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Finance Bill

I am pleased to follow the hon. Member for Wirral, West (Stephen Hesford), who provided a cheery, upbeat assessment of the economy. I would hate to hear him when he was miserable. However, let me get rid of the delusion that he presented—the denial in his speech and the making light of the credit crunch. The Chancellor told us earlier that he would give the banks £50 billion in Treasury bills in return, at least in part, for US credit card debt; there are tens of billions of Treasury bills in Northern Rock now; there will be £581 billion of cumulative deficit next year—that is in the Red Book, as is next year's £43 billion of debt, and there will be £189 billion of private finance initiative liability, most of it off balance sheet. When the hon. Gentleman talks about the ““real economy””, he should remember that we have lost a million manufacturing jobs since Labour came to power, and that there is an £87 billion balance of trade deficit in goods and £1.3 trillion of personal debt. We all want to talk up the economy, but let us do it on the basis of—he is a Labour Member and will understand—objective reality. His speech contained no reality. On Budget day, I described the Chancellor's speech as a speech from"““a Chancellor who had no room to manoeuvre.””—[Official Report, 12 March 2008; Vol. 473, c. 345.]" The clearest indication that we have had of that limited room for manoeuvre is the detail in the Bill, which is another smash-and-grab raid. The Government will take £2 billion extra from business, including £200 million extra from business in Scotland, in the next three years. I will come to the detail of that, but there is also the abolition of the 10p rate. I do not want to claim credit for being the first person to notice that in last year's Budget, but I should like to put it on the record that I mentioned it in my speech on Budget day. The Finance Bill sees the Government scrambling around for every penny that they can get from business and people's pockets to plug the holes in the books. I have outlined some of those holes to the hon. Gentleman and will return to them later. The Bill also takes its lead from policy decisions in the previous Budget and the pre-Budget report, which the CBI estimated would take some £5 billion from business, straight into the black hole of the Exchequer. That is the clearest indication that, after 10 years of relatively benign international conditions, relatively stable if unspectacular growth and reasonable inflation, there is nothing left in the tank. Debt levels are far too high and there is no cash reserve to allow the Government to do what is necessary to stimulate the economy when the downturn comes. Ministers have said that there is stuff in the Budget and the Finance Bill for business, but where are the measures genuinely to increase investment in research and development? We know that such investment is relatively low in the UK, at about 1.8 per cent. of GDP, as I have said before. Our main competitors have a higher rate, and in Scotland the figure is very low indeed. The Government have done little in the Budget or the Finance Bill to assist R and D. Ministers may point to the small and medium-sized enterprise R and D tax credit increases, as well as the general R and D tax credit increases, from previous Budget measures. That will cost the Exchequer some £70 million this year, and that goes to business; however, that is taken away from business, in yield to the Exchequer, either by the changes to the integral fixtures capital allowances, which will bring in £70 million, or the first year of the phased abolition of the industrial buildings allowance, which brings in £75 million. There is therefore no net gain for business from doing the R and D that they want, and they will have to find the cash to pay for those outgoings. By increasing taxes—the small companies rate of corporation tax in particular—and refusing to consider proposed changes to capital gains tax, the Government are taking more tax from business at a time when they are making it potentially more difficult to secure investment. I am certain that those measures will worsen the situation in manufacturing, which has seen 1 million jobs lost in the UK since 1997, including 100,000 lost in Scotland and 34,000 lost since 2002. Making it more difficult to raise capital and increasing taxes for growing companies, particularly when they are struggling to meet spiralling energy, transportation and raw material costs, will worsen the balance of trade problem. We are talking about an £87 billion deficit in our trade in goods and a £70 billion deficit in our overall balance of trade, which is up £10 billion from £77 billion in the past full year. That deficit affects our ability to grow GDP. Since 2000, we have seen a suppression of GDP of around 0.25 to 0.5 per cent. every year. That means that UK GDP has grown by £30 billion less than it would have, had trade been in balance, which equates to about £1,000 per household. That is another matter that should have been addressed in the Budget and the Finance Bill, but which has not been. The Chief Secretary also argued that the Finance Bill was a Finance Bill for the environment—that was when she was actually talking about the Bill. I am not sure whether the Government are right about that. The Bill will defer the April rise in fuel duty until the autumn, which is to be welcomed, but from next year there will be a 1.84p per litre rise and a 0.5p per litre rise above indexation from 2010, as well as a swingeing new vehicle excise duty regime. My hon. Friends and I have no objection to using price to discourage unnecessary journeys, to encourage public transport or to encourage freight off the roads, which everyone in the House agrees is sensible. However, many of the Government's measures ignore the fact that so many journeys, of both people and freight, are wholly necessary and that in many areas there is often no alternative. With the Government already taking in excess of 60 per cent. of the price of a litre of fuel in duty and VAT, it remains outrageous that, when there is a windfall, particularly in VAT, and when there is spiking of prices at the pump, that money is not used to moderate the price of fuel. I hope at some stage to be able to table amendments to the Bill to do a number of things. The first would be to introduce a fuel tax regulator, in order to use the VAT windfall, first to help generally, secondly to assist remote rural areas, and thirdly and most importantly —I hope that this will command support—to assist the road haulage industry, which is being hammered and is even contractually unable to pass on the fuel prices it is having to pay. The second thing that I would like is for the Government to reconsider possible exemptions for working 4x4 vehicles from the new high rates of VED. The Chief Secretary said that growth is continuing, but at a much lower rate than previously forecast. The impact of the lower growth is that Government receipts are forecast to be down £1.2 billion from the pre-Budget report. That did not stop the Chancellor, like his predecessor, from boasting about growth in the UK economy. However, it is worth reminding ourselves —particularly the hon. Gentleman, who believes that this is the best of all possible worlds—that average growth in the OECD has outshone that of the UK in half of the past 10 years and that low-tax economies such as Ireland's have outshone the UK every year since Labour came to power. As ever, the Chancellor, like his predecessors, ignored the quarterly downturns in the Scottish economy and the many low and flat growth quarters under the Government's watch. Indeed, average growth in Scotland has been 30 per cent. lower than in the UK over the past 25 years, yet there was nothing in either the Budget or the Finance Bill to assist. One of the few areas where the Budget indicated revenue growth was from the North sea. There was an increased tax yield from the North sea, which was based on an average price at the Budget of $83.60 a barrel of oil, which is an increase on the $68 a barrel forecast in the pre-Budget report. As I pointed out at the time, four out of the five closing prices for oil in the week running up to the Budget were record closing prices. The price on Budget day was $94 a barrel, but it has now smashed through the $100 a barrel price. It is worth noting that the Budget forecast £56 billion in revenues over the next six years, as compared with £38 billion over the previous six-year forecast. That massive windfall alone should act as an encouragement for the Government to consider how we might deploy some of the extra revenue generated for a fuel tax regulator, to help people in remote rural areas in particular and the road haulage industry. Many Ministers and Government Back Benchers—the ones loyal to the Government, that is—have argued that the Finance Bill was a Bill for stability. Obviously the Budget was so dull and the Bill so appalling that the only watchword that they could come up with was ““stability””. However, the Bill and the Budget will not provide stability. They are designed to do one thing: to fill the holes in the UK books. There was £37.6 billion of debt, with £43 billion forecast for next year. There was a cumulative debt of £541 billion last year, with a debt of £581 billion forecast this year. The PFI liability last year was £179 billion, with £189 billion of PFI liability this year, for—from memory—only £60 billion of capital projects. That is why our First Minister, my right hon. Friend the Member for Banff and Buchan (Mr. Salmond), described PFI as hyperexpensive and a hyper-waste of money. We need to do something about that, and very quickly.