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Mr. Ian Bruce: I am grateful to the hon. Lady for giving way in such a passionate speech, but I am sure that she would not want to mislead anyone. Apart from the changes to single-parent benefits, which date from April 1998, the changes that the Government have announced will not be made until October 1999. I hope that she will ensure that her constituents realise that they must wait almost until the next century before any of those changes are introduced.
Lorna Fitzsimons: Yes, but no claimant loses anything now, and my constituents would never take lectures from Conservative Members about anything that they did for women and children in poverty. The Budget clearly says to my constituents--they have told me so, because I have had several meetings with large groups of them since the Budget statement was made--that, for the first time ever, the Government are no longer stigmatising them for being in poverty or trying to do better.
Some of my constituents have been allowed a real choice--whether to stay at home with their children or to go out to work. They feel that this is the first time that, in a Budget, a Chancellor has helped them by allowing them to make such a choice.
The other indicative policy change in the Budget was small, but important--the allocation of £10 million to a scheme to ensure that partners of jobseeker's allowance claimants, who previously were unregistered, under the Treasury rules, and in the unemployment statistics, get assistance in seeking work. For the first time ever, the Treasury has recognised that women's patterns of work
very much depend on their partner's pattern of work, and that, if they happen to be a partner of an unemployed JSA claimant, they get no help. There are roughly 11,000 women in that position.
That is one of the single biggest changes in the Budget. It shows that, for the first time ever, we have a Treasury that is no longer, in the glib phrases of some commentators last week, a "boy's zone", but is starting to conduct a gender impact analysis of the--[Laughter.] Conservative Members think that this is very funny, but their Front-Bench spokesperson on women, the hon. Member for Chesham and Amersham (Mrs. Gillan), was desperately trying to say that your Treasury actually invented it, so it is not that funny--you speak with forked tongue. The reality is that, if you are going to laugh at gender impact analysis--
Mr. Deputy Speaker (Mr. Michael J. Martin):
Order. I am enjoying listening to the hon. Lady, but may I say to her, I do not have a Treasury--I honestly do not have one--so perhaps she will remember that.
Lorna Fitzsimons:
I am sorry, Mr. Deputy Speaker. You will be well aware that, as women make up 52 per cent. of the population, it would be smart to have some form of analysis of how Government policy and Treasury policy affect them. Therefore, although some people would choose to laugh at it, I think this would be a very dim economic thing to do. That is why I welcome the Chancellor's move to change the focus of the Treasury and study the effect on 52 per cent. of the population of the Budget measures.
The measures affecting small and medium employers were very much welcomed. Rochdale--at least the portion of the borough that lies in my constituency--has more than 2,500 small and medium enterprises, the majority of which are small, and they very much welcome the Budget measures.
As most people know, Rochdale has a very strong manufacturing tradition and manufacturing base. Many of the small employers managed to duck the worst aspects of the second recession by changing their business focus to exports. One or two big businesses in Rochdale have been the pioneers of a superb export drive. They used a lot of their clout and a lot of their experience to re-educate many of the small employers into the benefits of exporting. Obviously, they are now suffering because of the strength of the pound, but the thing--
Mr. Ruffley:
Will the hon. Lady give way?
Lorna Fitzsimons:
No. May I just finish my point?
The one thing that employers are saying to me is, "Can you please get the Chancellor to make more positive statements about the single currency?" That is the point that my right hon. Friend the Member for
Ashton-under-Lyne (Mr. Sheldon) was making. They wanted us to go ahead and make positive noises about the single currency.
Lorna Fitzsimons:
I give way to the hon. Member for Bury St. Edmunds (Mr. Ruffley).
Mr. Ruffley:
If Government economic policy is so successful, can the hon. Lady explain to the House why manufacturing output has fallen for five successive months?
Lorna Fitzsimons:
No. The point that I was making was the point that manufacturers in my constituency have asked me to make to Ministers. Those manufacturers understand the problem that the Government have in terms of the economy and the high pound. They are saying to Ministers, "We want you to make more positive comments about the single currency." The majority of small and medium employers in my constituency are subcontractors to big companies. They will need to be ready to deal with the single currency in 1999, because it will be a clause of their contract to do so--
Mr. Bercow:
Will the hon. Lady give way?
Lorna Fitzsimons:
No; I will not. This is important.
Those manufacturers will need to be ready, even if we do not join the single currency. They are saying, "If the majority of us will have to be ready, why are we, as a country, not making more positive noises about joining the single currency?" In their estimation, it would make the problem of the strength of the pound less damaging to them and it would give them ease in terms of long-term planning and in their relationships with their banks, their investors, and so on.
All I am doing is passing on a heartfelt message from the majority of employers in my constituency. That message is, please have the confidence to make more positive noises about the single currency.
There have been a lot of good points--
Mr. Bercow:
Will the hon. Lady give way?
Lorna Fitzsimons:
I will not, because I am just about to wind up.
Mr. John Butterfill (Bournemouth, West):
The Budget is like the curate's egg--good in parts. Some parts are very good indeed; I shall say something about those. Some parts are muddled; others are addled; others are downright bad.
I am worried about the general thrust of the Government's taxation policy. The Chancellor seems to be constantly trying to find ways of raising taxation without anyone noticing. The worst possible example was the advance corporation tax change last year, which attacked the country's pension funds severely. Nothing in the Budget has remedied that.
This time, the Chancellor is announcing nominal reductions in corporation tax rates, but the cash flow changes in the tax system mean that there have been substantial increases in the tax that companies pay.
One aspect of the Red Book and the Budget speech that I find rather sinister is the reference to a review of the North sea oil tax regime. The hon. Member for Gordon (Mr. Bruce) mentioned that matter earlier. There is a real concern that, in looking for ways of raising taxes without anybody noticing, the Government may do serious damage to one of our most important industries. The problem is that the finds left in the North sea are not huge and easily exploitable; they are much smaller, complex oil deposits which are more expensive to mine. If it is much more expensive to operate in the United Kingdom, the oil companies could easily go elsewhere to Uzbekistan or wherever. I caution the Chancellor not to pursue that route because, although it may appear an attractive way of raising moneys in a manner that people will not notice, it will do much damage to the United Kingdom economy in the long term.
The Chancellor introduced one or two welcome measures for small business, and it would be churlish not to welcome them. For example, it is helpful that small businesses will be exempt from stage payments. We also welcome the fact that small businesses will receive 40 per cent. capital allowances in the first year. However, that is not always a tremendous asset--particularly for new and emerging businesses that do not have profits to shelter. Therefore, the impact of that measure will be very much less than the Chancellor would have us believe.
I also greatly welcome the changes to venture capital. I must declare an interest in that subject as I have been an adviser to the venture capital industry for many years--as the hon. Member for Delyn (Mr. Hanson) knows. The Government have made some worthwhile changes to an industry that does a great deal for the British economy. I am particularly pleased about the technical changes to transfer pricing and the enterprise investment scheme improvements. The Government have also introduced a £50 million venture capital fund for universities--although that is a rather small sum.
More important still is the Chancellor's commitment to look at ways of developing share incentives in order to attract executives into smaller, growing companies. A principal problem in the economy is that small companies that need to grow cannot attract quality people. Many such people are comfortably ensconced in their established jobs and do not wish to take the risk of moving to a smaller company, even though they could have an enormous impact on its development. I hope that that consultation will bear fruit in the future.
Unlike my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), I am keen on the idea of capital gains tax reform, and I have for many years advocated a taper for capital gains tax. It has always
seemed totally mad to have a tax system where the marginal rate of tax is the same for someone who has built up a business over 10 years as for someone who has made an overnight gain on the currency market. That position could not be sustained. Therefore, I believe that the introduction of the taper is worth while.
I have some reservations about the way in which the taper is supposed to operate. I believe that 10 years is too long, because it will hold investment in existing patterns and, in a dynamic economy, we may wish to change those patterns. Another effect of the taper, combined with the withdrawal of indexation, is that some entrepreneurs will pay more than they do under the present arrangements. For example, the withdrawal for non-business assets will reduce by 16 per cent. over 10 years--or 1.6 per cent. per annum--on a flat rate. The real rate is less than1 per cent. per annum. If we take away indexation, we can see that the situation will be worse than if there were no taper and only indexation.
That is a problem as many of those who invest in developing businesses will not qualify for the business asset criterion. To qualify, people must have voting rights of 25 per cent. or more or they must be employed virtually full time in the business. I hope that the Chancellor will consider this matter in Committee, because some definitional changes must be made. For example, a financial partner will not invest in a business unless he ends up with more than 25 per cent. of the shares, which carry voting rights. That will act as a disincentive for entrepreneurs to bring in financial partners because the Government are, in effect, forcing them to give away more than 25 per cent. of the equity in return for the injection of finance. I am not sure that that is what the Chancellor intended when he drew up the rules. Therefore, I hope that he will consider an arrangement whereby someone coming in as a financial partner to a suitably qualified company will get the benefit of the business asset definition. I believe that the present definition leaves much to be desired.
I welcome the ISA changes and the regime for TESSAs and PEPs. I think that it is as well to thank a Government for changing their mind. It is easy to criticise Governments and say, "You only did it under pressure," but it sometimes takes political courage to admit that perhaps one's first ideas were not correct. It is worth paying credit to the Government for showing that courage.
I had intended to say quite a lot about the working families tax credit, but I do not think that I could improve in any way on the extraordinarily detailed and brilliant analysis of the problem by my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis). The Government deserve some credit for examining the problem and for trying to do something about it. However, they are perhaps open to criticism for rushing in too quickly with a rather poorly thought-out scheme which could lead to all sorts of problems in the future. Apart from the scheme's technical difficulties and the other problems which my right hon. Friend outlined, I think that the Inland Revenue will have physical problems handling the work load. One prays that they do not recruit the people who are coming out of the Child Support Agency scheme.
I do not like the stamp duty changes in the Budget. Many Labour Members will claim that they will affect only the rich, but that is not quite true. The tax will be paid almost exclusively in the south of England, in
London and the home counties where house prices are very high. If you walk out the doors of this Chamber, Mr. Deputy Speaker, you will find that £200,000 will buy only a two-bedroomed flat in central London. It is by no means only the very wealthy who will pay that tax. It will lead to less mobility of labour, which is a real problem.
I am also a little concerned about the niche areas, such as tax relief for overseas giving. That sounds like a lovely idea with which we can all identify, but it means that people will be more inclined to give to charities that are involved in overseas giving and less inclined to give to domestic charities. I must again declare an interest--although it is not a financial one--as I am a member of the board of management of the People's Dispensary for Sick Animals. I predict that worthwhile domestic charities may experience problems when they find that their income has been diminished by the Chancellor's singling out a particular group of charities in that way.
Having said that, my fundamental criticism of the Budget is that it does not address the major problem in the British economy: the level of our interest rates and the impact that that has on the parity of the pound and the competitiveness of British industry and commerce as a whole.
When the Chancellor announced his proposals for perhaps joining the euro at some time, I asked him how he would approximate interest rates. Even though our long-term interest rates have come down a little, they are still virtually double those in the rest of Europe. The approximation of those interest rates is a real problem.
There are two underlying reasons for our interest rates being so much higher than those of most of our competitors. One is that there has been an historic suspicion that British Governments will not, at the end of the day, stand up to the rigours of counteracting inflation, and that, sooner or later, a Government will let things rip a little. There has therefore been a propensity for interest rates to nudge up. The other reason has been the conduct of macro-economic policy. Although the Chancellor has engaged in fiscal tightening over the past 12 months, it has been in entirely the wrong areas--not in the areas that will damp down consumer demand, but in the areas that discourage investment and saving. That gives all the wrong messages.
Unfortunately, those wrong messages which the Chancellor has been giving have not been addressed in the Budget. It is vital that they should be addressed sooner rather than later. If we continue down our present course, we will be in great danger. The Red Book makes it clear that it is not looking for the 3 per cent. level of growth in the economy that this Government inherited--indeed, it admits that next year the rate may be as low as 1.75 per cent. It says--more in hope, I think, than in reality--that the rate will go back over 2 per cent. in the subsequent years, but not much over 2 per cent. for the whole of the predicted life of the Government.
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