---

The Lord Bishop of Worcester: My Lords, I recognise that this is a debate of high political confrontation, and for that reason I venture into it with some hesitation. But, as the noble Lord, Lord Blackwell, said, the issues are of considerable importance not just in the realm of economics and policies, but also in the realm of fundamental values. I take comfort from the fact that, although the Apostle exhorts bishops not to be lovers of money, he did not say that they could not be interested in it. As a member of the assets committee of the Church Commissioners, and as somebody who has written on the subject, I therefore felt it important to take up the noble Lord's challenge, specifically in the area of values, to which he frequently referred.

For that reason, and because of the importance of the topic in that area, the doctrine commission of the Church of England, in its recent report Being Human, took a whole chapter on money and its effect on our personal lives. Note that it looked at money's effect on our personal lives, not the other way round. The report recognised that the way in which we regulate our economic affairs has a great effect on who we are as persons. It is not just our personal bank statements that reflect our personal lifestyle and values more eloquently than anything we say. The way in which our public finances are regulated reflects clearly and affects our social consciousness and the values of our society.

I am grateful for this debate, but like most debates on taxation it focuses on the quantity of taxation. However, I noticed that in the process of his reflections, the noble Lord, Lord Blackwell, also focused on many other aspects of our economic life. Much of what he said about the diversion of resources from investment to consumption would apply just as readily to our personal life as to our public life; it is not necessarily specific to taxation. But the debate is about
 
12 Jan 2005 : Column 268
 
amounts and that has become the area of inter-party competition: which party can tax less is much of the political argument, as I hear it.

However, other issues around taxation are just as significant and I shall spend a few minutes talking about them. Before I do so, I note that the noble Lords, Lord Blackwell and Lord Lamont, both made much of the fact that taxation regimes are now competitive and that that is one of the main reasons why they favour a low-tax economy. It is true that tax rates are competitive, but the countries that the noble Lord, Lord Lamont, cited are all evidently in the developed world. He did not mention the competition that we are in with countries in the two-thirds world and the effect of our competition in rates of taxation on their economies and economic freedom of movement.

I sometimes think that we expect the poorest countries to leap over the phase that we had to go through of major public investment in infrastructure, the health service and so on, and to go straight into the competitive, technological economies that we now have the freedom to achieve. If we take serious note of the competitive nature of taxation, we must also consider the effect that the competition in rates of taxation among the richer countries has on the poorest countries of the world, whose economic freedom is significantly hampered as a result.

I therefore turn to the question on taxation that has to do with quality rather than simply with quantity—that is: who in our society is taxed on what? There is no doubt that such consideration has just as much effect as the naked issue of quantity. We also have to look at what resources are used for. If they are used for consumption, they very evidently fall to the charges levelled against taxation by the noble Lord, Lord Blackwell. But what about public investment and the things that we cannot enjoy unless we enjoy them together? What about the activities that can be undertaken only in community?

My sense is that the decision to move toward some increase in government expenditure arises from a deep public recognition that having had the short, sharp shock of reductions in taxation rates, the associated social costs have to be remedied by public provision. That is one of the ways that we plan for our future and bring it into effect.

As well as expenditure, there are issues to do with how we raise taxes in our economy. In this country, we raise about four-fifths of our taxation from what people earn, either at the point at which they earn it or when they spend it. Much the most significant event in that respect was the move from an emphasis on taxing earnings to taxing expenditure, which came about in the early budgets of the Conservative government of the post-1979 period.

There are some notable examples of what we do not tax. If several billions of pounds accrue to landowners because, as a matter of social policy, we construct the Jubilee Line, and if that is completely untaxed, given that those who live and have land next or near to the line make no specific contribution, how is that just? How is that fair? How have we arrived at a situation where there is precious little taxation of the kinds of
 
12 Jan 2005 : Column 269
 
wealth which depend on the social infrastructure so that they make no commensurate contribution to it, except in the rather arbitrary and much criticised way surrounding inheritance, for example, when capital is transferred? It seems to me that this debate will fail to address some very important questions if it focuses only on quantity and not on the sources of taxation and the direction of public expenditure.

There is a further issue which we must be prepared to examine. I refer to the character of the money in which taxation is managed and raised; the character of the money that we use in our contemporary world which is a great distance from the time when money was under the exclusive control of the sovereign authority of government; to the well over 90 per cent of the financial instruments that we are accustomed to using; and to the money that is our effective claim on resources which are produced and created by the banking system for private profit.

This is not a harking back to previous years. The New Economics Foundation and the Christian Council for Monetary Justice are arguing for financial reform precisely to produce a situation in which we do not need to achieve our public goals by the medium of taxation so exclusively. If money was created exclusively—even if it was created somewhat more—by government and spent in the economy, we would not be in our current position, where it looks always as though public expenditure is a result of taking money out of people's pockets. Money is a public asset. The money that we physically use in shops declares itself to be the product of our society, regulated by government. Is it not, then, surprising, that we do so little to regulate the production of money and financial instruments within the private sector for profit?

I mention some of these major issues around taxation because it seems to me that this debate must be redeemed from being solely a political debate about numbers, about quantity. I believe that the public are increasingly cynical about finding themselves living in a situation in which politicians vie with one another to produce lower taxation rates. I refer to the recent example in which the main political parties produced—rather out of the air, I thought—target numbers for the reduction of the Civil Service. I think that that proposal was simply competitive; it did nothing other than reduce the morale of public servants. That is not a good way to conduct our politics, and it is not a good way to achieve the kind of taxation regime we wish to achieve.

As I said at the beginning of my remarks, taxation is about our public values and how we display them in the way we spend our money. I believe that our fellow citizens are somewhat cynical about finding themselves living, in effect, in an auction chamber in which they are subjected to the spectacle of political parties deciding how much they would pay or for how much their support can be acquired.

I hope that the fundamental spiritual and values issues around this debate are taken seriously. That will mean discussing matters other than simply those of quantity.
 
12 Jan 2005 : Column 270
 

I shall detain the House no longer from what it would like to do, which is to welcome the experience and contribution of the noble Lord, Lord Howard of Rising, in his maiden speech.

Lord Howard of Rising: My Lords, as this is the first occasion upon which I have had the privilege of addressing your Lordships' House, I crave your indulgence and would like to thank all in this House who have been so kind and courteous to me.

When, as a small boy, I first visited the Houses of Parliament, I never imagined I would have the honour of joining your Lordships' House. It has proved to be one of those happy, but all too rare, occasions when the pleasure of the reality greatly exceeds the expectation.

Today we are debating the low-tax economy. To anyone familiar with the Laffer curve, the financial benefits of a low-tax economy are self-evident. If further proof were necessary, one has only to see how, in recent times, successive Chancellors of the Exchequer have been reluctant to increase direct taxes.

For those of your Lordships who have better things to do with your time than study such arcane matters, the Laffer curve is a proposition that if tax is either 0 per cent or 100 per cent, there is no revenue from taxation. In between, as tax increases from a zero start, it rises to a point where receipts start to fall, because taxpayers' energies are diverted from creating wealth to avoiding taxation. There is ample evidence to demonstrate that this works in practice as well as in theory.

Knowing this, Chancellors have used indirect taxes to keep up with government spending, as a result of which we have arrived, as my noble friend mentioned earlier, at the absurd situation where, according to the latest information from the Office for National Statistics, the poorest 20 per cent of the population pay nearly 40 per cent of their income in taxes—a fact that deserves more attention and is surely yet another argument for lower taxation. There is such a wealth of evidence, for anyone who wishes to see it, that proves how damaging high taxation is to an economy that I would like to emphasise to your Lordships the other major aspect of this subject.

Taxation is not only about economics. More importantly, taxation is about who decides how individual citizens conduct their affairs: whether it is the individual or the state which decides how money belonging to the individual should be spent.

Government itself is penniless—it has no resources of its own—and since anything that government does costs money, the extent to which government can dictate peoples lives is governed by the extent to which it taxes.

Much talk is made of services provided by the state. The state provides nothing—it acts as an intermediary, and an extremely inefficient and expensive one at that, to take from one citizen in order to spend on another.

There are certain matters that can be dealt with only by government, but high taxation allows government to go beyond what is necessary and so interfere with people's freedom. The purpose of government should
 
12 Jan 2005 : Column 271
 
be to preserve freedom, not to undermine it. How can freedom exist if the state appropriates a large portion of its citizens' material resources?

Over the centuries the role of Parliament has been most marked and distinguished when it has sought to control the power of the executive and protect the people. In many cases the battleground has been taxation, but, always, Parliament has been truest to itself when it has fought to preserve the freedom of the individual and to preserve for citizens of this country the right to go about their own affairs, in their own way, without interference from the state.

Perhaps I may quote William Pitt the Elder, who said:

"The poorest man may in his cottage bid defiance to all the forces of the Crown. It may be frail—its roof may shake—the wind may blow through it—the storm may enter—the rain may enter—but the King of England cannot enter—all his force dares not cross the threshold of the ruined tenement!".

What on earth would William Pitt have thought of today's state which is so intrusive that there are even laws on how you repair a broken window in your own home?

It is distressing that in recent years Parliament has virtually given up its role of controlling the executive. Without this important element of the checks and balances of power, the executive has lost its inhibitions and successive administrations have introduced legislation governing the most minute details of people's lives: taking away from them the right to make their own decisions on a plethora of different matters which should be their affair and no one else's. This interference is both expensive and inefficient and is the driving force behind the need for high taxation.

Low taxes are the friend of freedom—high taxes the enemy. The preservation of the freedom and liberty of the citizens of this country, even if it is to do and say things of which we disapprove, is a matter which should unite this House rather than divide it.

---