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AMENDMENT OF THE LAW

I shall certainly be brief and seek to direct my remarks to the Budget, Mr. Deputy Speaker. I was not able to speak yesterday or in previous debates on the EU treaty, so I thought I would start with the Budget proposals on European expenditure. Such things often escape our attention when they should not. It is worth pointing out that in these straitened economic times and in a Budget where, as the Leader of the Opposition pointed out, the Chancellor has little room for manoeuvre, table C9 in the Red Book sets out clearly the steady increase in the net transfers of money from the British taxpayer to EC institutions. Such transfers will have risen from £4.7 billion in 2006-07 to £6.7 billion in 2010-11. The increases are even higher if one takes as one’s figures the net contributions to the EC budget, which are given in a footnote to that table. All hon. Members have seen us give yet more powers to the European Union—or seek to do so—through the Lisbon treaty, so it is important that we are aware of the consequences for our constituents, some of which are shown in the Red Book. This is the first day of these debates, and I am sure that my right hon. and hon. Friends will have an opportunity to examine the real substance of the Budget in much more detail. The Chancellor’s statement gave almost nothing away. The Budgets of the previous Chancellor, who is now Prime Minister, were always a kind of snowstorm—figures and statistics were showered over the Chamber leaving us all snow-blind and none the wiser. This Chancellor took a completely different approach, making his remarks for 53 minutes or so without providing any detail. It leaves us trawling through the books and statistics to find some indication of the facts and of the implications of economic policy Let us examine what the Government are doing in taxation; the current receipts are set out in table C6 of the Red Book. It appears that some pretty significant increases in taxation are being made: income tax gross of tax credits will increase over two years from £147.8 billion in 2006-07 to some £160.2 billion in 2008-09—an 8 per cent. rise or thereabouts; VAT receipts will increase by £6.4 billion; capital gains tax receipts will increase by £1.2 billion; business rates will increase by £2.7 billion; and council tax receipts will increase by £2.7 billion. Total current receipts will rise over that two-year period from just under £520 billion to £575 billion, an increase of about 10 per cent. One could say that receipts will increase by roughly 5 per cent. each year. If one accepts the Government’s projections of growth at about 2 per cent., and if we accept that inflation will be about 2 per cent., that leaves us with an increase of about 1 per cent. each year attributable to fiscal drag and the general increase in the tax burden. As people have more time to study these things they will perhaps arrive at a clearer and more detailed picture, but those basic facts about the Budget were simply avoided by the Chancellor. For that reason, we were given no real indication of the overall effect of the Budget. I want to touch briefly on one or two specific items in the Budget. I had a brief exchange earlier with the hon. Member for Brent, North (Barry Gardiner) about the air movement tax. As with other taxes, we have to ask ourselves what the purpose of it is and what benefit it is intended to achieve. The principal purpose is obviously to raise revenue, but in this instance the stated objective is also to achieve an environmental benefit. The basic logic is that there will be greater benefit if we incentivise airlines to fly their aircraft full, by charging for aircraft movement rather than individual passengers. However, I am concerned that there appears to be no recognition of the degree to which different types of aircraft generate different amounts of pollution. If we are honest about wanting to incentivise better environmental performance, we should try to reflect that consideration. Before the air movement tax is introduced, we also need to know what the Government propose to do to mitigate the potential effect on the air freight industry, about which I had an exchange at the latest Treasury questions with the Exchequer Secretary, who is in her place. She accepted the need to look into that and see what can be done. Air freight is a mobile and competitive industry, and there will be no environmental benefit at all if we simply divert air freight from UK airports to those in the near continent, from where it is transhipped by road to the UK. We must also consider carefully the impact of the new tax on the establishment of new routes from regional airports. Obviously, I am particularly concerned about routes from Manchester airport. The tax on aircraft movements could disincentivise the establishment of new routes, particularly long-haul routes, which would damage the regional economy. The hon. Member for Dundee, East (Stewart Hosie), mentioned road fuel duty. It is welcome that the increase has been deferred, but the purpose of the Government’s policy is still not clear. There is a massive disparity between road fuel duty rates in the UK and in some other countries. The hon. Member for East Antrim (Sammy Wilson) mentioned concerns in Ulster about the position across the border, with the Republic of Ireland charging about half the rate of fuel duty that we charge in the UK, which creates significant problems. There are also serious problems for road hauliers in England. We see many foreign hauliers on our motorways, operating from all sorts of places around the EU, including Lithuania, where I think the duty is 16.5p a litre, compared with 50.9p in the UK. Again, we must ask what is being achieved by that huge disparity. Are we simply diverting investment and trade to our competitors in other EU countries, or are we achieving anything environmentally or for the UK? We must consider that carefully. There are to be changes to capital gains tax. Much as I welcome the principle of simplifying the tax, the Chancellor has mishandled the matter woefully in recent months. We need to see details of how the reliefs in the new tax regime will operate. It is unfortunate that the Financial Secretary is not in her place, because I wanted to establish whether I have achieved a minor victory on behalf of a constituent who sold his IT business before the pre-Budget report in exchange for a small shareholding of 1.5 per cent. in a much bigger company, but is locked in and prevented from disposing of it until after the start of the new tax year. I am sure that many people are in comparable positions, so it would be interesting to hear more about the transitional provisions that are referred to in paragraph 6 on page 118 of the Budget notes. I hope that, as is stated, the transitional relief will address such concerns by applying to"““circumstances where gains that have been deferred from disposals made on or before 5 April 2008 become chargeable after that date.””" I hope to hear confirmation from the Treasury that that is a response to the concerns that I raised. In this Budget, it is difficult to establish what the genuine big picture is. In his statement, the Chancellor used the words ““stability”” and ““stable”” 23 times, yet most of the indicators suggest that the last thing we have at the moment is genuine stability. We are faced with the global difficulties caused by the credit crunch, which have led to significant drops in business confidence across the country. Against that backdrop, the Chancellor wants us to accept not only that the problem is of course a global one, not caused by British Government policy, but that the appropriate response is to carry on more or less as we have been, with relatively little change and only a modest shift in the balance of tax and expenditure. As my right hon. Friend the Leader of the Opposition said, that is because the Chancellor’s room for manoeuvre is absurdly limited. Spending, taxes and borrowing have been driven up to levels that are simply unsustainable. I want to ensure that there is plenty of time for others to speak—[Interruption.] I have considerable support from my hon. Friend the Member for Ribble Valley (Mr. Evans) for that, if for nothing else. However, we have to ask what levers of policy are available. The Bank of England is now responsible for monetary policy, of course, but, as people well know, it is held in a vice: the Bank is trying to balance the need to provide some degree of stimulus for the economy against growing concerns about inflationary pressures. Normally—historically—we would consider the effect and operation of fiscal policy, but the Government seem to have abandoned that as a lever of policy. The United States has responded with a massive fiscal stimulus to its economy. That may not be appropriate here, but what is really telling is that the Government do not have the freedom even to contemplate such an approach. If it is appropriate to create a little slack in the economy by reducing the fiscal burden, such measures are not found in the Budget, which seems to reflect a degree of tightening, and would require fairly dramatic shifts of policy. A degree of consensus is gathering on what the Government are now doing to restrain public expenditure growth quite firmly. They are trying over a period of years to regain the control and flexibility that they have abandoned. That objective is shared not only by the Conservatives, but increasingly by outside observers, including business organisations such as the Institute of Directors, which has been pressing for a more sustainable long-term approach in which public expenditure growth is much reduced. That is probably the responsible thing to do now. It is a pity that, as far as we can tell from the Budget announced today, we are instead to see an increase in taxation, and there is little prospect of significant change to that approach in the coming years.