The Economic Secretary to the Treasury (Ms Patricia Hewitt): In general, the Government determine their expenditure according to need rather than the source of the revenue, but we will continue to look at each case on its merits.
Mr. Baker: Does the Minister agree that the recent Marshall report on energy taxation represents a good example of what an hypothecated tax might provide? Will she then explain why the Chancellor's advisers have been briefing that that has been kicked into the long grass--into the very long grass? Will she give an undertaking that the Marshall proposals will be implemented in this Parliament, or is the Treasury still stuck in the 1950s?
Ms Hewitt: The Marshall report is extremely welcome. It has moved forward significantly the debate on a possible tax on business use of energy. We are now looking in detail at the complex technical issues that the Marshall report raises. He recommended further work on the subject. We are continuing to carry that out and to consult on the matter.
Mr. Harry Barnes (North-East Derbyshire): Has the Minister heard of the Tobin tax, an internationally co-ordinated tax directed against currency speculators? That money could then be used for third-world debt and for international development. As Labour is good at reviews, might it not be a good idea to have a look at that idea and to feed it into the international community?
Ms Hewitt: I am sure that my hon. Friend will be aware of and welcome the work that my right hon. Friend the Chancellor of the Exchequer has done in pursuing proposals for reform of the global financial architecture. No doubt the Tobin tax proposals will be debated within that context.
Ms Hewitt: As I have already said, it remains our view that, in general, expenditure should be determined according to need rather than the source of the revenue. I am sure that the hon. Gentleman will be aware of the problems that can arise when revenue is inappropriately hypothecated to particular expenditure goals. As I said, we will continue to look at each case on its merits.
Mr. Ian Davidson (Glasgow, Pollok): Does the Minister accept that, although there is a general reluctance among the public to pay increased taxes when they believe that the money may go simply into a bottomless pit of Government expenditure, there would be a willingness to pay hypothecated taxation because people would then be clear that the money was being spent on education and health. Perhaps it would give some political parties, not least my own, the courage to go to people and say that, if they want improved services, they have to pay for them.
Ms Hewitt: I am sure that my hon. Friend and, indeed, all hon. Members will welcome the additional £40 billion that the Government have committed to schools and to hospitals. [Interruption.] I am sorry that the official Opposition have apparently decided to oppose that additional expenditure. As I said, we will continue to look at each case on its merits, but I draw my hon. Friend's attention to the announcement by the Deputy Prime Minister earlier this week that, where a local authority decides to carry out a pilot programme of congestion charging on the roads, it will be allowed to put up to 100 per cent. of that revenue into worthwhile transport-related projects.
Mr. William Ross (East Londonderry): Is it not the case that, originally, the road fund taxation was supposed to be an hypothecated tax to build roads? If my memory serves me well, income tax in the 1890s was set up to build battleships. Does the fate of those two taxes not show the folly of any hypothecated tax? Will the Minister stick firmly to principles that she has enunciated to the House?
Ms Hewitt: I am grateful to the hon. Gentleman for that interesting excursion into the history of taxes. The Inland Revenue has recently opened an exhibition on the history of income tax. I think that income tax was originally introduced to pay for the Napoleonic wars, but the point that the hon. Gentleman makes is extremely valid. In general, expenditure should be decided according to need rather than the source of the revenue. Any proposals for exceptions to that should be considered as we consider them: on their merits.
The Chief Secretary to the Treasury (Mr. Stephen Byers): The Office for National Statistics has recently reviewed its methods for estimating national economic growth. Its work is important, as it informs the discussions of the Monetary Policy Committee of the Bank of England. The Government welcome today's decision by the Bank to cut interest rates. As the Bank said, it follows a weakening in global economic activity. The cut was made possible only because the Government are steering a course of economic stability in an uncertain and unstable world.
Mr. Chapman: I thank my right hon. Friend for that answer. Does he agree that our economic growth forecasts are based on sound methodology, but are also cautious and prudent? Does he also agree that Labour Members are in the business of realism and not pessimism? Does he further agree that that contrasts sharply with Conservative Members, who are constantly taking the pessimistic view and talking down the economy and the United Kingdom?
Mr. Byers: It is a matter of great regret that Conservative Members fail to recognise the underlying strengths of our economy. The fact is that 400,000 more people are in work now than when we took office, on 1 May 1997. In the shadow Chancellor's own constituency, there has been a 29 per cent. reduction in the number of those who are out of work. I should hope that he would be able to knowledge that, and to recognise the United Kingdom's underlying economic strengths. The Government are not prepared to go back to the days when he was a Treasury Minister--the days of boom and bust, interest rates at 15 per cent., inflation at 10 per cent., and over 1 million jobs lost. That was the reality. We shall not go back to those days. We are steering a course of stability in an uncertain world.
Mr. John Wilkinson (Ruislip-Northwood): May I suggest a methodology that may be more readily understood by the general public--counting the tally of P45s issued? Yesterday, 200 were issued at Alsthom; today, 1,200 were issued at Doulton; and probably a lot more will be issued tomorrow and the day after. Is not the economy heading for great stability against the rocks?
Mr. Byers: That was a very good example of the way in which Conservative Members have a very partial approach to events in the economy. The reality is--as always--that, at particular times, some areas face particular difficulties, whereas other areas create employment opportunities. However, to consider the economy in the round, the figures and the facts show--I know that the hon. Gentleman does not like facts to get in the way of his own prejudice--that 400,000 more people are in work now than when the previous Government were ejected from office. That is the reality, and those are the facts. It is about time that Conservative Members recognised them.
Mr. Edward Davey (Kingston and Surbiton): Will the Minister tell the House how much weight the Government put on surveys of business confidence when they forecast economic growth? Will the Minister confirm that, after 18 months of Labour in power, business confidence is
Mr. Byers: The Government welcome the interest rate cut announced today by the Bank of England, which will be good news for businesses, consumers and home owners. We believe that the Bank has been able to take that decision only because of the tough measures that we have introduced to ensure that inflation is at the 2.5 per cent. target, and to cut last year's national deficit by £20 billion. Interestingly, a majority of people express confidence when asked specifically about their own business, whereas they express pessimism about the economy as a whole. It is an example of people listening to scaremongers, such as Conservative Members, who talk down our economy.
Mr. Francis Maude (Horsham): Talking of realism, as opposed to the Government's astonishing complacency, has the right hon. Gentleman seen today's MORI poll of senior executives, showing not only that only 1 per cent. expect the economy to improve in the next year--whereas a staggering 89 per cent. expect it to worsen--but that a majority of them take a more pessimistic view of their own business prospects? Are all those people talking down the economy? When will Ministers stop talking down British business by attacking it? When will they abandon their complacency and reverse the burdens that they are piling on which threaten to make Britain's downturn the first and the worst in the western world, with 2,000 more job losses announced just this morning?
Mr. Byers: The right hon. Gentleman talks about talking business down and placing burdens on business, but we are a Government who have cut corporation tax, from April 1999, to 30 per cent. From next April, we are cutting corporation tax for small businesses to 20 per cent. Those burdens were imposed on business by the Conservative Government. They are being lifted by this Government. That is why we have underlying strength in the economy, and can steer a course of stability. We shall continue to do that, not adopting the right hon. Gentleman's short-term approach, but planning in the long term for continued economic prosperity and stability.