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Noble Lords: Hear, hear!

Baroness Hogg: My Lords, £5 for every £4 per head spent in England. I find it quite unconscionable that the Government should have gone through the whole process of devolution without addressing that disproportion. I do not believe that they can leave it in abeyance for very much longer, because it is now a source of deep resentment in England. Do not misunderstand me. I am more than happy for the Scots to vote themselves that higher level of public service. The effect of the money may be seen in terms of shorter waiting lists and in terms of higher spending per pupil in Scottish schools, right across the board. However, I do not understand why parts of England that have no higher levels of income per head should have lower levels of expenditure per head. I do not understand why they should have to pay for the Scots to have that advantage.

Noble Lords: Hear, hear!

4.48 p.m.

Lord Oakeshott of Seagrove Bay: My Lords, I follow the noble Baroness by declaring an interest as a director of an investment trust and as an investment manager for pension funds and charities. Like many noble Lords, I also had great difficulty finding criticisms of British economic policy in the IMF directors' report. So rare were they that I wondered whether the noble Lord, Lord Strathclyde, had read the report before he framed the wording of his Motion. Having read the report myself, I would certainly have given Gordon Brown at least nine and a half out of 10. I could disagree with my noble friend Lord Taverne about what variation of alpha we give him, but that is probably rather too Oxford elitist; let us stick to simple numbers.

The only real criticism that I found in the report was of the weak productivity performance of the UK between 1995 and 1998. However, it also reported that there had been an encouraging improvement during

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the past year and a half. If it had a criticism, it was that investment in public spending on education and training was too low, not too high. That was the only criticism of any substance. I turn to the tax objectives that Labour set themselves in their last manifesto. They said:

    "New Labour will establish a new trust on tax with the British people. The promises we make we will keep. The principles that will underpin our tax policy are clear: to encourage employment opportunities and work incentives for all; to promote savings and investment; and to be fair and to be seen to be fair".

Progress towards two of those goals can fairly easily be measured. Testing on the third is rather more subjective.

I shall examine them in turn. The first aim is to encourage employment opportunities and work incentives. With unemployment below 1 million, its lowest level since 1975, the big picture is clearly excellent. But the regional picture of employment and economic development is less benign. There are 33 parliamentary constituencies with unemployment levels below 1 per cent. Every one is in south-east England.

The pattern is just the same when we see what has happened to unemployment during the past year. Of the 25 constituencies where unemployment has fallen fastest, 21 are in the South East, with only three in the South West and one in Scotland. There is none in any other region. In the 25 constituencies where unemployment has risen in the past year, or where there have been the smallest falls, not a single one is in south-east England. There are four in Scotland; two in Northern Ireland; four in Wales; one in the North West; six in the West Midlands; seven in the East Midlands; and one in the South West.

So, the Government's overall record on unemployment has been good but they have allowed economic growth to become dangerously unbalanced, with overheating in the South East, all the associated problems of housing strain and pressure on public services, but a more patchy pattern elsewhere. When one examines the areas in which unemployment remains stubbornly high, a single theme comes through clearly as one looks at the names of the constituencies. Overwhelmingly, they are dependent on manufacturing and they are suffering from an over-valued exchange rate. Britain is still a very open economy. What really matters to so many of the depressed areas and regions is to have a competitive and stable exchange rate, particularly against the euro, as my noble friend Lord Taverne pointed out.

I turn to the second of Labour's three objectives; to promote savings and investment. The Bank of England's Quarterly Economic Report, which was recently published, contains an interesting article about that. It points out that the household savings ratio in this country has fallen from 10 per cent in 1997 to 3 per cent today. There are a number of reasons for that and wealth effects are one of them, but on one of Labour's three key objectives of tax policy--that is, to promote saving and investment--the Government have clearly failed. That is hardly surprising when by

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far the biggest change in tax policy has been the removal of the dividend tax credit from pension funds at a cost of £5 billion to £6 billion. After all, regularly paying into a pension fund is still the most important form of regular, sustained, long-term saving for the hardworking families about whom Gordon Brown is so keen to talk.

I turn to the third and more subjective aim. How is Gordon Brown doing on being fair and being seen to be fair? I suggest that, unusually, he is doing better on the reality than on the spin. He has taken more out of higher earners' pockets through national insurance contributions and higher stamp duty on house moves than if he had broken the New Labour taboo against putting up the basic and higher rates of income tax. He has given substantial help to poorer families through tax credits and the national minimum wage and the real increases in spending are at last coming through on health and education, as he wriggles out of the eye-wateringly tight straitjacket which he imposed on himself during the first two years.

However, redistribution by stealth, which is what he is doing, is a dangerous game for a left-of-centre Chancellor. You can get away with it for a few years if the public finances are buoyant, the world economy is strong and if you get the odd bit of help, such as £22 billion from mobile phone licences. But the trouble with that policy is that the losers tend to work out what is going on rather more quickly than the gainers and the losers tend to shout louder than the gainers, with plenty of sound and fury from the Tory press.

If you are a radical Chancellor, in the long term it is far safer to make the case openly and with conviction for using the tax system to fight poverty and inequality, as the noble Lord, Lord Barnett, pointed out. Tell the country what you are doing and why. That is the way in which you build popular support for the day when the economic climate turns foul. That day may be coming sooner than we think, as the irrational exuberance of world stock markets and American consumers last year is now showing every sign of giving way to irrational despondency at the other extreme. Nor in our British case do we yet know--and we should not underestimate--what the one-off economic costs of the foot and mouth epidemic for us may be.

Overall, the Chancellor is not doing badly. But we on these Benches urge him to raise his sights. The purpose of prosperity is not to win plaudits--and they were plaudits--from the IMF; it is to end the grinding poverty in which so many of our people still live and to rebuild the creaking public services--education, health and public transport--on which the whole country depends. If the Government have the courage to raise that banner--the banner of fair taxation--they will have the whole-hearted support of these Benches and they will also have the unique combination of support from the noble Lord, Lord Barnett, and God, who loves a cheerful taxpayer, as the right reverend Prelate the Bishop of Hereford told us.

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4.56 p.m.

Lord Desai: My Lords, I agree with the noble Lord, Lord Strathclyde, that we in this House need a debate on the Budget soon after its presentation. I believe that I have a small footnote in history because I pioneered the practice a few years ago. For two years running, we had a debate on the Budget the day after, on a Wednesday. For various reasons, that practice was discontinued, but I believe that we could again have a debate on the Wednesday after presentation of the Budget. I am pleased that the noble Lord, Lord Strathclyde, favours resuming the practice. That is as far as I shall agree with him--we may as well get the good news out of the way.

If any of your Lordships were to appear on the television programme "Who Wants to be a Millionaire?", and if Chris Tarrant were to ask, "In the past 50 years, which Chancellor increased the tax burden the fastest? Was it Healey, Howe, Brown or Lamont?", you would be best advised to ask me--to ask a friend--before you answer. It was the noble Lord and learned Lord, Lord Howe, who increased the tax burden from 33 to 38 percentage points during his chancellorship. Even the noble Lord, Lord Lamont, to whom I pay tribute for his tax-raising capacity during the 1990s--

Lord Howe of Aberavon: My Lords, will the noble Lord be kind enough to acknowledge that for several years I was engaged in clearing up the debris left by the noble Lords, Lord Barnett and Lord Healey?

Lord Desai: My Lords, I always give credit to people who raise taxation because I am a great fan of taxation. But 33.4 to 38.9 per cent is a good achievement during one chancellorship; and 38.9 has never been exceeded. I am pleased to say that the noble and learned Lord holds the record and I respect that.

It is not difficult to cut the tax burden. As my noble friends Lord Haskel and Lord Woolmer said, you can always borrow money. If you add up the tax burden and government net borrowing, you see that the tax cuts of the 1990s were bought by the large public borrowings which accompanied them.

Again, if you were to be asked, "In the past 30 years, under which party the net borrowing was negative four out of five times?", please do not answer, "Conservative". It happens to be the Labour Party. The noble Lord, Lord Jenkins, started the rot by having a Budget surplus and my right honourable friend the Chancellor has continued that practice and produced a negative net borrowing.

Therefore, as regards fiscal responsibility, we are on fairly good ground. However, I was somewhat distressed by the Chancellor's habit of repaying the debt. I am not a great fan of repaying the debt but I am told that he has promised not to do it again soon. I believe that he will reduce it to 29½ per cent and then resume the good habit of taxing and spending. What can one do other than tax and spend? One cannot tax and not spend; and to spend and not tax is not very good either. A prudent person taxes and spends so that the budget is balanced over the cycle.

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When my right honourable friend says that he wants to end boom and bust, he does not mean that he will abolish the cycle; he means that he will not exacerbate it by bad macro-economic policy. In the 1980s, shocks from outside the system were exacerbated by bad macro-economic policy, which was why inflation doubled twice, spending hit the buffer of 7½ per cent of PSBR, taxation was 38.9 per cent and so on. It is important to take a long-term perspective and balance the budget in such a way that we do not exacerbate the cycle. If the Chancellor has run the economy properly and is lucky enough to have the money, at the margin he makes the choice whether to give a tax cut, have more public expenditure or repay debt.

My only criticism of the Chancellor--he knows that I have said it before--is that I would not have started to repay the debt so soon, but that is his choice. He is a Scot and I am not, and we all have our preferences. I believe that a gross amount of public under-investment in the British economy, to which my noble friend Lord Woolmer referred, was such a serious problem that my right honourable friend had to do something about it. However, being a cautious man, he did not do anything immediately because he would have been criticised by everybody, including the party opposite. He waited a while and, being a politician, gauged the political and economic cycle correctly so that there was a good Budget, not a bad one, at the time of the election. Even so, I must give my right honourable friend credit for his very modest tax cuts. A tax cut of £4 billion is one half of 1 per cent of GDP. That is hardly enough to make one get out of bed. As far as concerns the Chancellor's fiscal prudence, the Motion before the House can be safely rejected.

I turn to the International Monetary Fund. One is slightly embarrassed because the first item to make the headlines on 22nd February was co-authored by one of my former students. I always thought that he had problems--but so did the IMF. I have never been very trusting of the macro-economic expertise of the IMF because it has been wrong about practically every crisis in the past 10 years. Be that as it may, I shall even take praise from the IMF. One cannot make biting criticism of the economy. We now have one of the best macro-economic dispensations that we have had for a long time.

I agree, and have said before, that the good times started after our exit from the ERM when the noble Lord, Lord Lamont, was able, through good taxation, to reduce the budget deficit. Mr Kenneth Clarke continued that practice. I believe that the Conservative Opposition should say, "We started stealth taxes and you have stolen them from us. How dare you!". I believe that stealth taxes were invented by the noble Lord, Lord Lamont, who learnt never to disturb the basic rate of income tax. One can always adjust other things around it and get a much higher rate of taxation. He learnt the trick from which we have all benefited.

I turn next to productivity. I believe that the numbers to do with productivity are fairly dubious. Everybody talks about our output per worker or per hour being low, and so on. Being a professional

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economist, one is aware that when one talks about productivity one is measuring one's ignorance rather than one's knowledge. But if one looks at output per unit of capital the UK has one of the most efficient economies, but nobody points it out. All of this breast beating is out of order, and one will probably pursue the wrong policies if one tries to pursue productivity. The important point is not how well our productivity compares with that of others; it is bad enough to do it for our own country. What is important is that productivity grows enough so that we are able to afford a decent life for everybody.

As long as the economy is on a growth path, and we can afford public investment plus growth in private consumption and a reasonable amount of taxation, that is a successful macro-economic policy. That should be our concern, not comparisons with Italy, the United States, Germany or others. I believe that those numbers are wholly dubious. My noble friend Lord Haskel shakes his head because his son happens to be the local expert on this matter. Be that as it may, I still believe that productivity is dubious.

I have one minute. I support the observation of my noble friend Lord Haskel that we still have a very considerable amount of inequality. As the Whips turn round, I conclude by saying that we have a large amount of inequality. I shall sit down.

5.6 p.m.

Lord Stevens of Ludgate: My Lords,

    "The art of taxation consists in so plucking the goose as to obtain the largest number of feathers with the least possible amount of hissing. Why do something the hard way when you can do it the easy way? We call this stealth taxes".

I am indebted to Samuel Brittan and others for that quotation. Last time it was education, education, education; this time it is the economy, the economy, the economy. Having failed with one they now try another. If I may refer to the speech of the noble Lord, Lord Woolmer, everything that is wrong with education, the health service and transport is the fault of the previous government. It is strange that the economy is all to the credit of the present Government. My noble friend Lady Thatcher in her time helped to make staggering changes for the better in British competitiveness. That is Labour's inheritance. What has it done with it? The tax system is now so complex that even the Revenue has trouble coping. This year's Budget report runs to a staggering 225 pages, and at a time when most of the tax changes just tinker with the problem.

I apologise for quoting figures which have already been quoted. Since 1996 government tax revenue has risen from 35.2 per cent to nearly 38 per cent of GDP. At the same time it has become increasingly difficult for the man in the street to understand what is going on. Even after the Chancellor's changes, income tax receipts have risen from £69 billion in 1996 to £104 billion this year. Tax revenue has risen by more than 33 per cent since 1996. Even the Chancellor has found it difficult to admit that taxes have gone up. His Budget speech omits significant details. You have to

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read the small print with great care. Is this what the Government call "open government"? For example, we now know that the rise in the upper earnings limit for national insurance contributions from £535 to £575 a week will hit middle-income earners who pay basic rate tax. The extension of the 10p tax band--a tax cut for all--adds a pitiful 69p per week. After adjusting for the Chancellor's so-called three-year spending plans--the last year of one overlaps the first year of another--his increased spending raises the NHS budget by 0.7 per cent next year. It is enough to confuse Einstein.

Nearly 1 million people have failed to register for the new children's tax credit. Nearly 300,000 people have failed to register for the working families' tax credit to which the Government believe they are entitled. These are the Government's figures. They had an opportunity to think the unthinkable and really reform the health, welfare and education systems but failed to do so.

Spending more money, however limited, will not achieve it. Let us consider the percentage of the education budget taken by local authority supervisory bodies. Look at the supervisory bodies in the NHS and the lack of proper management in the wards where it all starts. Let us get rid of some of the administrators and bring back the ward sister; and encourage rather than discourage patients to opt out of public health. Look at the paperwork. Even a golf club half-way hut--I emphasise "hut" and declare an interest as a golfer--has to keep records of its fridge temperature and its cooker heating capabilities and is subject to regular inspection. Is that really justified by the risks involved? Before we know it, Members of Parliament will have to take exams and pass regular tests.

The 45 new taxes raise £36 billion, yet the Chancellor congratulates himself on the lowest inflation for 30 years and the lowest long-term interest rates for 35 years although he did not admit taxes had gone up until 13th March last year. However, the financial markets do not seem to agree. The FTSE 100 index is more than 20 per cent off its peak, and there is a nasty collapse going on in the United States.

The UK current trade deficit is over £20 billion, and must, because of a slowdown in growth in the United States, widen further. That may be financeable unless we start to become even more entrapped in the pro European monetary union debate. If the UK were to vote for further European integration, our problems will be just starting; namely, 80 per cent tax, including employer and employee, on standard wages. People have disputed this figure. If they wish to see my tax returns in France I shall be happy to supply them. Fifty per cent plus of GDP is taken in tax by government. The list goes on. That will really make our exports uncompetitive, which is exactly what some of our European competitors want. The problem is fundamental. Do we want to be a European style welfare state or to have a US style of capitalism with lower taxes, less regulation and services left largely to local authorities and/or private enterprise?

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The Chancellor remains convinced that he can spend our money better than we can. Only four months ago spending was due to grow at 3.4 per cent per annum. The figure is now 3.7 per cent per annum. Even on his figures, he will be borrowing again in two years' time. Again he has missed the chance to reform the health service and education. How could any organisation, the largest employer in the land, cope with the proposed 50 per cent increase in its budget efficiently? It could not. A large amount would be wasted.

Last month manufacturing output dropped by nearly 1 per cent, the largest monthly fall since August 1997. Admittedly, manufacturing accounts for only 20 per cent of the economy. Industrial production is now nearly 1 per cent lower than a year ago. According to the Office for National Statistics, real disposable incomes have risen at the lowest rate for 30 years. The private sector is running a large financial deficit, some 4 per cent of GDP. As we have been told, the saving ratio has fallen from 11 per cent in 1996 to 3 per cent. That is clearly not sustainable. Why is there such a large and rapid turnaround of sentiment in the United States? Put simply, there was a negative savings ratio of minus 1.5 per cent last year, followed by a loss of confidence and very rapidly the private sector tries to save again. The economy can move 5 per cent in GDP in a few months, which is what it has done.

What is the answer to all these pending or even imminent problems? The IMF skirts with the dilemma. The way to solve it is to let the economy free. Do not control every aspect of life from the centre. Give industry back its freedom. Stop the ever-increasing regulation. Even now there is support for more regulation in pension fund markets. I have no idea how it will work: reduce the power and scope of the state; protect the weak and the poor; but for those that can look after themselves, let them get on with it and then the IMF may have no reason to continue to criticise our economic plans. The Chancellor will not agree. He imposes more restrictions on businesses. The minimum wage seems to go up even if prices do not. His spending plans assume that tax revenue will continue. How can it when he is quietly killing the goose?

5.14 p.m.

Lord Harris of High Cross: My Lords, I very much enjoyed the contrasting opening speeches from the three main parties. I especially enjoyed the sparkling performance of the noble Baroness, Lady Hogg. I wish she had more time to tell us the extent to which this almost comically Scottish-dominated government favours the Scottish electorate. I thought that required further examination.

My view runs rather more radical than to that of the Front Benches. I come not only to bury Gordon Brown but also to highly praise him. From the vantage point of the IEA back in 1957, it was not only on taxation that the record of both governing parties inspired little confidence. As the noble Lord, Lord Barnett, may remember, those were the days of monopoly trade unions, protected state industries,

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incomes policies, central planning, multiplying subsidies, universal welfare, budget deficits and, of course, the consequent inflation.

The earliest brief stand against ever rising government spending was in 1958 when the then Chancellor, Peter Thorneycroft, with his Treasury colleagues, Enoch Powell and Nigel Birch, resigned over a mere £50 million. Today that would be equivalent to £1 billion. That was "super Mac's little local difficulty", if I remember correctly.

If the Thatcher Government's demolition of union monopoly released new Labour from the TUC's inflationary grip, it was the 1979 Budget of the noble and learned Lord, Lord Howe of Aberavon, which put tax-cutting high on the political agenda. With his first Budget he reduced personal taxes.

Yet although Gordon Brown has not followed that example, nevertheless, with two cautions, I would give him high praise--higher praise than most post-war Chancellors, save possibly the noble and learned Lord, Lord Howe, whose Budget was particularly important.

My first caution is that the full credit does not properly belong to Mr Brown and his advisers alone, since--as other noble Lords have said--he has built on the unacknowledged Tory legacy of stability bequeathed by his predecessors, the noble Lord, Lord Lamont, and Kenneth Clarke.

My second caution is that Gordon Brown's outstanding inflation record over, so far, four years, has been achieved only by abdicating control of monetary policy to the Bank of England. Since I was among the first in this House warmly to applaud that bold departure, I might be permitted to remind the House of a certain irony. When the first majority Labour Government under Mr Attlee came into power in 1945, they could not wait to nationalise the Bank of England. That was among the first steps that they took. Here we are 50 years on when new Labour has, in effect, privatised the Bank of England; restoring that key power to Threadneedle Street.

My reason for wishing to bury the Chancellor--as well as to praise him--is that he looks to be in serious danger of fulfilling the political adage that all success tends to end up in failure. To explain that danger it is necessary to ask why Gordon Brown's Monetary Policy Committee was what the noble Lord, Lord Healey, would have called "a jolly wheeze". It is generally agreed that, since Keynes, successive Chancellors, irrespective of party, have been under incessant pressure to cure recessions or win elections by stimulating the economy with lower interest rates or taxes. The logic taught by Milton Friedman was that expansionary monetary or fiscal policies were like drink, with the good effects coming first to be followed by a nasty hangover some time later.

The value of the Monetary Policy Committee is simply that it removes the bottle from the reach of chronic tipplers. In short, it depoliticises monetary management. But on Friedman's logic, the removal of

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one weapon from the Chancellor's political armoury exposes the tax system all the more to manipulation for party advantage. Unfortunately, Mr Brown has shown himself no less inclined than the worst of his predecessors to yield to the temptation to fiddle with taxes. Here we have a born interventionist and social engineer, with a missionary--even Messianic--zeal to cure the ills of the world, with his hand not only on the tiller, but in the till.

To return to Friedman, increased government spending, like inflation is politically popular in the short run. But gradually, cumulatively, it raises costs, blunts incentive and, above all, it discourages every-day economy. Not even an Aberdonian spends other people's money as cautiously as he spends his own. And Mr Brown does not even come from Aberdeen. Indeed, he comes from nearer Glasgow where I am told they all have holes in their pocket.

Part of the technique of Mr Brown has been so to complicate the tax system, with perpetual, fiddling changes, that only experts can work out exactly what he has been up to. Accordingly, like others, I rely on the Institute for Fiscal Studies--many years ago, the noble Lord, Lord Taverne, played an important part in its development--to tell us that the Chancellor has raised taxes altogether by £24 billion to bring the total above £380 billion a year. As a proportion of national income, that represents an increase of 2.5 per cent to 40 per cent next year. That is different from some other figures, but I stick with the IFS calculations.

The lesson I would draw from the Chancellor's mixed record is that he is no more to be trusted with unchecked discretion over taxes than his predecessors could be trusted with control over interest rates. My proposals for reform are therefore twofold. First, as I have long argued, the Monetary Policy Committee should now be instructed to lower its average annual target for inflation from the present 2.5 per cent. That would still be sufficient to reduce the value of money by more than 80 per cent over the average expectation of life today--from £1 to 20p over some 80 years. As the present inflation rate is nearer 2 per cent, a reasonable programme would be to shave the target down by perhaps 0.5 per cent every four years to give us the boon of stable money and lower interest rates in 10 or 15 years.

My second reform would be to depoliticise the tax system by creating an independent taxation policy committee alongside the Monetary Policy Committee. Its task would be to review the Chancellor's Budget proposals, in advance of them being delivered to Parliament, against a target of reducing the total burden of taxes from 40 per cent of GNP to Colin Clark's safe figure of 25 per cent of GNP over a similar period of, say, 15 years.

Once launched, the expectation of stable money and lower taxes would bring earlier promise of unheralded prosperity, individual responsibility and consumer freedom to choose more leisure and that gracious living for which many new Labour and other Members of the House provide such an enviable example.

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5.24 p.m.

Lord Sheppard of Didgemere: My Lords, unfortunately, the noble Lord, Lord Desai, has left the Chamber, but perhaps he will read my advice in Hansard. He should not ring a friend; he should ask the audience. But he should be careful because sometimes the electorate is not quite as predictable as people think. I say that because we both come from the LSE and we know that there is "on the one hand" and "on the other hand".

For a few moments, I should like to take noble Lords away from the discussion on the recent national Budget. I shall deal with one specific aspect of business taxation that has not yet arrived. It is a tax to come. This Government have often indicated that they fully realise that successful business is vital to achieving a growing standard of living for all. We welcome that recognition. They have also said that relationships between business and government should be open and constructive. At this point I should probably declare all types of interest. I am a businessman, chairman of London First and a stealth tax payer. Against that background I wonder why the Government's recent Green Paper, Modernising Local Government Finance, proposes an extra tax on business in the form of a supplementary business rate.

As noble Lords will know, the proposal is for an additional surcharge on top of the national rate already paid by business. This surcharge would be set and controlled by local authorities. It is proposed to start at 1 per cent but increase to a maximum of 5 per cent of the normal rate at the end of five years. That will be a burden on all businesses, but it will particularly hit small businesses, many of which are already fighting to survive.

Having declared my interest as chairman of London First, perhaps I may refer to London. In London alone, a 5 per cent levy would add £150 million per annum to business costs. The Green Paper proposals include a reserve power whereby the Government could require "rate rich" authorities--whatever that may prove to mean--to pay part of the supplement to other areas. That may not be Scotland; I do not know. In reality that would probably be used to increase the £19 billion a year of taxation already raised in London but spent elsewhere.

The proposed supplementary business rate is a "back door" tax unless it delivers local benefits and has prior business consent. There are no guarantees that the extra moneys will be targeted to achieve specific local improvements that business wants. There is not sufficient safeguard to prevent local authorities from using it to fund existing borough services. The proposed arrangements for consulting business are complicated and bureaucratic. It gives us all kinds of general lessons on tax as well as this specific one. The proposal does not allow business a real say in how the extra money is spent.

A supplementary business rate on the lines proposed would do nothing to encourage businesses truly to get involved in their local areas by, for example, taking ownership and leadership of regeneration projects.

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Incidentally it would be levied on occupiers, although it is often property owners who have the greatest long-term interest in a locality.

Is this just another whine from business about taxes being too high? No, I am talking about how the tax is levied. Part of the criticism of the Government's taxation policies is that one does not find them until one reads the small print issued by the Inland Revenue a few days after the Budget.

The supplementary business rate proposal is an example of how not to work with business. The Government claim that they are trying to work hard with business. The alternative is to pursue the business improvement districts' approach as outlined in the Bill, which has passed through this House but has not been progressed following its introduction into the other place.

Perhaps I may briefly remind the House about BIDs. They are "town improvement schemes" that work. One can see them operating successfully in New York and other parts of America. One can see the improvements. Business improvement districts are statutory ventures, financed by an addition to property tax, and is thus an additional cost to business. However, under that law, it can be levied on all businesses in a locality only if the majority of those businesses have voted in favour of the creation of a BID. Compulsion is of course necessary to stop freeloaders.

Business improvement districts introduce intensive localised management in particular areas. They may embrace only small blocks or they may cover a much wider area. They deal with matters such as local employment opportunities, improving security and maintenance in an area and undertaking promotional activities. In this country they would, in my view, encourage greater partnership between business and local authorities.

Why has the Bill come to a stop in the other place? I understand that the Treasury has stated that it sees this as a tax. To my knowledge, it has been saying that for a long time and certainly it has said that over the past four years. It is a levy which would put up the costs of business. But the difference would be that business communities would be able to vote for and against the levy. It would not take place unless a vote had been taken. I am not trying only to reduce tax--much though I may wish to do that--but to seek a better means of how to use a tax. No such vote will take place on a supplementary business rate.

What lessons can be learnt from this when we return to the general subject of tax? There is too much bureaucracy. God knows how many experts have to be employed actually to understand the increased taxes being levied. If you are running a small business, you cannot afford to employ those extra people. Something is wrong with our taxation system. Similarly, if business taxpayers--although this point would apply to people outside of business--do not feel part of the decision-making process, it is obvious that they will reject the taxes by calling them stealth taxes, hidden taxes and so forth--and they would be right to do so.

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I ask the Minister to try to persuade the Government to reintroduce the BID Bill, even though that may not be the best way to approach this. In that case, I would be quite happy to wait until the local finance Bill comes along, at which point I shall simply rewrite it so that the BID proposals can be put in.

If any government want genuine business involvement and an open and constructive relationship with business, the bureaucracy must be cut out and an open style introduced. As one aspect of that, let us opt for the BID approach.

5.32 p.m.

Lord Tomlinson: My Lords, I should like, first, to congratulate the noble Lord, Lord Strathclyde, both on the fact of this debate and on his impeccable sense of timing. To have selected the very day that it is announced that unemployment has fallen below 1 million and to choose the very week in which opinion polls have shown clearly that we have the most popular Chancellor of the Exchequer since polling records began and a Budget that has received one of the highest levels of public approval shows the noble Lord's great courage and judgment.

In the Motion, the noble Lord, Lord Strathclyde, clearly invokes the International Monetary Fund. I can only believe, having listened carefully to his speech, that, after someone else had drafted the resolution, he must have got around to reading the report. He then must have decided that the best way to invoke the International Monetary Fund was to ignore the report as if it had never happened. However, I do not think that the noble Lord can expect to get away with that.

We have heard all kinds of quotations from the report. Usually I am not one to embrace the International Monetary Fund with a great deal of enthusiasm, but even people like me can find points in it--in particular from the directors' meeting of the fund, following publication of the report--where the United Kingdom Government are commended on their strong performance as regards the United Kingdom economy. In the discussion held in Washington on 23rd February, the directors went on to say that,

    "plans to increase public investment in infrastructure and human capital are justified in light of the evidence",

and that they,

    "welcomed the Government's efforts 'to enhance competition, innovation and entrepreneurship'".

That was the judgment of the directors of the International Monetary Fund.

The directors continued by saying that they agreed that,

    "sound fiscal and monetary policies, underpinned by transparent medium-term policy frameworks as well as the sustained implementation of structural reforms, have contributed to the strength of the economy in recent years".

They concluded this part by saying that they,

    "expected output growth would remain robust",

and that the,

    "prospects for inflation remain benign".

14 Mar 2001 : Column 891

There is a great deal more where that came from. I am sure that, if the noble Lord, Lord Strathclyde, wants to read the directors' report and executive summary in full, he need only make a quick telephone call to Steve Field in the Treasury Press Office. No doubt he will then be speedily supplied with the text.

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