Mr. Barry Jones (Alyn and Deeside): It is moribund.

Mr. Trimble: The hon. Gentleman says that it is moribund, but that is not quite the right term because it implies that it once had some vigour which it has lost. The measure has not managed to move significantly in Northern Ireland but the projected public capital spending from it is £20 million in the next financial year and £60 million in the following year.

Mr. Roy Beggs (East Antrim): Does my hon. Friend agree that the £20 million projected for the PFI represents no more than two, or at most three, small projects and is quite insignificant?

Mr. Trimble: I take my hon. Friend's point. The Select Committee report states that conventional capital expenditure is being reduced because of plans for the PFI without the compensating PFI investment necessarily materialising. Hon. Members will appreciate that I have added a few words to that extract from the report to adapt it to the circumstances, but it shows one of the problems. PFI investment has been so sluggish in coming forward that it may not materialise, and ordinary capital expenditure plans have been curtailed because such investment is expected--resulting in what is sometimes called a "double-whammy".

As I said, the Government are proud of their economic record. We concede that, in many respects, the Chancellor has been more responsible than we had expected. However, the success of the Government's policies, certainly over the past few years, has flowed not from the Government's original chosen policies but from policies that were thrust upon them, five years ago, after they were forced to leave the exchange rate mechanism. The Government's original policies, prior to leaving the ERM, were bad. I recall that the Prime Minister, who was then Chancellor of the Exchequer, took us into the exchange rate mechanism at the wrong rate.

Although the Government have been much more sensible since 1992, many of us are concerned that some of those in the Government again want to place our economic policy within a European straitjacket. We believe that a single currency would be bad for the United Kingdom and, therefore, we hope that the United Kingdom will not join it. However, we also think that a single currency will be bad for Europe, even for the countries that join it. We will, therefore, be affected by a single currency, even if we are outside it, because of the damage that it will do to the European economy. Even if we stay out of it, our economy will suffer from it. That is why--like many hon. Members, not all of whom are

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Although we have some disagreements and doubts about the Budget, which can be pursued in Committee and elsewhere, we welcome the basic approach to formulating the Budget. It would therefore not be right to vote against the Finance Bill's Second Reading.

7.41 pm

Mr. Douglas French (Gloucester): I add my congratulations to those already given to the hon. Member for Barnsley, East (Mr. Ennis) on his maiden speech. Getting a laugh from the House on a maiden speech is a rare achievement, and I felt that he did extremely well.

The hon. Gentleman's speech, however, was not quite as riveting as that made earlier in the debate by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I have always recognised the right hon. Gentleman's long experience in the House, particularly his great experience in financial and fiscal policy. Nevertheless, like my hon. Friend the Member for Stamford and Spalding (Mr. Davies), I found his speech extremely interesting, if not somewhat alarming, because of the specific recipe that he advocated. The right hon. Gentleman, to give him credit, has for many years been consistent in those views, although it is rather surprising now to hear him advocate the merits of an apparently deliberate weakening of the exchange rate. One can only speculate whether that represents official Opposition policy or whether he is in a minority within his party.

I should like to link those comments with those made on capital taxation by my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg). When my hon. Friend made the arguments--with which I very much agree--for a reduction in the burden of capital taxation, and particularly for a revision of capital gains tax, little enthusiasm was detectable on the faces of Opposition Members. I think that it is reasonable to assume that, were they to form the next Government, some modification of capital taxation and particularly of capital gains tax would not be very high on their agenda.

Earlier in this debate, my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) made a similar point on capital taxation, which elicited from Opposition Members a response best described as a jeer. Therefore, we have the combination, as two building blocks of Opposition financial policy, of a deliberate weakening of the currency and an apparently clear determination to continue a stringent capital tax regime. Those are hardly two good ingredients to sustain the very strong economic recovery achieved by the Government.

I fully support the Budget judgment made by my right hon. and learned Friend the Chancellor. It was a correct combination of measures to sustain the firm recovery that we need to keep inflation down, increase new job opportunities and reduce the percentage of gross domestic product devoted to Government expenditure. That combination of measures is highly likely to continue to deliver the good economic progress that we have been experiencing. I have no reservations about the Budget judgment itself.

A good Budget requires a good Finance Bill to go with it, and by "good" I mean one that is technically polished. This Bill will, of course, be more polished technically

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The common characteristic of all Finance Bills--certainly in the past 20 years--is that they have been more complex than is desirable. The complexity is often borne of a desire to achieve, particularly in fiscal measures, as much fairness as possible and to recognise special cases; a need to make a particular concession for one specific interest group; the Treasury's desire for some symmetry in proposals; or a desire to make special provision in anticipation of a theoretical situation which may arise but, in practice, often does not.

A good example of the point that I am trying to make is provided by value added tax. When VAT was introduced 25 or so years ago, it was acclaimed as a very simple tax; the principle of VAT is very simple. In reality, however, the practice has proved to be extremely complicated. I think that my hon. Friend the Member for Havant (Mr. Willetts) referred to the 1980 and 1981 Budgets. I, too, cast my mind back to those Budgets, and recall that professional advisers and politicians were wrestling with some of the early difficulties with VAT. Some of those difficulties involved very technical matters, and some were so technical that it is astonishing to think of the time devoted to them.

A classic example of the difficulties was in the application of VAT to Jaffa cakes. Today, at a distance, that may sound like a ridiculous and trite example, but at the time it exercised minds. Should a Jaffa cake be zero or standard rated? It all depended on whether it was regarded as food, which would make it zero rated, or as a chocolate, sweet confection, which would make it a snack food and standard rated. There was a similar experience with peanuts, depending on whether they were salted, roasted or plain. Their VAT treatment depended on the category to which they belonged.

For many years, we had debates on VAT demarcation lines in the construction industry. When was an alteration to be considered as new work, and when was it maintenance? We had similar problems with landing dues on small aircraft and with children's clothes. All those are very technical matters. I would argue that they are far too detailed and technical to justify the time spent on them in the past.

In more recent Finance Bills, I have seen the seeds of the same complexity. My plea is that when dealing with new Finance Bills, particularly those that introduce new fiscal measures, strenuous efforts should be made to ensure that we do not build in more complexity than is necessary to ensure a reasonable degree of fairness. There will be occasions when it would be more desirable to accept a degree of rough justice on a particular measure rather than make it so complicated that those who are required to comply with it simply cannot understand on which side of the line they fall.

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I had hoped that the current Bill would show the results of the quest for simplification which I know my right hon. and learned Friend the Chancellor, my hon. Friend the Financial Secretary and the other Treasury Ministers would, in theory, all like to see. However, I fear that some measures in the Bill are much more complicated than they should be.

Early in the debate, my right hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) referred to the proposals for VAT on property. I think that all hon. Members know that there has been a significant lobby in respect of the proposal to curtail what is known as the option to tax. The property industry can make a good case--it is doing so--on the adverse effects of withdrawal of that option. An equally strong case can be made on the grounds that that proposal is unnecessarily complicated and, in practice, will be extremely difficult to implement. It can also be argued that it is not well targeted.

It has to be accepted that there have been examples of exploitation of arrangements whereby a landlord of a commercial property can opt to charge VAT on a letting. However, generally, that exploitation has not been by the landlords themselves. It has tended to be by financial institutions that are not delivering VAT-subject services and goods, sometimes aided and abetted by intermediate associated property companies.

Enormous practical difficulties are posed by introducing a measure that requires an assessment to be made of whether the VAT-able supplies of a particular tenant are greater or less than 80 per cent. of his total supplies. The property company doing the developing--the development may take two, three or four years, depending on the size--cannot reasonably be expected to take a view on what is likely to be the VAT position of the tenant who eventually occupies the property. That is what will determine the method of disposal by the property company and will be the way in which the property company strikes the profit that it hopes to secure from the transaction.

I cannot think of another example where the status of the tenant determines what view the property developer should take on the likely proceeds from the development. It implies that, once a tenant has occupied the property, the landlord will have to monitor any change in the tenant's VAT position. Perhaps the Minister can tell me whether that will be necessary. If it is necessary, it presents a complexity that we could do without.

I have no doubt that within Customs and Excise there are many people working on this matter, but if such a measure goes forward, we will need to have regimes relating to the VAT position of buildings that are let to different tenants and to sub-tenants.

The solution proposed is not well targeted on those who currently exploit the loophole. It hits the wrong category. I urge Treasury Ministers to re-examine this subject. This is not intended as a plea on behalf of the property industry, which is well able to make its own pleas, but it is a plea for simplicity. We should not introduce complexities that will absorb an enormous amount of time to get it right. A company may feel that it has got it right and then find that its interpretation is not shared by Customs and Excise and is, therefore, unacceptable.

I find some common ground between that point and the proposals for the refund of overpaid VAT. I was pleased when Treasury Ministers decided to equalise to three

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Unjust enrichment is a subject that has been raised outside the House on many occasions, but I do not think that it has been mentioned in the debate other than in passing. I believe that when it is not possible for the supplier of goods or services to make a repayment to the original customer--perhaps when VAT has been charged when it should not have been--there are no grounds for the VAT to be returned. It is unjust enrichment for the supplier of the goods and services to sit on the returned money and not pass it on to the person against whom he charged it.

Also on VAT overpayment, a distinction has to be made between correcting errors when the wrong amount has been paid and a deliberate recalculation. Recalculations can often occur as a result of the different schemes relating to retailers. When it becomes obvious that an alternative retail scheme would be more beneficial, it is perfectly legitimate for retailers to recalculate over a period. That is quite different from correcting an error and we should make certain that the two are not confused.

There is another category from which I have heard a great deal--sports clubs and opticians. I have no idea why they fall into the same category, but in the representations that I have received they are grouped together. This matter also relates to an element of retrospection: those VAT payers are saying that, before last July, they had been advised by their individual customs officers--this covers a wide geographical area--that there was no time limit for putting in claims because matters had to be resolved in relation to European legislation and United Kingdom case law. They did not therefore go ahead with claims, and the now applied date of 18 July intervened, excluding them from exercising the opportunity that they might have taken, but for the advice that they were given. That is an unsatisfactory situation that I hope Treasury Ministers can address to the satisfaction of VAT payers and Customs and Excise.

I have some reservations about the VAT disaggregation proposals, dealing with what is seen to be the artificial splitting of a business to ensure that as many parts as possible do not reach the VAT threshold. As I understand the proposals, Customs and Excise will no longer have to show that the reason for the splitting of a business was to avoid the VAT registration threshold. If customs announces that that is its interpretation, there is no opportunity for appeal. That is not satisfactory and needs attention.

I agree with some of the remarks made earlier about insurance premium tax and the comments of my hon. Friend the Member for Bournemouth, West. The insurance industry will obviously dislike such a tax. It is an increase on the industry's costs and insurance companies realise that it is likely to rise. It is a thoroughly unwelcome burden.

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The tax is likely to prove impractical when applied to warranties. Hon. Members have already mentioned attempts to increase artificially the cost of a warranty, which has so far attracted the 2.5 per cent. insurance premium tax, and decrease the cost of the product, which is subject to VAT at 17.5 per cent., thereby making the global figure more competitive.

My hon. Friend the Member for Bournemouth, West said that he did not think that happened very often. I take a different view--I think that it happens a great deal. It certainly happens in the sale of domestic electrical appliances and computers. The practice amounts to evasion, which ought not to go on.

The proposed solution is that the lot should be subject to 17.5 per cent. That would create an unfair distinction between those who buy a warranty in the same purchase as the equipment and those who buy it separately. That would clearly create great difficulties. There can hardly be a precedent for the level of tax on a product varying according to where it is bought.

Experts will be working on how to overcome those difficulties. I can envisage a television salesman, for example, saying, "I can't sell you the warranty, but if you go around the corner, there's a little booth in the same shop just to sell insurance. If you go there you can get it with insurance premium tax at 4 per cent. instead of paying the full amount." That cannot be practical. What about salesmen recommending that customers go to the shop next door or recommending such and such an outlet for the best deal on insurance? The proposals are thoroughly unsatisfactory and have to be rethought.

A similar argument applies to travel insurance. It cannot be right that the man who sells the travel service must apply 17.5 per cent. to the accompanying insurance while someone selling insurance separately does not have to do so. That would encourage direct selling of travel insurance, to the detriment of the industry.

That view was strongly put to me by my constituent Mr. Millard of Starline Travel, Clarence street, Gloucester. In a letter to me, he urges a reconsideration of the Government's position. He says:

"If the Government is not prepared to reconsider its position, it should at least allow the industry to compete fairly with the insurance sector by taxing all travel insurance at the same rate regardless of by whom it is sold."