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Finance Bill

That is exactly right. The tripartite mechanism was a dreadful failure, and it is the background to the Budget and these measures. The Government need to raise so much revenue now because the banking system went wrong; the banking system went wrong through a combination of foolish judgments by bankers—that is clearly true, as I am sure my hon. Friend will agree—and a catastrophic failure by the regulators, who were paid big salaries to sort out exactly that kind of problem. They were unable to control cash and capital in a way that smoothed the cycle. They were violently "pro-cyclical", as the technical people now say; they reinforced the damage of the cycle by being far too easy on the banks in the good times and extremely tough on them in the bad times. If Ministers foolishly think that I would want to take risks with banks in a way that might bring them down, I should like to disabuse them; I want my country to do well, and I know that it needs strong and stable banks. However, the banks do not have to be instructed today to put so much extra cash into gilts, when we need them to lend a bit more and see business over the worst of the crisis. We now know, I trust, that the Government and the Bank of England are standing behind the banks. People have no reason to take their deposits out because they know that the lender of last resort is there. The Government stand behind the banks, so there is no need for the dramatic requirement for so much more in gilts. We must assume that the only reason for what is happening is that the Government and the Bank of England think that it would be handy to have another enforced buyer in the market at a time when so much gilt-edged security is being issued. Some of the pension regulations achieve something similar from the now-rather-mature pension funds, thanks to the fact that the Government's taxation on pension funds has led to most private sector schemes being closed. When a scheme moves from being active and growing to being closed, the regulators normally say that the scheme must hold much more in fixed income, rather than in growing assets or claims on such assets. That also serves the Government's book rather well. Paradoxically, the effective wrecking of private sector pension funds in the past 11 or 12 years, through higher taxes and regulation, is now creating a demand for the very borrowing that the Government need to see themselves through to the election. Let me turn specifically to the tax measures in the Budget. The Government belong to the school of thought that says, "Make us a bit more chaste—but not yet," and takes the view that we can raise more revenue by putting rates up. I have already dealt with the first folly. We need to start to control spending much more immediately because of the longer-term strain on the accounts, but we also need to challenge the assumption that putting rates up in such conditions, or even in the conditions that will prevail in a year or so, will necessarily raise more revenue. The Treasury should be asked to do rather more work on what happens when there are increases and decreases in the rates on entrepreneurs and on people who earn significant salaries. I remember that the Labour party was full of grief when a Conservative Government dared, in two stages, to lower the top rate of tax on earned income from 83 per cent. to 40 per cent. Labour said that the Conservatives were letting the rich off scot-free, that it was a disgrace, and that they were helping their rich friends. The net result of that big change was to make us competitive again in a world where, when we had those very penal rates, people thought that we were a complete joke and not a place to come and do business. As a result of those changes, two important things happened. First, the rich paid a lot more tax. I think that that is rather good news. I would like the rich to pay a lot more tax, but the way to achieve that is to impose realistic, not penal, tax rates on them. Secondly, and even better from the Labour point of view, the rich paid a bigger proportion of tax. Not only did the economy start to grow faster, but the rich had to pay more.