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Mr. Davey: The hon. Gentleman is completely wrong. The reason why this situation is particularly bizarre is that, at the same time as the Budget was published, the Wanless report was published. It tried to work out what the health needs of the nation would be in 20 years. When Wanless looked at population trends, he took the principal forecasts of the Government Actuary, not the higher one that has been assumed by the Government. The Government's core strategy was for health spending, but in their Budget strategy they use a different forecast of population growth from the Wanless report's.

I hope that the Minister will explain that in his summing-up speech. I also hope that the Government will do rather better than the document on trend growth, which provides no intellectual backing for the change. There is no model of the causes of emigration or immigration, and no analysis of whether they are to do with the relative economic performances of different countries, asylum policy or international political situations. All the independent expert advisers to the Select Committee on

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the Treasury said that it was an area of great uncertainty, yet the Government are not taking the principal projection of the Government Actuary. It is bizarre.

I had the privilege the other day of discussing such matters with senior people at the Bank of England. They informed me—I was not aware of it—that the statistics on immigration and emigration are among the weakest there are. Unlike other countries, which require people to register with the local police, for example, when they enter the country, we do not. I support that policy, but it limits our ability to understand net migration. We do not have the figures, yet the Government base their increase in growth forecast on that. They may be right; perhaps we will achieve that underlying growth, but they need a slightly better analysis in order to convince us. We hope that they are right.

It will be a long summer in the Finance Bill Standing Committee. We will have some long debates—[Interruption.] If the hon. Member for Bexleyheath and Crayford (Mr. Beard) tempts me, I can speak for a lot longer. In fact, I think I will make some remarks; the hon. Gentleman has really tempted me.

I have a concern about the whole process that we are engaged in: the Finance Bill process. People who have to use the tax system say that it results in very poor scrutiny. The processes, the time and the whole ethos around the Standing Committee do not enable us to engage in constructive scrutiny.

Like the hon. Member for Sutton Coldfield (Mr. Mitchell), I had the privilege of sitting on the Institute for Fiscal Studies tax law reform committee, which looked at the institutional processes behind a move towards tax simplification. That committee, which was staffed by experts, had a vigorous debate. It believed that the Finance Bill process is of second order and is failing this country, and that we need radical reform. As that is a process point, the Second Reading debate is the right place to make it.

The Chancellor wanted to create consensus on NHS investment, which was a bold and courageous ambition. Unfortunately, the Conservative party has prevented that consensus from being established. The Chancellor cannot take any blame for that, but he can take the blame for the fact that he has alienated a number of taxpayers, particularly in the corporate sector, because he has developed a tax policy that is unfair, inefficient and over-complex. Had he chosen a different route, he would have had even greater support, and we would be far surer than we can be today that we will get the quality NHS that our country deserves as a result of all the extra money.

5.46 pm

Mr. John McFall (Dumbarton): I am pleased to have the opportunity to speak on Second Reading. The hon. Member for Kingston and Surbiton (Mr. Davey) has gone on a lot. I could sum up his speech with the slogan, "More and simpler tax." Given the promises that the Liberal Democrats have made, they will end up as the party with the simplest tax system in the country: they will be taking 100 per cent. of everyone's wages. They have to do an awful lot to convince people that their policies are credible.

It is the same with the official Opposition. The hon. Member for Buckingham (Mr. Bercow) made an indelicate rant. I look forward to the day when he

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improves and makes a delicate rant. Their whole argument is this. The shadow Chancellor, his boss, was on the radio and television today. In answer to a question, he said:


but when the questioner asked him what the next stage was, he said:


How can a party have any credibility in opposing the Second Reading of a Finance Bill when it cannot come up with its own proposals? That question will plague Conservatives throughout the land until they answer it.

There was much ado about the Treasury Select Committee report. As the Chairman of the Committee, I wanted the opportunity to put the report into context. I feared that some people had their own gloss on it when I received a telephone call from a television station at 8 o'clock this morning, three hours before the report was published. However, let that be.

It is my responsibility as Chairman to ensure that the principles of the Committee are adhered to. Those are simple: as a Back-Bench Committee comprising hon. Members on both sides of the House, we have a responsibility to undergo an intellectual inquiry into the Budget. Everything we have said in the report, particularly the draft report, centres on that intellectual inquiry. I will go through the report on that basis.

The Select Committee report was preliminary. It was for the benefit of the House—to help it with the Second Reading. Paragraph 1 is clear:


In other words, we have not had time fully to assess their implications and we will come back to it. I tell the House and those on the Front Bench that we will come back to that particular issue. The statement is therefore provisional.

The report does not criticise the Government's budgetary aims; in fact, it welcomes the Budget's redistribution from high to low earners.

Mr. Laws: I entirely agree with the hon. Gentleman that the Select Committee's report welcomes certain Budget measures, but does he acknowledge that some of the amendments welcoming Government policy were tabled by Opposition Members, and enjoyed the support of the entire Committee?

Mr. McFall: Yes, but as I said, there were 25 amendments, and not all of them fell into that category. None the less, the hon. Gentleman is right and if he bears with me I shall mention some of the relevant issues.

As I said, the Committee welcomed the redistributive effect. It also welcomed the sound economy that the Government have built over the years. Britain has the fastest growth of any G7 country, and we are very pleased that, since 1997, over 1.5 million more jobs have been created. We are also pleased that inflation is at its lowest level for 20 or 30 years, and above all that the Government have made finances transparent over the long term.

Some of the experts to whom reference has been made spoke of a synchronised global slowdown, and said that the Government have forecast growth of about 2 per cent.

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to 2.5 per cent for 2002, and of 2.75 per cent. to 3.25 per cent. for 2003. We think that that is wise, because as the Chancellor said in his pre-Budget statement,


and stand on its own. He continued by saying that he is


I shall return to the Committee's comments on that issue.

On the economic outlook, we agree with the OECD that the United States is leading the global upturn. Gross domestic product growth of 1.5 per cent. for 2002 has therefore been revised to 3 per cent. to 3.5 per cent. for 2003. Historically, the Government's growth projections have been on the low side, but that has changed. We took evidence from the Chancellor, Gus O'Donnell and other Treasury officials. Mr. O'Donnell's explanation of the growth prospects for 2002–03 seemed particularly realistic.

As the report makes clear, according to commentators such as Goldman Sachs, the Government are being optimistic. The report states:


That approach is a reasonable one for any Committee that is charged with taking evidence from a wide range of people, and with engaging constructively with the Government, and the Chancellor in particular. We put such points to the Chancellor because it is incumbent on us to probe these issues, and to satisfy our own minds that matters are in order.

We are concerned about the imbalances to which the hon. Member for Kingston and Surbiton referred. We are mindful of the comments of Mervyn King, the deputy governor of the Bank of England, who said that the weakness of net trade


The report asserts:


That is a valid comment for any Treasury Committee to make, particularly in respect of imbalances. Goldman Sachs told the Committee that the Budget has not done enough to dampen consumer demand, and that the Monetary Policy Committee should take that factor into consideration. We questioned the Chancellor about that, and he made clear his views, and those of the Government.

The Government said that a trend growth of 2.75 per cent. had been established, but that was before they based their public finance forecast on the more cautious assessment of 2.5 per cent. When we considered those assumptions, the question of demographic changes and immigration arose. We should welcome the opportunity to debate immigration, but we should not tie it exclusively to the Second Reading of the Finance Bill. Countries such as the United States enjoy labour mobility, increased productivity and economic dynamism and interchange because they opened their doors and allowed people in. In that regard, immigration was seen as a valuable

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component. No Government should be afraid to take on such issues, and we need a wider debate. The issue of demographic change should be debated upfront, rather than being buried in our deliberations on Second Reading and in Committee. If we do that, we will be looking ahead and can perhaps put our economy on a more sound footing.


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