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I am grateful to my hon. Friend for giving way, as I want to emphasise that the CBI has welcomed the research and development tax credit. The hon. Member for Kingston and Surbiton (Mr. Davey) complained about complexity in the tax system, but does my hon. Friend consider that the CBI would rather do without the R and D tax credit, and that it would prefer that the relevant legislation did not appear on the statute book?
Mr. McFall: Your power, Mr. Deputy Speaker, is clearly greater than mine, as my hon. Friend the Paymaster General turned her back on me as soon as you spoke. However, I heard her question nevertheless.
In conclusion, I am aware that the Government have tried, with this Budget, to build a consensus with regard to the welfare state. It is already clear that families will benefit from some useful measures. I used to be a schoolteacher, and I worked in a number of deprived areas, as they were termed. It warms me to know that child benefit, which in 1997 was worth £11 for the first child, has been raised to £16. Moreover, 5 million out 7 million families will now receive £27.50 for the first child, and poorer families will receive £54.50. That is of immeasurable benefit for families that have been at the margins of society.
I am very pleased, too, about the Government's proposals for pensioners. We must be alive to the fact that we must be generous to pensioners who have got by on small pensions but who have been penalised by the system. The fact that the pensioner credit will be available to between 5 million and 6 million pensioners is a cause for celebration. The average pensioner will be £8 a week better off from October, so many elderly people will be able to stay in their homes longer and look after themselves in a better fashion.
I agree with my right hon. Friend the Chancellor that we should use the tax and benefits system to build a consensus with regard to the welfare state. However, we must remember that nothing can be delivered if sound economic policies and a sound economic platform are not in place. The Government have established those policies and that platform, and I urge that they be maintained.
I am also at one with the Government in their ambition to enhance and promote public services. For too longfor decadesthose services have been in disrepair. I want the Government to communicate to the electorate the fact that we have a viable strategy, but they must also make people understand that its implementation will take time. However, if we do not repair the public services, we could lose them all. This Budget hinges on that question. I urge the Government to stand by their fairness agenda for families and pensioners.
It is very important that Britain look outwards, to the EU and the third-world countries, so that we keep abreast of what is happening on the international stage. I shall be back, in another capacity, to urge the Government to do more about global poverty. I welcome my right hon. Friend the Chancellor's admission that we survive in the global economy but that half the people in the world are not engaged in it. We must be outward looking, and ensure that the fairness agenda applies globally, and is not confined by borders.
Mr. Michael Jack (Fylde): I am grateful to be called to speak. At the outset, may I remind the House of the declaration of my business interests in the Register of Members' Interests, and in particular my role as a non-executive director of a retail tile company?
I listened to the hon. Member for Dumbarton (Mr. McFall) with interest. He spoke with the authority that goes with being Chairman of one of the most important Select Committees in the House, and he reminded us of some of the important economic parameters underpinning the Budget and this Finance Bill. The hon. Gentleman made clear the importance that he attachesas do many othersto having good-quality public services in this country. I think that hon. Members of all parties share that view in connection with the health service. We are divided by a difference of opinion as to how we should achieve that, but that is probably healthy in its own way. Labour Members should not criticise the Opposition simply for the fact that we are still debating the matter and have not yet reached a decision.
I should like also to recognise the work of officials in the Treasury and the Inland Revenue, who are not present in the Chamber and who cannot speak about the Finance Bill and the Budget. I used to be involved in putting together Finance Bills, and I recognise the singular contribution those officials make. Regardless of the contents of the Bill, a huge amount of work goes into producing it. I, for one, am grateful that the task has been performed with skill once again this year.
Some of the measures in the Bill are very debatable, but there are others that I welcome. The simplification of VAT will certainly be welcomed by many small and medium-sized enterprises, and I know that hon. Members of all parties are united in their welcome for the important proposals to help sports clubs with financing.
In addition, I was very pleased with the sections of the Bill dealing with combined heat and power, and with the proposal to modify the climate change levy, which will no longer be charged on the electricity sold by CHP systems into the national grid. When the climate change levy was introduced, I stood at this very location in the Chamber and made that same proposal, and I was supported by hon. Members from all parties. I am glad that the Governmentthe sinners on that occasionhave repented, but it is a case of, "I told you so."
If the Government are in repenting mood on the climate change levy, I hope that they will look again the position of the horticulture industry which, as the Paymaster General knows, is carbon neutral. I have entertained hon. Members before with detailed expositions as to why that industry should be given relief from the levy. Now that the light is dawning on the Government, it is possible that it will dawn again on the horticulture industry.
I am especially pleased with clause 37, which introduces some important minor changes to the operation of schedule E. I am aware that the changes are a response to representations, if I can put it thus, from those involved in the tax law rewrite exercise. That has not happened before. Much had been said already about the complexities of our tax system, and I shall have more to say about that in a moment.
I am pleased that the Finance Bill is being used as a way to aid the processat least within the strictures of the rewrite exerciseof making our existing law understandable. It raises an interesting point. We praise that exercise for its clarity, but to pick up the point of the hon. Member for Kingston and Surbiton (Mr. Davey), there are in many cases more pages of clearer tax exposition. The real challenge for those of us who debate the length, weight and size of a Finance Bill is to decide what we want from our tax system in a complex world.
I listened carefully to the analysis of some of the many pages that have been required on aggregates tax and changes in matters connected with petroleum, and probably they are too long. However, we have no mechanism to debate the efficient operation of our tax system. I think that the time is right for the Government to consider having a standing commission on the operation of the tax system. We have a Law Commission, and from time to time it makes important recommendations about how the law of the land could be changed and improved. I think that a similar mechanism is now required for the tax system so that we can examine in detail how to make it operate properly.
I acknowledge that the legitimately elected Government of the day have the right to raise the money that they think fit, and we have the right to object to that if we disagree. However, there are ways, as the tax law rewrite exercise shows, in which the operation of the tax system can be made more efficient. A commission made up of experts with, if necessary, a political input, might be a way of creating neutral territory on which recommendations about the operation of our tax system can be made on a continuing basis.
In welcoming parts of the Bill, may I also welcome the extension of the age allowance to many pensioners? That is right for someone who has worked hard, particularly when returns from pensions are under pressurelargely as a result of falling stock market returns. However, the Government are complicit because of the ending of the payable tax credit. Vicars, for example, are especially badly off as the Church of England is £12 million down in its pension scheme. That is the reality, and anything that can be done to ensure that there is tax relief for pensioners who may be living on more modest means is welcome.
I come to some items that are not in the Bill. However, I would like them to be debated in Committee and I hope that the Government will consider them. I said in 2000 that in life assurance products, the way in which the I-E formula dealt with capital gains tax had not been amended to reflect changes in the capital gains tax regime as it applied to the individual. The Government did change, within that formulaic approach, the way in which personal taxation affected individuals.
I mention that because such products are the basis of many people's saving expectations for the future. That area has not been attended to, but it would be simple to do so and the cost would be relatively modest. In a letter sent to me in 2000, the former Financial Secretary to the Treasury told me that it would cost £30 million. That would enable there to be a modest improvement in the return to those policies if the internal capital gains tax regime was brought into line with wider capital gains tax changes. The hon. Gentleman did me the courtesy, in writing his letter, to say that the matter had been considered carefully by the Treasury, but that it was not minded to make the change just yet. I have been very patient, and now suggest to the Paymaster General that the time is right to look at that. It is a relatively inexpensive way of ensuring that life assurance policies returns can be improved and that their internal tax regimes are in line with wider tax activity.
In his concluding comments, the hon. Member for Dumbarton referred to the fact that large parts of the world are totally disconnected from the wealth and economic growth mentioned in the earlier part of his speech. I propose that the Government should give serious consideration to developing a tax credit to encourage investment by British companies in some of the least developed parts of the world. It would, by definition, be riskier, but what I have read about the workings of overseas aid leads me to believe that the private sector can make a positive contribution. British companies need some encouragement, and a credit such as I have described might be one way of addressing that issue.