House of Commons Hansard Debates for 17 Oct 1991

Hansard

House of Commons

Thursday 17 October 1991

The House met at half-past Two o'clock

PRAYERS

[Mr. Speaker-- in the Chair ]

PRIVATE BUSINESS

London Underground (Safety Measures) Bill

[Lords] (By Order) Order for Third Reading read.

To be read the Third time on Thursday 7 November.

King's Cross Railways Bill

(By Order)

Order for consideration, as amended, read.

To be considered on Thursday 7 November.

East Coast Main Line (Safety) Bill

(By Order) Order read for resuming adjourned debate on Question [13 May], That the Bill be now read a Second time.

Debate further adjourned till Thursday 7 November.

London Underground (King's Cross) Bill

Ordered,

That the Promoters of the London Underground (King's Cross) Bill shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the Bill up to that date be paid ; Ordered,

That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House ;

Ordered,

That there shall be deposited with the Bill a declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill at the last stage of its proceedings in this House in the present Session ;

Ordered,

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That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and, having been amended by the Committee in the present Session, shall be ordered to lie upon the Table ;

Ordered,

That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session ;

Ordered,

That these Orders be Standing Orders of the House.-- [The Chairman of Ways and Means.]

London Underground (Safety Measures) Bill [ Lords ]

Ordered,

That the Promoters of the London Underground (Safety Measures) Bill [ Lords ] shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office of their intention to suspend further proceedings not later than the day before the close of the present Session and that all Fees due on the Bill up to that date be paid ;

Ordered,

That, if the Bill is brought from the Lords in the next Session, the Agents for the Bill shall deposit in the Private Bill Office a declaration signed by them, stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the present Session ;

Ordered,

That as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been so deposited, has been laid upon the Table of the House, the Bill shall be read the first time and second time and committed (and shall be recorded in the Journal of this House as having been so read and committed) and shall be committed to the Chairman of Ways and Means, who shall make such Amendments thereto as have been made by the Committee in the present Session, and shall report the Bill as amended in the House forthwith, and the Bill, so amended, shall be considered and ordered to be read the third time ;

Ordered,

That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session ;

Ordered,

That these Orders be Standing Orders of the House.-- [The Chairman of Ways and Means.]

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Oral Answers to Questions

NATIONAL FINANCE

Inflation

1. Mr. Douglas : To ask the Chancellor of the Exchequer if he will make a statement on the current level of inflation.

The Chief Secretary to the Treasury (Mr. David Mellor) : My right hon. Friend the Chancellor has asked me to apologise to the House for his absence today. He is attending the annual meeting of the IMF and the International Bank for Reconstruction and Development in Bangkok.

The answer to the hon. Gentleman's question is that the 12-month all items retail prices index inflation rate was 4.1 per cent. in September--the lowest level for more than three years--and, since August, is below the European average for the first time in four years.

Mr. Douglas : I thank the Minister for that reply. All sensible people welcome the decline in the high and unacceptable rate of inflation, but the price that has been paid for that has been enormous in terms of the erosion of our manufacturing base. I do not ask to be forgiven for referring in particular to the position in Scotland, where it could be argued that in previous recessions some of our old basic declining industries were impaired. But now we see the impairment of our high technology manufacturing base. That is an unacceptable fact. That loss should be halted as soon as possible. What are the Chancellor's proposals on that?

Mr. Mellor : Of course, I understand the hon. Gentleman's anxiety. As he rightly says, we should all welcome the news on inflation because plainly it is a condition precedent to full economic recovery, and in particular to the reduction in unemployment, that we should have a climate within which British industry can expand and compete on favourable terms with that on the continent. The fact that today our inflation rate is within 0.2 per cent. of the German rate is extremely good news to those who look for economic recovery. The hon. Gentleman will welcome the fact that the unemployment figures published today are encouraging in Scotland.

Mr. Andrew Mitchell : Has not the prestigious Item club made it clear that in the unlikely event of a Labour Government's being elected, the current levels of inflation would be doubled within a short period? Would that not be a tragic end to the great successes that we have achieved in lowering inflation in the past 18 months?

Mr. Mellor : As time goes on, people will look more and more closely at the Opposition's policies, and on issues that worry them about our handling of the economy they will ask where the Labour party would differ and what would be the consequences. The Item club is the last in a long list of forecasters who on every key indicator show that the Labour party's policies would make the position worse.

Mr. Winnick : As the Government's policies were responsible for high inflation in the first place, there is

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clearly no room for self-congratulation. How many people will lose their jobs? How much further will unemployment rise? How much further will manufacturing industry be eroded and undermined as is happening in the west midlands, which suffered badly enough 10 years ago and is now hit by the second wave of recession? Do the Government intend to do anything whatever about unemployment?

Mr. Mellor : The hon. Gentleman suggests that the Government invented inflation. When he was a Back-Bench Member supporting a Labour Government, inflation averaged 15 per cent. The long run average for inflation under this Government has been less than half of that and is well in touch with our European competitors. British industry has come well through this recession. Export volumes are 5 per cent. up on the year to the end of August. We are well set for a recovery which will undoubtedly take people back into jobs. Before the hon. Gentleman smiles too much, may I say that I am sorry that that is a matter of sadness to him? He knows full well that the last time there was a peak in unemployment in the 1980s, it was followed by more than three years of continuous falls in unemployment, totalling 1 million. There is no reason why that success should not be repeated, if there is a Conservative Government.

Mr. Tim Smith : Is it not a remarkable achievement that, contrary to the forecasts of pessimists, since sterling joined the exchange rate mechanism just over a year ago the United Kingdom has enjoyed stable exchange rates, lower inflation and lower interest rates? Is not that the only recipe for sustained economic growth?

Mr. Mellor : Yes, indeed it is. The ERM disciplines have proved to be well worth while for this country and the Government are committed to them. The evidence is there for all to see.

Share Values and Investment

2. Mr. Hain : To ask the Chancellor of the Exchequer what are the percentage changes in (a) the total value of shares quoted on the international stock exchange and (b) total investment in manufacturing industry since 1979.

The Economic Secretary to the Treasury (Mr. John Maples) : The increase in the total value of shares quoted on the international stock exchange between March 1979 and June 1991 was 560 per cent. The value of the manufacturing capital stock at current prices doubled between 1979 and 1990.

Mr. Hain : Whatever gloss the Treasury seeks to put on those figures, manufacturing investment between 1979 and 1990 rose in real terms by a pitiful 10.6 per cent. whereas the market value of United Kingdom and Irish equities rose in real terms by 214 per cent.--20 times more. Surely that is eloquent testimony to the fact that market forces are not working and that capital markets and institutional investors are failing British industry abjectly. What do the Government intend to do about that?

Mr. Maples : I hope that the Labour Front Bench will listen to that critique of capitalism because they no longer believe what the hon. Gentleman believes. He cannot draw those conclusions. Stock market valuations are higher because companies are more profitable, better run and

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paying less in tax, and therefore worth more. A good deal of that--some £70 billion--is accounted for by privatisation. I am sorry that the hon. Gentleman is so unhappy about the level of manufacturing investment. It may interest him to know that the average annual level of manufacturing investment between 1979 and 1990 was £9,788 million a year and the average between 1974 and 1979 was slightly less, at £9.77 billion.

Sir Anthony Grant : Can my hon. Friend confirm a change that has taken place which is of immense importance to our economy and nation--that for the first time in living memory the number of individual shareholders exceeds the membership of trade unions? Long may that continue.

Mr. Maples : My hon. Friend is right. We think that it is excellent that more and more people own shares in companies, but it seems that that opinion is not shared by Labour Members, who hate any form of private ownership.

Income Tax

3. Mr. Amos : To ask the Chancellor of the Exchequer if he will make a statement on personal income tax.

The Financial Secretary to the Treasury (Mr. Francis Maude) : The basic rate of income tax has already been reduced from 33p to 25p in the pound. We intend to reduce it further to 20p in the pound over time.

Mr. Amos : Does my hon. Friend agree that people do not want to pay higher taxes? Indeed, they want to pay less tax. If people wanted to pay more taxation, the Labour party would not be so desperate to hide the truth about its extravagant spending policies.

Mr. Maude : It is conspicuous that the Labour party has not contested a single one of the spending pledges that we costed last summer. I assume that it accepts that every one is correct, and they are increasing almost day by day. My hon. Friend is entirely right that it would be impossible for any Labour Government to fund those extravagant spending pledges without raising the basic rate of income tax as, indeed, every Labour Government, except Ramsay MacDonald's first one in 1924, has done.

Mr. Beith : As it has been the Chancellor of the Exchequer's declared policy for quite some time to reduce income tax to 20p, what is holding him back? Is it the fear that public services are already so stretched for resources, particularly in areas such as education, that further cuts are not possible? Or is it the fear that the boom consequences that were generated when the right hon. Member for Blaby (Mr. Lawson) was Chancellor would be generated by a sharp cut in income tax rates?

Mr. Maude : There is nothing very dramatic about the position. We managed to reduce the basic rate of income tax over a period of years and, along with the whole tax-paying nation, we were glad that we did. We shall continue to reduce taxes when it is possible, prudent and safe to do so. In a time of recession, when tax revenues are inevitably less buoyant and when public spending increases, as it always does in a recession, it is not possible to do so at present.

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Mr. Charles Wardle : Is the Minister aware that the Inland Revenue's new method of assessing mileage by voluntary drivers for hospital and other community work is causing a measure of dismay and confusion? Is he further aware that unless the method of assessment is modified, a number of those voluntary drivers will be deterred from offering their services?

Mr. Maude : I am aware that there has been a good deal of concern about the matter. I should stress that it is only the extent to which any mileage allowance exceeds the cost to the driver that is chargeable to tax. That has always been the case. That is the law as it has stood for many years, but as it is well understood that people who have been receiving the allowances have not been charged tax on that basis I have decided that the introduction of the charge to tax should be phased in gradually over a number of years.

Mrs. Beckett : In view of the state of our education and health services, and particularly of training and transport, will the Minister explain how it can be wise stewardship for the Government to contemplate using resources for tax cuts rather than for investment?

Mr. Maude : As the hon. Lady has taken the opportunity to rise to her feet, she may care to explain from which of the Labour party's pledges she is now resiling. [Hon. Members :-- "Answer."] I will give the hon. Lady a straight answer. In the middle and late 1980s, we managed at the same time to increase spending on all those desirable objectives to which she referred, to run a substantial budget surplus and to reduce tax, and we shall be able to do so again.

Mr. Quentin Davies : Does my hon. Friend agree that the only possible consequence of placing an additional tax on savings income would be to reduce savings, which would be a thoroughly inept and dangerous policy for this country to adopt?

Mr. Maude : At a time when the consensus everywhere, outside the ranks of the Labour party, is that savings should be encouraged, it is remarkable that Labour Members cling to their antediluvian ideas about taxing savings ever higher. The Labour party hates people having savings, hates people being independant and wants to tax people's savings so as to discourage them from having any.

School Uniforms

4. Miss Lestor : To ask the Chancellor of the Exchequer if he will exempt school uniforms from value-added tax irrespective of size.

The Minister of State, Treasury (Mrs. Gillian Shephard) : No. Under the EC VAT sixth directive, member states may neither widen the scope of existing zero rates nor introduce new ones.

Miss Lestor : I remind the Minister that I received precisely that reply long before the regulations relating to the EC were introduced. Is she aware that the myth that children's clothes are exempt from VAT is easily exploded by the fact that children grow much faster than the rate allowed for by the Treasury? With the increases in VAT, thousands of parents suffering unemployment, combined with family poverty, are having to pay VAT on children's shoes for school, which can cost £25 or £26, and full VAT

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on school uniforms. Will the Minister find a way to enable uniforms designed for children to wear at school, and the wearing of which is compulsory, to be exempted from the tax?

Mrs. Shephard : I have explained that under the sixth directive, member states may neither widen the scope of existing zero rates nor introduce new ones. The hon. Lady will also be aware that the sizes and measurements in the schedule take account of the average sizes of children up to their fourteenth birthday, which is a suitable cut-off point. Even if we were allowed to do it, the problem would be to make certain that the benefit of zero rating was confined to children. As those who followed the Jaffa cake saga will know, definitions are a great problem in the VAT system.

Mr. Harry Greenway : In addition to the important point raised by the hon. Member for Eccles (Miss Lestor), may I ask my hon. Friend to comment on VAT on horses?

Mr. Speaker : Not unless they wear school uniform.

Mr. Greenway : When children wear school uniform to ride horses, can my hon. Friend say anything about VAT on horses?

Mrs. Shephard : I am not sure whether I am allowed to reply to that question. You seem to be nodding, Mr. Speaker.

Mr. Speaker : Yes, depending on the answer.

Mrs. Shephard : All right. There have been considerable problems for the bloodstock market caused by distortions within the European Community which have disadvantaged the bloodstock industry in this country. We have agreed to enter into discussions with the industry to see whether we can work out an acceptable agricultural flat rate scheme. That will depend on discussions with the industry, but progress is being made.

Child Poverty

5. Mr. Ron Davies : To ask the Chancellor of the Exchequer when he last met representatives of the Child Poverty Action Group to discuss the effects of the Government's economic policies on child poverty.

Mr. Maples : My right hon. Friend met representatives of the CPAG in June 1990.

Mr. Davies : Is the Minister familiar with the report of the Select Committee on Social Security which says that more than 3 million children in the United Kingdom are now living in conditions of poverty? Will he confirm that the level of child benefit in relation to earnings is now lower than at any time since 1948? When he next meets the Child Poverty Action Group, will he consider seriously its advice that an immediate substantial increase in child benefit is needed to offset the worst consequences of his economic policies on those who are most vulnerable?

Mr. Maples : It may interest the hon. Gentleman to know that when my right hon. Friend the Chancellor announced the increase in child benefit in the Budget the CPAG wrote congratulating him, saying how pleased it was with the increase.

The statistics on the number of people living in poverty are, as the hon. Gentleman knows, completely meaningless

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as they rely on a totally artificial definition of poverty-- [Interruption.] I did not say that there was no poverty, but that the figures on how many people live in poverty are artificial. They rely on taking a notional percentage of income and saying that everyone below that level lives in poverty. As the hon. Gentleman knows, that is not so. Under this Government, real incomes have risen at all levels and the incomes of the poorest 10 per cent. of households have risen by 9 per cent.

Mr. Rupert Allason : When my hon. Friend next meets the Child Poverty Action Group, will he discuss the role of legislation in relation to accounts submitted by politically motivated charities? Is he aware that for the past 10 years Christian Aid has not submitted full accounts and that there is grave disquiet about the performance of Oxfam?

Mr. Speaker : That is a little wide of the Child Poverty Action Group.

Mr. Allason : Will my hon. Friend ensure that the CPAG submits full accounts for the current year and for subsequent years?

Mr. Maples : My hon. Friend raises an interesting point. The whole question of charities' accounts is being considered.

Imports (Tax Arrangements)

6. Mr. Michael : To ask the Chancellor of the Exchequer if he will make it his policy that all tax arrangements and other regulations in regard to products available for sale in the United Kingdom shall apply to imported items with at least the same stringency as they apply to items produced in the United Kingdom.

Mrs. Gillian Shephard : The Government are fully committed to removing distortions in the market between home-produced and imported goods.

Mr. Michael : While I support the idea of restrictions likely to reduce smoking and improve health--indeed, the Opposition have a greater commitment to that idea than the Government have--does the Minister agree that to implement regulations so as to place a greater onus on home- produced items than on imported items is likely to endanger jobs in this country to the benefit of jobs abroad, without any balancing improvement in health? Will the Minister undertake, with colleagues in other Departments, to review the Government's approach to the matter?

Mrs. Shephard : The hon. Gentleman clearly understands that the Tobacco Products Labelling (Safety) Regulations 1991, based on the EC directive to which he referred, are a matter for the Department of Health. The directive applies partial harmonisation, so there appears to be a little room for manoeuvre above the 4 per cent. of the surface area of the front pack that has to be devoted to the health warnings. From a tax standpoint, the important issue is that all products manufactured to be sold in the United Kingdom will be required to display English language warnings, whatever the text or size permitted, so that packs of cigarettes being imported which do not bear that warning are likely not to have had duty paid on them. That will be useful from a tax point of view.

Mr. Ian Bruce : Will my hon. Friend look particularly at those European countries to which we export goods and

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which impose high rates of VAT upon those goods? Most of the tax raising in those countries is done by indirect taxation through VAT. Does that not give an unfair advantage to people who export goods to us, given that we impose a low rate of VAT compared with the European average? Surely, the evening out of VAT throughout the European Community would be good for industry and we should not resist that.

Mrs. Shephard : I agree with my hon. Friend. The Government are fully committed to removing the distortions, whichever way they work.

Mr. Nicholas Brown : Have not the Government also agreed to increase dramatically the duty paid allowances for travellers from Europe coming to Britain, including returning British citizens? In so doing, the Government have forgone more than £1 billion in duty, mostly on cigarettes and spirits. Can the Minister tell the House how that duty forgone will be made up? Do the Government intend to increase VAT again? Do they intend to extend the public sector borrowing requirement still further or to cut expenditure on the national health service to encourage people to smoke cheaper cigarettes? It surely requires a peculiar incompetence on the Government's part to lose £1 billion of revenue and to encourage cigarette smoking at the same time.

Mrs. Shephard : It seems that the hon. Gentleman has been reading some rather misleading figures. For example, the Tobacco Advisory Council claimed that the effects of the single market would mean a £1 billion loss in revenue, but that claim is far too high as it assumes that every traveller who smokes will bring in 2,000 cigarettes for his own use each time he passes the border. As things stand, travellers who smoke by no means use up their allowances. The Government estimate that the loss in that particular case might be about £200 million.

Economic Convergence

7. Mr. Simon Coombs : To ask the Chancellor of the Exchequer how he proposes to measure convergence between the economies of European Community member states.

Mr. Maude : This is being discussed in the intergovernmental conference on economic and monetary union. The criteria should include measures of price stability, the sustainability of public finances and monetary stability.

Mr. Coombs : Does my hon. Friend agree that there is a degree of inconsistency in the way in which the various member states of the European Community measure economic developments of one kind or another? Does he therefore believe that there is a case for harmonisation in the way in which economic trends are measured so that countries cannot claim to have converging economies when they are diverging?

Mr. Maude : Inevitably, there are different measures of economic convergence. I have mentioned just some of them, and those are the ones that we believe are of particular importance for the purposes of economic and monetary union being discussed at the intergovernmental conference. There are accepted common measures of convergence which are applied for the purposes of comparison between various member states.

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Ms. Quin : Does the Minister agree that whatever rules are adopted to measure convergence, notice must be taken of money available in Brussels for regional development? Will the Government therefore now honour the commitment that they entered into to supply money to the coal mining regions of Britain under the RECHAR scheme? Those regions rightly regard that scheme as extremely important. After all, such money is not part of a budget rebate to Britain--it is part of a scheme intended to provide additional and direct benefits to the regions concerned.

Mr. Maude : I am well aware of the issue, as my constituency is one of those which should be in line for some of the money from the scheme. I hope that the hon. Lady will use her contacts with European Commissioner Millan, whose decision it is to withold those funds from Britain. My constituents--and, I suspect, the hon. Lady's constituents--have a pretty strong grievance against that Commissioner for his refusal to give that money which is due to Britain.

Sir Ian Stewart : Does my hon. Friend agree that, whatever measures of convergence between the economies of European states are used, they are still such a long way from a degree of convergence that could support any form of economic or monetary union as to make it dangerous to talk about practical steps in that direction in the near future? Will he ensure that that reality is reflected in the British position in the negotiations?

Mr. Maude : I assure my right hon. Friend of that. From the inception of those discussions it has been our view that any monetary union that was not founded on real and sustainable convergence would be doomed to failure and disaster from the outset. As we have argued that case quietly, firmly and persuasively, we have won others to the cause. There is now a growing consensus among the 12 member states of the Community that strict convergence is of paramount importance before any moves to full monetary union take place.

Mr. Chris Smith : Does not real convergence depend not only on the headline rate of inflation and interest rates but, crucially, on levels of growth, unemployment, investment and output? On all those fronts do not we lag miles behind our European partners? Will not this country continue to lag behind unless and until we have a proper industrial strategy for manufacturing industry?

Mr. Maude : That is one of the most fanciful outbursts that I have heard for a long time. Our rate of unemployment has been consistently below those of most of our major competitors in the European Community. In any event, it is not essential as a precondition for monetary union that there should be comparable levels of growth or output. Within any country or confederation that is an economic union there are wide disparities in all those measures. The measures in which it is essential that there should be convergence are those that I mentioned : interest rates, inflation rates and--I should have thought this was of some importance to the Labour party- -the state of public finances. Any country that did not get a grip on its public finances and get its public deficits under control would have serious problems. On all those measures our record is exceptionally good. The hon. Gentleman mentioned rates of growth, but he may have failed to

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notice that, during the 1980s, our rates of growth outstripped those of every other member state of the European Community.

Mr. Ian Taylor : Does my hon. Friend agree that the discipline of exchange rates in the exchange rate mechanism is one way to ensure that there will be ultimate convergence within the Community? However, that also provides the possibility for competitive instincts on taxation and fiscal policy. Has not the Government's record of keeping taxation low for direct taxes and the corporate sector led to an inflow of inward investment from outside the Community? Forty per cent. of non-Community investment has flowed into this country, forcing other countries to adopt lower taxation, too.

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