like to consider the matter further.

I have nearly reached my final remarks. What really puzzles me as an economist is that we are heading towards a public sector borrowing requirement of £20 billion with a lower figure still to come. Speaking from memory, I recall that the margin of error in the public sector borrowing requirement is plus or minus £6 billion. That is in the nature of such economic figures. Is it not strange that within a number such as £6 billion we are footling around with £200 million which is of a totally lower order of magnitude? Why does not the Chancellor approach this matter rationally and say, "I wanted to do it, but the economy is doing pretty well, and I wanted it to carry on doing well", and let us forget the whole thing, apart from apologising to the pensioners?

I conclude by echoing the remarks of my right honourable friend the Leader of the Opposition in the other place. He offered to help the Government out of their difficulties in this matter. I should like to echo those remarks. I wish to be as helpful as I possibly can, because I am concerned about the future of our great nation, and my desire is that the economy should not be made worse than it otherwise would be. Will the Minister tell his right honourable friend the Chancellor of the Exchequer that if he feels that he needs my advice, which I feel strongly he does, he has merely to pick up the telephone and ask, and I shall respond as positively as I can?

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