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Rob Marris: Will the hon. Gentleman cast his mind back to 1948, when we embarked on the creation of the NHS? Admittedly, he may well not have been born then.

The national insurance system, surely, was intended to cover unemployment benefit, the basic state pension and the health service. Is that not provided for in the National Assistance Act 1948, and is it not entirely appropriate for a Chancellor who wishes to increase NHS funds to do so through national insurance?

Sir Robert Smith: The hon. Gentleman should wonder why, having included such proposals in the Budget, the Chancellor suddenly discovered that he did not understand the procedures of the House and the workings of national insurance, and therefore had to make emergency changes to the business of the House to make his plans feasible. That is typical of the tortuous circles that the Government are having to negotiate—the hoops through which they are having to jump—to avoid the fact that they made certain promises with which they hoped to buy the last general election. They tried to keep the back door open in order to do what we told them they would have to do—find extra money for the health service. If they had not tried to close the front door, we would not be having these rather farcical discussions about their having to use national insurance.

Others wish to speak, and although we could go on for ever I think the aim is to finish at a sensible hour. I apologise to the Government for the fact that, in the interests of time, I may concentrate more on concerns my constituents will have than on all the good news in the Budget and the Bill.

My hon. Friend the Member for Kingston and Surbiton and the right hon. Member for Fylde (Mr. Jack) spoke of efforts to bring about a simpler tax system and a more effective way of dealing with big policy changes that Governments want to make. They said that fundamental shifts in taxation should be separate from day-to-day tidying up of tax legislation. Any progress in that regard would be welcome. In the last Parliament we tended to sit until much later and we often had debates in the early hours. The right hon. and learned Member for Rushcliffe (Mr. Clarke) and others used to make rather good speeches at that time of night about the need to simplify and improve the tax system.

I enjoy Finance Bill debates in which we move away from the political aspects and where there is some good cross-party recognition of ways in which we could improve tax and finance arrangements to the general benefit of the country and the political system. We still have not got there, and I urge all with greater minds than mine who have applied themselves to the task to keep up the good work. That would be much appreciated by those who must currently fill in some of the most complex tax returns, and interpret some of the most complex signals sent by the Budget.

Others have touched on issues that will affect my constituency. A measure of the complexity of all this is the fact that, in the Bill, we are still trying to sort out the aggregate tax that the Government claimed to have sorted out last year. It would be nice if they admitted that they could perhaps restrain themselves, step back and look again at the impact of that tax.

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The assessment of the environmental impact focused very much on the local impact of quarrying, in terms of environmental costs attributed to it. However, tax is being collected to the centre and being distributed throughout the country. Those from whom the tax is collected do not necessarily see the benefit of undoing any potential environmental damage.

This Budget poses an additional problem. Because of difficulties involved in the introduction of the tax, it will now affect large boulders from quarries. That will hit coastal defences. Given increasing flood threats and the growing need for such defences, it seems perverse to impose a major tax on the cost of building them. Even if the Treasury cannot look at the global nature of the tax, perhaps it could look at the margins. It has made other exemptions. The hon. Member for Banff and Buchan (Mr. Salmond) mentioned the extra costs affecting the breakwater at Peterhead. The rock used will be transported only three miles from the quarry. Adding to the cost of the breakwater strikes me as an unfortunate side-effect of the tax.

As has been said, fuel duty is being kept down this year. That is bound to be welcomed in the north of Scotland—indeed, in the whole of Scotland. As it is so far from any markets, any move to reduce costs and avoid extra burdens is welcome. I hope the Treasury will resist pressure from the hon. Member for Broxtowe (Dr. Palmer) to extend fuel duty to parts of the economy such as agriculture, fishing and, indeed, heating.

I am pleased about the proposal to charge foreign hauliers for road use, and to level the playing field between them and our hauliers. Some find it frustrating that it may not be implemented for several years. It is indeed frustrating that the announcement has been made so often, but implementation is still only on the horizon.

Haulage is important to my constituents and to the north and north-east of Scotland because, as I have said, we are further from the markets. Another important industry in my constituency is agriculture. A wider debate on finance and the general state of the economy still concerns the high pound versus the euro. Nothing in the Bill explains how the Government will square the circle, and help to remove some of the pressure.

There is still the possibility of access to agrimonetary compensation. If the Treasury could allow the Department for Environment, Food and Rural Affairs access to the money this year, it would redress some of the hangovers of the foot and mouth outbreak. I suppose it would help if DEFRA asked the Treasury, but I hope the Treasury will tell it that it can use the money this year, although it may not be able to in future. The Government should try anything that is available to them to repair the damage of last year's major foot and mouth outbreak.

One of the frustrations for the farming sector is that we are in the European Union, with free trade in agricultural products and a common system of agricultural support, yet the Government deny UK farmers access to the support that is available to competition abroad. UK taxpayers are in effect paying for foreign farmers to take jobs away from agriculture in this country. It would be a great gesture if the agrimonetary compensation were accessed in the last year in which it could be accessed.

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We have already touched on national insurance versus tax. It goes back to one of the sad things about the way in which the Government approached the last general election. There is common cause between Liberal Democrat and Labour Members about the need to invest in the health service. Some of us are disappointed that the Government are looking to launch the first year of major investment in the health service when we had hoped to be in the fifth year of it, but at least there is common agreement about that investment.

The Government are in danger, however, of undermining the message that we tried to get across to the public at the election—that investment must be paid for through fair taxation. By not making that point at the election and by trying to use back-door methods to find the funding, the Government could undermine the credibility of the core message that we need to get across. The Government have a last chance to ensure that there is effective delivery of health care. For the sake of future generations, they have a major responsibility not to destroy the fundamental belief in an NHS free to users and paid for out of public funds. This is the last chance to get it right. Having made a mess of how to raise the money, I hope that they do not make a mess of how to spend it.

As the Paymaster General knows, I have major concerns about the Government's proposals for North sea taxation. In many ways, they were most effectively put by the hon. Member for Waveney (Mr. Blizzard). I hope that the Treasury will look at his speech extremely carefully and I hope that the tenor of his arguments have convinced those on the Treasury Bench that he is expressing a genuine concern; it is not a matter of political point scoring. Many in the industry had thought that there was much greater understanding in the Treasury of the complexities of the financial arrangements that apply in the North sea than appears from its presentation of the Budget.

I welcome the promise of the Chief Secretary to put in the Library detailed workings of the Government's assumptions and calculations. I hope that those detailed workings will go some way to explaining the figures that the Paymaster General gave in her reply to the Budget debate last Monday.

Malcolm Bruce (Gordon): My hon. Friend will know that, as his neighbour, I share his concerns about the implications of the proposed tax changes. He will know that, on the day before the Budget, members of the all-party group on the UK offshore oil and gas industry met the United Kingdom Offshore Operators Association, which clearly had not the slightest indication that the Government had such proposals in mind. Those of us who have contacted members of that organisation since then know how shocked they are that the Government, having apparently developed a constructive relationship over five years, blew it out of the window without any notice. That has inflicted incalculable damage on confidence and investment in the North sea, and may be extremely damaging to the British economy.

Sir Robert Smith: I welcome that intervention. My hon. Friend has long experience of the importance of the industry. He has seen at first hand its impact on the north-east economy for longer than I have, and understands the industry's early stages of development,

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its progression, the way it integrates into the economy and the way it is affected. He is right about the all-party group. A sad message has gone out to people that they should ask for more than they want rather than enter into a genuine dialogue and reach a common understanding.

Those in the industry are genuinely shocked. Some people have put a lot of time and effort into trying to make the taskforce and Pilot work and to develop something from which we would all benefit. That is the important thing—the aim was to gain something from which we would all benefit. Obviously, the industry has its own interests, shareholders and finances to worry about. If the industry's financial interests differed from those of my constituents and the economy, I would have to part company from it but there was a commonality of purpose. The Treasury stood to benefit in the long run because, if we get more oil and gas out, we get more revenue. Jobs would benefit from long-term investment, and security of supply would benefit from the fact that we were taking our gas out of the North sea, rather than importing it. All those things seem self-evident.

On various platforms and in various debates, including in Grand Committee, I have often praised the Government for the way in which they handled Pilot. I praised Ministers in the Department of Trade and Industry for the way in which they took that initiative forward. Sadly, the Government have now done a lot of damage. We looked at other sectors, including fishing, and we said that Pilot was a model for the way forward for business and growth, a way of achieving financial understanding and dialogue between those affected by Government decisions and Government. That relationship has been broken, which is extremely damaging, and I hope that the Government will try to repair it.

I hope that it is possible to place the relevant information and figures in the Library before the Committee stage. If the Finance Bill receives its Second Reading and the motion goes through as on the Order Paper, the clauses will be debated next week. It would help if the Government were to provide the background and analysis to inform that debate. I suppose that to expect a change of heart by next week would be to expect a miracle. However, if, in the light of the debate, the Treasury concludes that it has got some of its assumptions and analysis wrong, it would be helpful if the Paymaster General offered the hope that the proposals might be revisited on Report, so that the damage can be undone.

Having listened to the Treasury make its case, I think that it has misunderstood where the North sea is at in terms of drilling, exploration and production. Current oil fields are tiny, and the cost of finding and developing them must therefore be met out of a much smaller return. Even though a huge field off Angola, say, would involve the payment of a higher tax return, it would still make much more money than a field in the North sea, on which less tax is paid.

The Treasury has lost the ability to strike a balance and ensure that the North sea's investment potential is maximised. It has not recognised the differential in costs and returns, and that we are dealing with much smaller fields. It has not dealt with the long life cycle of oil investment, and it has failed to recognise that profits aid investment in the next stage of exploration. Nor has it acknowledged that companies have to consider the long-term cycle of low and high oil prices, and the total

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return over the life of the risk. It has not considered the fact that every hole that a company drills that fails to yield oil has to be paid for through the successful fields.

One of the most fundamental and depressing facts for my constituents—many of whom have recently lost their jobs to make the industry competitive, and many more of whom may do so—is that the tax hits investment in the United Kingdom alone. If a company chooses to invest abroad, the Government do not impose that tax burden. Other Members have pleaded with the Government to consider measures such as interest costs and royalty relief. That would be a welcome development, but when the Government place the figures in the Library, they should recognise that, as we have shown, they have got them wrong. Doing so would offer some hope to my constituents, and for the long-term future of this country's prospects. The Government should be good enough to tell the House that the figures and the assumptions are wrong, and that they will happily revisit the tax regime on Report and do more to invest in this country's future.

The oil and gas so far extracted from the North sea are equivalent to the remaining reserves; in other words, we are perhaps only half way through its development cycle. However, if the Government kill off the investment and the larger platforms that provide the hubs for small fields, such fields will never be developed. Our future generations will not get the tax revenues from those fields, they will not get the jobs and we will lose the export industry that we have built through expertise. I urge the Government to think again about this extremely damaging and ill-thought out manoeuvre. Such a manoeuvre may be politically easy to achieve, but sometimes in government—and especially in the Treasury—it is a matter of more than easy political hits. Careful, structured decisions need to be taken that do not do long-term damage but long-term good. The rewards are for future generations, but the decision as to whether those generations will get them is in the Treasury's hands.


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