| Previous Section | Home Page |
Mr. Malcolm Chisholm (Edinburgh, Leith) : Conservative speakers have today made much of the public sector borrowing requirement, but have omitted to say who ran it up, why they did so and how different methods can be used to reduce it. Some Conservative Members also discovered the usefulness of seeming green. They forget that the Secretary of State for the Environment did not even mention VAT on fuel as a green option in his recent consultation paper on climate change.
The demand for heating is notoriously inelastic. If anyone cuts back on heating, it will be those on low incomes. Those people should be at the heart of our debate as it is they who face the cruel choice between becoming colder or cutting other essential items. I say "colder" as there is already overwhelming evidence that large numbers of people cannot afford to keep warm.
Two recent Scottish studies show that 70 per cent. of respondents in deprived areas said that their houses were too cold. The report "Cold Comfort" from Age Concern focuses on the elderly and contains many revealing and alarming facts. I urge all Conservative Members to read it. It says that the morning room temperatures of 81 per cent.
Column 576
of elderly people are below the guidelines of the World Health Organisation and that the main reason for low temperatures is lack of money. It states that two thirds of those asked in the survey would spend any extra money that they received from pensions or other sources on heating. It also states that 30,000 to 40,000 more people die in this country in the winter than in other European countries and that there are more than twice as many cold-related diseases in this country than in any other European country. It found that a staggering 750,000 elderly people were at risk of hypothermia in the winter months.8.45 pm
How dare the Government put those already at risk even more at risk? Those people need help with their heating, not the opposite. Today we should be discussing the means by which pensioners and other low-income groups should receive such help. The Government like us to believe that no one on a low income will be worse off as a result of the measure. Earlier, we saw the Chief Secretary weaving and evading the subject.
It is clear that there will not be full compensation, even for those on income-related benefits. There are thousands of poor people who are not on income-related benefits ; for example, 700,000 pensioners--one in three-- who could claim income support do not do so. About 2.35 million pensioners get between 1 and 39 per cent. above income support levels. We are talking about at least 3 million poor pensioners who will receive no help.
The measure will affect not just pensioners, but millions of other people on low incomes. A recent report of the Policy Studies Institute called "Credit and Debt" revealed that, of those earning £100 a week, 5 per cent. had problems with electricity debts and 6.4 per cent. with gas debts. The percentages of unemployed people with similar problems were even higher. One young mother came to my surgery only two or three weeks ago and said that, although she was on a low income, she had to spend £25 a week on electricity because her house was appallingly damp. She is not alone--a recent survey on the condition of Scottish homes revealed that 423,000 houses in Scotland suffered from damp, serious condensation or mould. A recent Shelter report revealed that 120,000 children in Scotland faced severe health problems because of living in damp homes.
What right has the Conservative party to tell people living in such homes to reduce their heating in the interests of our planet or to spend more on heating in the interests of the Exchequer? If the Government cared about those people or were even faintly green, they would spearhead a massive home insulation drive, which is what Edinburgh district council is trying to implement through policies of insulation, window replacement and central heating for elderly people.
Edinburgh district council was promised £30 million in its capital allocation for housing, but because the Government got their sums wrong-- they said that £15 million had to come from council house sales, when the figure was only £10 million--Edinburgh district council has a shortfall of £5 million. Therefore, it cannot pursue its desired policies on home insulation-- [Interruption.] If the hon. Member for Harrow, West (Mr. Hughes) is saying that that is not relevant, I must tell him that it is extremely
Column 577
relevant. If the Government claim to be green, they should be implementing such policies, not producing spurious green measures such as those proposed in the Budget.As well as claiming that the proposals are green, the Government claim that they will help the public sector borrowing requirement. There are PSBR problems, but as my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) asked : who caused the problems in the first place? If the Government were more confident of the prospects for the economy, they could afford to be more relaxed about the PSBR. The fundamental solution to the problem is to gain economic growth, followed by a policy of progressive taxation and possibly taxes on luxury items. VAT on heating is the most regressive taxation imaginable. As York university's social policy research unit report, issued over the weekend, said, the top fifth of income earners spend an average of £13 a week on heating and the bottom fifth spend £11. The difference is small and the figure is a high percentage of a single pensioner's income.
VAT on heating is almost a second poll tax and will do as little good for the Conservative party as the poll tax. The result will be more poverty and more ill health, with all the public expenditure implications inherent in that--or, more probably, a combination of the two. It is a totally unacceptable, but typical, Government measure. It punishes the poor for the mistakes made by the Government and should be thrown out tonight.
Mrs. Browning : I shall not detain the Committee long as I was fortunate enough to make a long speech on Second Reading and my right hon. Friend the Chief Secretary accepted an intervention from me this afternoon. However, I must put on record in Committee my continuing concern that pensioners, the disabled, the frail, the elderly and people of whatever age who very much rely on heating should be granted proper compensation in the announcements made by my right hon. Friend the Secretary of State for Social Security in the autumn.
I have had discussions with my right hon. Friend on the subject and I understand the need to raise through taxation sufficient money to reduce the PSBR. I would say to Opposition Members, although no Liberal Members are present, that had the Government addressed the PSBR in the Budget, the cries from the Opposition Benches would have been accusing the Government of irresponsibility and profligacy and all the other arguments that would have been levelled at us. It is a matter of on-going concern. Perhaps one of the disadvantages of announcing a tax a year in advance and, for the 17.5 per cent. rate, two years in advance, is that it gives Opposition Members a chance to make hay with the policy. On the plus side, it gives my right hon. Friends the opportunity to listen carefully to the concerns of Conservative Members.
I am sure that those who depend on income-related benefits will have proper compensation, but I reiterate my concern, particularly for pensioners who are just above the level at which they could claim income-related benefits. One would not classify them as wealthy ; as hon. Members have said, they have been frugal during their working lives and they may have small occupational pensions and some money in the building society. While the fall in interest
Column 578
rates is welcome in the business sector and from the point of view of mortgage payers, people on fixed incomes rely on the interest from building societies on their life savings.I urge my right hon. Friends to spend the months between now and the announcement in the autumn listening carefully, particularly to what Conservative Members are saying about that group of people. I also ask my right hon. Friend to address a technical point. I am not sure whether I have interpreted it correctly, but I should be grateful if he would address it tonight. We have been assured that when the announcements are made in the autumn, the increases will come into effect in April before VAT is levied on fuel bills. I am aware that VAT involves a tax point in that VAT becomes payable from the date of the bill.
Will my right hon. Friend confirm trst two weeks of April, when VAT becomes applicable, will not have to pay VAT on bills which are received in the VAT period but relate to fuel consumption in the previous three months? I should be grateful if my right hon. Friend could provide some clarification as I have received one or two letters on that specific point.
I shall not detain the Committee any longer, as other hon. Members wish to speak, except to say that I hope that my right hon. Friend has listened to my intervention earlier in the debate and to the representations made particularly by my hon. Friend the Member for Teignbridge (Mr. Nicholls), who represents a neighbouring constituency in Devon.
Devon has a high retirement population. We are pleased when people from other constituencies decide to retire there, but we are only too well aware that it is not a wealthy part of the country. We have high water charges and the prospect of high fuel bills in addition is causing great concern to my constituents.
Mr. John Hutton (Barrow and Furness) : Opposition Members have rightly drawn attention to the inequities of the Government's proposals in clause 42 to impose VAT on domestic fuel and power. To their credit, some Conservative Members, including the hon. Member for Tiverton (Mrs. Browning), have also drawn the Government's attention to their unease about the proposals.
In stark contrast to Opposition Members, Conservative Members have been divided into those who wish to delude themselves that the Government have not broken their election promises by bringing clause 42 to the House, which of course they have, and others, such as the hon. Member for Corby (Mr. Powell), who have made it clear that they have no intention of supporting the Government in the Division Lobby tonight.
I speak for many of my hon. Friends when I say that it has not been an edifying spectacle to see Government Back Benchers in such complete disarray. I suspect that those on the bottom line tonight, as in other debates, is that the Government Front Bench are dragging Back Benchers by the nose through the Division Lobby, and I hope that some Conservative Members will do what they have said tonight and withhold their support from the Government.
In addition to exposing the inequities behind clause 42 and its impact on those struggling to make ends meet on income support, my hon. Friends have also drawn
Column 579
attention to the bogus environmental and green arguments that the Government have used in a tawdry attempt to justify clause 42. Later in my speech I shall say something about the environmental case for clause 42, if there is one. However, I remind Conservative Members who might be considering supporting the Government tonight to look carefully at the timing that the Government propose for the implementation of clause 42 and draw their attention to how close that would be to the likely date of the next general election. If there is one thing that should be tattooed across the forehead of every Conservative Member it is the poll tax and how its prominence in the run-up to the last general election caused the Government considerable discomfort. I suspect that the same will happen over the implementation of clause 42.Some of my hon. Friends, particularly my hon. Friend the Member for Neath (Mr. Hain), drew attention to the Government's PSBR problems and the fact that clause 42 owes its origins not to any green concern stemming from Rio but to the Government's desire to balance the books, which are seriously out of kilter. In that context, we need to be clear that the imposition of VAT will be extremely regressive and will hit those on low incomes particularly badly. Some of my hon. Friends have already drawn attention to the precise implications of clause 42 on those on income support. Those with incomes of more than £800 a week spend only 3 per cent. of their weekly expenditure on fuel and power, whereas those on incomes of below £60 a week spend 13 per cent.--the impact on those on low incomes is nearly four and a half times greater. That is disgraceful.
In my constituency, more than 10,000 men and women currently claim income support, and of those more than 3,000 people draw the state retirement pension. Crude arithmetic would lead me to conclude that if we assume that, at the lowest point, clause 42 would increase weekly fuel bills by £1.50, we are talking about between £750,000 and £1 million being withdrawn from the local economy. That is in addition to the acute economic difficulties stemming from the severe redundancies at Vickers Shipbuilding and Engineering in the past two years. Those considerable sums of money will have a regressive deflationary impact on the local economy of Barrow and Furness. It is disgraceful that those on desperately low incomes are being forced to pay the price of the Government's gross economic incompetence, yet that is precisely what clause 42 envisages.
It has also been clear from today's debate, particularly from the comments by the Chief Secretary, that the Government propose no specific measures to ease the impact of this dramatic hike in fuel bills which most of our constituents will be required to pay. The Government's promise that RPI indexation will reflect increases in fuel bills is clearly untruthful. There is no way such indexation will compensate those on low incomes for the extra £1.50 or £2 a week that they will be asked to pay once the clause reaches the statute book. We are talking about an attempt to balance the books, which are in their current disastrous state because of the Government's incompetence.
As my hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm) has said, there is a long list of precedents for this move--whenever the Government are in economic difficulties, it is always those on low incomes who are asked to fork out the necessary funds.
Column 580
9 pmAs for the environmental arguments for the clause, it is worth bringing to the Committee's attention the Department of Trade and Industry's assessment of the likely increase in fuel prices. It is estimated, for instance, that carbon dioxide emissions are projected to remain constant, at about 22 million tonnes a year, until the year 2020, even taking into account the high prices that will go with additional VAT on fuel bills. That was the estimate given in the Department's energy paper No. 59, published in October 1992. The Treasury's best assessment is a modest drop of 1.5 million tonnes in carbon dioxide by the year 2000 as a result of this measure. It is worth speculating about whether other measures, such as promoting home insulation and draught proofing, might have produced a faster, fairer way of reducing carbon dioxide emissions. While we are on the subject of the Government's record of promoting energy and fuel efficiency--green measures--it is worth pointing out that the Government's green house programme, designed to assist local authorities with energy efficiency, was worth £45 million in 1992-93 but is due to be cut to only £5 million in the next fiscal year. That is the true measure of the Government's commitment to environmental measures.
It is clear to my hon. Friends and to me--and, I suspect, to Conservative Members--that the Government's case is bogus and tawdry. I am afraid that it is yet another naked attempt to punish those who are least able to defend themselves. That is why, tonight as on other occasions, my right hon. and hon. Friends and I will resist the Government's proposals.
Dr. Marek : A succession of Conservative Members have this evening said, "I fully support the Government, but " I suspect that many of them are rather new and do not understand how Ministers operate. The plain fact is that the Treasury wants the money, and it will get it if Back Benchers vote to get it. Treasury Ministers will make as few concessions as they think they can possibly get away with. That is why they have arranged matters so that no details are to be given out on whether charities will be compensated or on the rate of indexation--at any rate, not until the autumn statement some time in November. If Conservative Back Benchers want to believe Ministers--who say that they will look a little more carefully at the problem--it is obvious that they have not been here long, or, if they have, they have not been listening hard.
One of the problems is that Treasury Ministers do not live in the real world. Their houses are not draughty and do not cost much to keep warm. Those who work in the Treasury building giving advice to Ministers do not live in the real world either. They all live in London, in the south-east of England, where it is generally warmer than elsewhere. They therefore have no experience of paying a lot for electricity or gas ; they lack the experience of many other citizens, especially those who live in the northern-most parts of the country. Another Conservative fallacy, heard this evening, was based on the idea that it is difficult to unpick a Budget. I do not see why we cannot unpick this little bit of Tory political dogma and get rid of it. It is not due to come into effect until 1994, and not fully into effect until 1995, so there is plenty of time. The sob stories delivered by one or two Conservative Members simply will not wash. On 27 March 1992, the Prime Minister said :
Column 581
"We have no plans and no need to extend the scope of VAT." That was a few days before the election. People throughout the country--I know this because I have been campaigning in the local elections, as have many Labour Members--have asked whether the Government were lying when they said that, whether they were bare-faced liars. I believe that there is no other explanation. They were either bare-faced liars or they were incompetent.I suspect that the Government wanted to win the election, and they were worried because the opinion polls showed that the Labour party was ahead. Anything would do, and did, so long as the hon. Gentlemen sitting on the Conservative Benches by fraud tonight were enabled to win that election. It is clear that the country has recognised what they were up to ; it has rumbled them as cheats and liars. It will not forgive them easily.
The Government have lied about value added tax, national insurance contributions and mortgage tax relief. Worse than that, they are now introducing a measure that cannot be removed by a succeeding Labour Government and that will hurt the worst-off in society most and the best- off least. Even worse, they are putting VAT on standing charges.
Standing charges are not very much to us as Members of Parliament with the salaries that we get. I can manage to pay standing charges ; Conservative Members can manage to pay standing charges. Treasury Ministers--they do not live in the real world ; they all live in London and the south-east--can afford to pay standing charges. I know that thousands of my constituents find it difficult to pay standing charges.
My hon. Friends have admirably made the case--I will not repeat it because time is getting short--that many people dare not spend a lot of money on electricity. They would rather go cold and hungry, because they do not want to fall into energy debt by spending too much on heating. They save on their heating, but they have to spend money on standing charges. Now the Government, without any sign of remorse--they regret nothing, to translate a famous phrase--are prepared to put VAT on standing charges.
I agree that the public sector borrowing requirement is in a mess. It is in a mess because the Government do not have, and never have had, an economic policy. They were forced out of the exchange rate mechanism, which they went into at too high a level. [Interruption.] I do not know what the hon. Member for Tiverton (Mrs. Browning) is saying, but if it is that the Opposition did not criticise it at the time, that is true. That was for the very good reason that we did not want to run the country down.
Conservative Members may laugh, but I always thought that DM2.95 was far too high a rate. However, Mr. Morris, you will not find in Hansard one statement in which I said that it was too high, although I believed it. I did not say it, because I believed that it was our duty to pull together to see if we could get the economy right. We could not do it, and the Government found out at the end of the day that DM2.95 was too high. They had no economic policy then ; they have no economic policy now.
The Government have run up a PSBR. They have a balance of payments problem of about £14 billion a year in the middle of a recession. Taxation, as a percentage of gross domestic product, is near the 40 per cent. mark--7
Column 582
or 8 per cent. higher than when Labour was last in office, in the 1970s. We are much more highly taxed than we were before. In spite of all that, the Chief Secretary says that the Government need to do something about the PSBR of more than £50 billion projected for this year and have decided to hit the poorest in society by putting VAT on electricity and gas bills. I want to know why they do not increase the highest rate of income tax from 40 per cent. to the higher levels seen elsewhere in Europe. The Committee will remember that, in the Budget for the year 1988-89, the 60 per cent. top rate of income tax was reduced to 40 per cent.Why do not the Government think first about taxing those who can pay? For example, in The Guardian today, an article headed "30 per cent. rise for Asda chief" states :
"The chairman of Asda Property Holdings took a pay increase of almost 30 per cent. last year. The company's annual report shows that Emanual Davidson received £232,000 against £179,000 in 1991." An increase in the top rate of tax on those incomes would go a certain way towards cutting back on the £50 billion PSBR. That is not the only example. The papers are full of details of indecent rises in incomes. Last Friday, an article in the Evening Standard, headed "The TV millionaires", said :
"Bonanza payout will make moguls seriously rich men. Greg Dyke, the man who saved TV-am with Roland Rat, is set to collect a £5 million-plus jackpot for staying with London Weekend Television." That article went on to mention another dozen people who would receive such payouts.
Why do not the Government tackle the problem and tax such people properly? They are the people who can pay. Old-age pensioners cannot afford to pay. We all know why. The Government do not care a fig about old-age pensioners. Back-Bench Tories complain consistently about the measure, but did any of them say that they would not support the Government? I have been in the Chamber for nearly all the debate, and so far only one Conservative Member- -all credit to him--has said that he will not support the Government.
The Government have got it all wrong. I can see my Deputy Chief Whip glaring at me, so I had better finish what I am saying. However, I have a warning for the Government. This measure is like the poll tax. It will not come into operation until 1994 and even then it will only be at half cock. It will come fully into operation in 1995. If the Tories have any sense, those on the Front Bench will have organised a dozen Back Benchers to vote against the measure, to make sure that it never reaches the statute book. They would then be able to wring their hands in horror, but they would have saved the Tory party from ignominious defeat at the next general election. This is like a running poll tax and when it comes into operation, in 1994- 95, the Conservative party may be thinking of another general election. That is great for the Labour party, but I am speaking for the country and, for the country, I want the measure to be defeated. If any Tory Members have any guts, it will be defeated.
Mrs. Barbara Roche (Hornsey and Wood Green) : The formal wording of the Finance Bill--that domestic fuel
"shall cease to be zero-rated for the purposes of charging value added tax on any supply, acquisition or importation"
belies the very practical effect that the measure will have on those whom it will hit the hardest. Hon. Members on both
Column 583
sides of the House, but particularly Labour Members, have spoken eloquently about the effect that it will have on their constituents. My postbag bears witness to the many representations that I have received from constituents in Hornsey and Wood Green, particularly pensioners, who do not know how they will afford the extra fuel costs, and who anticipate having to choose between heating their homes or paying for other necessities such as food.It is axiomatic that an increase in fuel costs will result in colder homes for poorer families, who spend more of their budgets on fuel than others. Other hon. Members have quoted the estimate of the Institute for Fiscal Studies that families in the poorest 10 per cent. of the population spend 13.25 per cent. of their budgets on fuel, compared to those in the richest decile, who spend only 3.46 per cent. of their budgets on fuel. In the face of those figures, the Government's vague promises of compensation for poorer families are meaningless.
Mr. Nigel Evans : (Ribble Valley) What advice did the hon. Lady give the Chancellor of the Exchequer when Labour was last in power? Electricity prices rose by 30 per cent., but no assistance was given to the less well- off.
9.15 pm
Mrs. Roche : I welcome the hon. Gentleman to the Chamber : I am glad that he has taken the time to visit us. However, I should be rather more interested to learn what he put in his election address to his constituents.
According to Winter Action on Cold Homes, only 13 per cent. of the 7 million households who rely on social security benefits for most of their income have energy-efficient homes. Nearly 50 per cent. have no central heating, fewer than 50 per cent. have any draught proofing and only one third have adequate loft insulation. Young people will constitute one of the prime targets of the legislation. All the medical evidence suggests that cold rooms--especially cold bedrooms--increase the risk of lower respiratory tract illness in children ; and, as we all know now, that is particularly dangerous during the first year of a child's life.
As Margaret and Arthur Wynn say in their book "Prevention of Handicap and the Health of Women",
"Every year infant mortality in Britain goes down in the summer and up in the winter Britain suffers from what has been described as a winter massacre of the innocents If a baby's body temperature is lowered resistance to disease is reduced. Lowered body temperature, or hypothermia, is a major cause of infant death particularly of low birthweight babies during their first days or weeks of life." What if there is a massacre of the innocents now? Every year, more children die in the winter ; 200 more infants under one-year-old died during the winter quarter of 1991 than during the summer quarter of the same year. In those circumstances, where will the poorest families in our country find themselves? The only way in which they will be able to reduce their budgets will be to turn off the heating.
Although there has been a significant decrease in the number of gas and electricity disconnections over the past few years, that trend has been accompanied by a substantial increase in the number of pre-payment meters, which allow customers effectively to disconnect themselves if they are short of money. That has been confirmed by a recent report by the Joseph Rowntree Foundation, which found that indebted families were
"having to reduce their fuel comsumption in order to buy other essentials or to avoid further debt."
Column 584
How much harder and starker will be the choice presented to families if this measure is passed?It is not inevitable that more children will die in winter. In Finland, the Netherlands and Sweden, there is now no seasonal swing in the number of infant deaths, despite the more severe and longer-lasting winters. All the evidence shows that what happens in the first year of life is important, affecting respiratory and other diseases in later years. Any visit to a local hospital will show that treatment of such illnesses in middle and old age places a grave burden on our national health service.
The Chancellor of the Exchequer did the country a great disservice in proposing this measure. I hope that if Conservative Members do not have their consciences to guide them, they will at least be guided by Thursday's ballot boxes and vote against the Government's proposals.
Mr. Thomas Graham (Renfrew, West and Inverclyde) : I never thought that we would see the day when, once again, the Government would put the boot into our elderly people.
Does the Minister know the cost of a bag of coal, a gallon of paraffin or a bottle of Calor gas? I do, because I have lived in such circumstances, and my constituents still do. It is abysmal for the Government to propose a 17.5 per cent. VAT rate on fuel : they do not know what our people are suffering. Unemployment is at 3 million, and more than 9 million elderly, sick and disabled people have had their incomes savagely reduced by a pitiless Government. We have suffered for 14 years under a cold-hearted and cruel Government. This provision will cause great harm to the elderly. The Government are inflicting euthanasia upon them. That is how the Government intend to cut the bills : kill the elderly behind their front doors by making sure that they cannot afford to heat and eat.
For 14 years, the Government have mismanaged the economy. They have plundered our resources and sold the family silver. Now they expect elderly people to burn their furniture to give them a bit of heat. That is the level to which the Government have sunk.
I have worked with charitable organisations for years and years. The Government are putting more and more pressure on voluntary organisations to do what the Government ought to do : look after the elderly and the disabled and ensure that the unemployed can afford to heat and eat. Conservative Members ought to put an end to this savage, retrograde step by voting with us in the Lobby. I hope that Tory Members will have the guts to come into the Lobby with us and stop this imposition of 17.5 per cent. VAT on fuel and power now. I hope that they will show that they care for our elderly people.
Mr. Andrew Smith (Oxford, East) : There spoke the authentic voice of the British people. [Laughter.] There is no cause for Conservative Members to laugh at the hardship they are forcing on the British people through this provision, about which my hon. Friend the Member for Renfrew, West and Inverclyde (Mr. Graham) spoke from the heart, on behalf of the people he represents.
We have heard argument after argument against the imposition of VAT on fuel and power. Hon. Members know that it is cynical, that it is a betrayal of promises to the electorate, that it is unfair and that it is especially damaging to the most vulnerable. Most powerful in their persuasiveness have been the speeches of my hon. Friends who spelt out how VAT on fuel and power will hit the
Column 585
poorest, the elderly, charities and families on average incomes who are worried about their living costs. My right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) said that it will hit people with disabilities.We have also heard persuasive arguments for voting against VAT on fuel and power from Conservative Members, led by the courageous speech of the hon. Member for Corby (Mr. Powell). Remember what he said about the Chancellor's Budget imposition of VAT on fuel and power. He said that it was a very serious error of judgment. How right he was.
Concern was also expressed by the hon. Members for Teignbridge (Mr. Nicholls), for Bristol North-West (Mr. Stern) for Tiverton (Mrs. Browning) for Wellingborough (Mr. Fry), for Taunton (Mr. Nicholson) and for Southend, East (Sir T. Taylor), who said that it would cause huge distress. Those hon. Members who are sitting on the Bench behind the Treasury Bench know, too, that this provision is not right because, day in, day out, the electorate have told them that it is not right.
Another persuasive argument against the imposition of VAT relates to the difficulties that the Government have had in cajoling enough people to speak in the debate--it is significant that they ran out of speakers before the allotted time--and the feebleness of the arguments of those who spoke in favour of this provision.
Only one Conservative Member spoke unequivocally in favour of it--the hon. Member for Eastleigh (Mr. Milligan). I hope that he will be suitably rewarded by the Government and that he will be given responsibility in his future career for implementing this provision, of which he is so much in favour. No other Conservative Member was unequivocally in favour of it, because, like the proverbial turkeys, it must be bad enough being expected to vote for Christmas without being asked to sharpen the knife as well. That is what the Conservative Members who spoke in favour of this provision were being asked to do.
It must also be difficult for those who sit on the Treasury Bench. They know that their colleagues behind them grow more impatient by the hour for a Government reshuffle. They must be on the horns of a dilemma. It must be difficult for them to decide whether preferment will follow loyal defence of a provision that they know to be politically disastrous or whether it would be preferable to paddle some distance away from the Chancellor, lest he drag them down as well.
I listened to the Chief Secretary with care for any sign that he had taken the "bloody nose" message from the electorate or even from the Prime Minister. His eye-rolling ebullience makes him a less than plausible candidate for a role as someone who is listening to anybody, least of all the electorate. His inability to listen and learn was confirmed, as the hon. Member for Hayes and Harlington (Mr. Dicks) said, by his speech, in which he trotted out the stock advocacy of this punitive proposal to extend VAT.
The Government claim that the proposal is necessary for the country because it will bring in lots of money--never mind the people who will have to pay it--and will benefit the environment because it will cut consumption and therefore will not bring in quite so much extra money after all.
Column 586
The Chief Secretary argues that the proposal does not break Government promises because, when they said in the general election :"We have no plans and no need to extend the scope of VAT", they meant it, but now they have the alibi that they have made a bigger mess of the economy and public finances than even they anticipated, so that is all right now, isn't it ? That was the gist of the Chief Secretary's argument.
How shabbily that stood in comparison with the courageous words of the hon. Member for Corby, who had the integrity to say that he would keep his election promises by voting against extending VAT to fuel. The message of last Thursday from people up and down the country as well as in Newbury was that, contrary to what the Chief Secretary claimed, the proposal is not all right at all--it is all wrong. The Chief Secretary failed to understand, as the Government fail to understand, that the electorate were driven to bloody-nosed fury last Thursday not only by the VAT proposals, although they are bad enough, but by the shameless arrogance with which, time and again, the Government break promises, shift direction and always shuffle responsibility off on to somebody else, and never apologise or accept the blame for anything. They treat the British people with utter contempt, and the message of Newbury and of the county council elections is that people have had enough and want the Conservatives out.
People are not fooled into believing that the Government are doing all this for the sake of the environment. My hon. Friends the Members for Rotherham (Mr. Barron) and for Barrow and Furness (Mr. Hutton) did a comprehensive demolition job on that claim. People know that, if the Government were interested in conserving energy, they would, as my hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm) said, spend money on insulating pensioners' homes rather than inflating their fuel bills.
Mr. Nigel Evans (Ribble Valley) : In its policy document "Looking to the Future", Labour states that a future Labour Government would use the taxation system to protect the environment. What taxes would the hon. Gentleman introduce to protect the environment ?
Mr. Smith : We favour, for example, incentives to industry to act in the environmentally responsible way. We would not load a burden on the poorest, the elderly and the most disabled people in this country and claim that it had something to do with the environment when really it is just a means of closing the hole in the public sector finances, for which the Government, because of their economic failures, are responsible.
If the Government really cared about the environment, they would take practical measures to generate jobs, as well as save energy. Labour's proposed home energy efficiency scheme would reduce carbon dioxide by three times as much as the Government claim it will be reduced by the imposition of VAT on fuel.
If the purpose of the proposal really was to reduce energy consumption, the Government would not be extending VAT to standing charges, to rental charges for meters or to charges for connections, none of which has anything to do with consumption. The Government's policy has nothing to do with saving energy and everything to do with the desperate drive for money to narrow the yawning deficit in Government finances--the excess debt
Column 587
to which my hon. Friend the Member for Neath (Mr. Hain) referred--and they do not care who they hit in the process. Many hon. Members have referred to the effects on charities. The Charities Tax Reform Group, representing more than 300 charities, has stated the position with stark clarity. In a letter to me on 18 March, Adrian Randall, the chairman of the group, said :"The imposition of VAT on fuel and power will cost CTRG'S members £27 million per annum and charities which provide residential care for elderly or disabled people will be hit the hardest. Unlike ordinary households, these charities are unable to reduce their heating in order to compensate for the increase in fuel prices Charities again find themselves in a uniquely disadvantaged position because unlike local authorities and commercial organisations, they are unable to recover VAT."
The hon. Member for Exeter (Sir. J. Hannam) made similar points. 9.30 pm
The Conservative party is fond of proclaiming its support for charities and their important work. This evening provides the opportunity for Conservative Members to demonstrate that support in the only way that really matters here--by voting for amendment No. 5, which would exempt charities from the charge. After all, when farmers were disadvantaged by the VAT regime, the Government introduced the flat rate VAT scheme which enabled farmers to make a claim against their input VAT. If the Government can make exceptions for farmers, they can do so for charities. If Conservative Members do not vote for amendment No. 5, they will simply confirm the belief that Conservatives stand only for vested interests.
Another important matter, which has received less attention in our debate, is the effect on small businesses, especially the smallest and newest businesses. The effect will be dire. On the basis of Department of Employment figures, more than 1 million businesses are below the VAT threshold. Many of those are run from home when starting off and do not pay VAT on their fuel at present if the supplies are less than 40 per cent. of the household total. For such businesses, the VAT increase will bang up costs and will either be passed on to customers or will come straight out of profits. For many, it will mean the difference between staying afloat and joining the more than 1,200 a week who are going bankrupt under this Government. So much for the Conservatives as the friends of small business. Those businesses will have every reason to conclude that today's Tory party cares only for those who donate millions to Conservative party funds or those who bolster the personal incomes of ex-Cabinet Ministers on their boards.
What also worries the country is the danger that the misuse of VAT to bail out the Government's bad housekeeping will set a precedent for other extensions of VAT. After all, if the Conservatives could not be believed when they said at the general election that they would not increase or extend VAT, how can people believe them when they say that again now? They did not break only one promise when they introduced this proposal ; they broke their whole credibility as a Government. People know, as they showed last Thursday, that they can never ever trust the Conservatives again.
In practice, the extension of VAT puts at risk the very principle of Britain's right to levy a zero rate of VAT on essentials. As the hon. Member for Southend, East (Sir T. Taylor) and others pointed out, apart from the fact that,
Column 588
under the European Community VAT agreement, it would be impossible for Britain to restore fuel to zero rating, if the Government get their way tonight and surrender the present position, what sort of credibility could they have in the negotiations to keep the zero rate when it comes up for review at the end of 1996?Through the unilateral abandonment of a key zero rate on essentials, Ministers are sending themselves naked into the negotiating chamber as regards the continuation of zero rating. This is a precedent that will be used against them. I know, not least from the extensive debates on Maastricht, that many Conservative Members genuinely care about the maintenance of zero rating. I can only say to them, "If you really want to keep it, join us in the Division Lobby tonight." The worst thing of all is that VAT on gas, electricity, coal and central heating oil would hit hardest those on the lowest incomes. As my right hon. Friend the Member for Ashton-under-Lyme (Mr. Sheldon) has explained to the House on many occasions, VAT in general is a potentially highly regressive tax. When it was introduced, a measure of progressivity was retained by the zero rating of food, children's clothing, fuel and other necessities.
If zero rating is abandoned, as the Government now propose, VAT will be made more regressive overall and more unfair to those on the lowest incomes. As my hon. Friend the Member for Coventry, North-East (Mr. Ainsworth) pointed out, those are the very people who have seen the whole tax system skewed against them during 14 years of Conservative government, while the Nadirs of this world are pampered by the Government's organisation of their tax affairs. There can be no clearer demonstration that, when it comes to taxation, the Government operate one rule for the rich and a completely different rule for the majority of the country and for the poorest people of all.
As my hon. Friends the Members for Walsall, North (Mr. Winnick) and for Coventry, North-East pointed out to good effect, academic studies by the social policy unit at York have shown just how unfair the proposal is. Similarly, the department of applied economics at Cambridge has calculated that the average impact on the poorest tenth of the population will be no less than seven times greater in relation to income than it is on the richest tenth.
Talk of averages and statistics, damning though they are, comes nowhere near capturing the despair of the poorest families and pensioners who will be hit by the measure. My hon. Friends--and, I am sure, some Conservative Members--will be familiar with the pensioner who comes to their advice surgery clutching the lined piece of writing paper with meagre outgoings down one side and even more meagre income down the other, and who says, "What am I to do? I cannot make ends meet. I cannot afford to feed myself properly." Those are people whose days are spent worrying about how to pay for their heating and how on earth to pay their water rates. They are people who can never afford to buy a new coat. As my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) said, they are people who find that the small increase in their pension never covers the increases in the costs they face.
We are talking about men and women who have worked, scrimped, saved and struggled all their lives for a future better than this. What do the Government do to them? They put up their heating bills--in a country where
| Next Section
| Home Page |