Finance (No.2) Bill

§ Mr. Graham Riddick (Colne Valley)

On a point of order, Mr. Speaker.

§ Mr. Speaker

Is it concerned with this Bill?

§ Mr. Riddick

No, Sir.

§ Mr. Speaker

Then I shall take it some other time.

§ The Chief Secretary to the Treasury (Mr. John Major)

I beg to move, that the Bill be now read a Second time.

This is the Government's 12th Finance Bill and it incorporates the proposals set out in my right hon. Friend's Budget last month. It was a substantial Budget and continues our strategy of tax reform and tax reduction within a framework of sound public finance, firm control of public expenditure and progressive reductions in public borrowing. Those policies have now brought us a balanced Budget.

In conjunction with other policies, this strategy has without doubt transformed the British economy. The extent of the change in performance and confidence is remarkable. In the 1960s, the British economy was clearly in a poor state. In the 1970s it worsened. We were known, with some justification, as the sick man of Europe. That label and all that went with it have now disappeared. In the 1980s the British economy has become the fastest-growing in Europe and, in 1987, the fastest-growing of all leading industrialised countries.

During the 1960s we praised and envied the German economic miracle. In the 1980s the position has been precisely reversed. The House need not necessarily take my word for that. I shall quote briefly from one of Germany's leading liberal newspapers, "Die Ziet": In the past the German model was praised in an almost embarrassing manner and compared with Great Britain's bad example. Now it is the other way round". That transformation has occurred because of the policies that we have followed and continue to follow in this Finance Bill, and each and every one of them has been consistently opposed by Opposition Members, who later today will vote against tax reductions, against fair treatment for married couples and against a raft of measures designed further to improve our economic prospects. Let no one believe that economic Luddites no longer exist, for they sit opposite us and will demonstrate that fact later today.

The evidence since the Budget confirms that Britain's economic success continues. The latest figures show that between February and March unemployment fell by 28,000. It has now fallen for 20 months in succession, by 706,000 in total and by 533,000 over the past year. It is now at its lowest level for more than six years.

It is equally relevant that the numbers of those in employment, apart from demographic changes, are continuing to rise strongly. In the fourth quarter of 1987, they rose by 146,000. That means an increase of more than half a million in 1987 as a whole. Over the past four years, the United Kingdom has created more jobs than the sum total of all the rest of the European Community added together. That is the scale of the change coming over our economy.

215 More evidence of the health of the economy was provided only this morning by the results of the CBI's latest industrial trends survey, carried out in the first half of this month. I shall illustrate some of its findings. It states: Business confidence remains high … The rising trend in optimism is broadly based … Strong demand has been met by increased manufacturing output … Investment intentions have strengthened substantially and 86 per cent. of firms report their capacity at least adequate to meet expected demand.

§ Mr. Doug Henderson (Newcastle upon Tyne, North)

Will the right hon. Gentleman give way?

§ Mr. Major

In a moment. That is the way in which British industry sees itself after the Budget, and it is a tragedy that the Opposition cannot see that——

§ Dame Elaine Kellett-Bowman (Lancaster)

rose——

§ Mr. Henderson

rose——

§ Mr. Major

I promised to give way first to the hon. Member for Newcastle upon Tyne, North (Mr. Henderson).

§ Mr. Henderson

I am glad that the Minister is giving way to the Opposition first. I am also glad that the Minister has itemised a number of areas in which he believes we are prosperous. If we are, how does he explain the fact that we have the second largest deficit in the balance of trade of any OECD country?

§ Mr. Major

The hon. Gentleman should understand that one of the significant reasons for the balance of trade deficit is that the British economy is growing noticeably faster than those of any of our European competitors. If he examines the structure of the balance of trade deficit, he will notice that a good deal of it is semi-manufactured goods that are entering the country and will be re-exported.

§ Dame Elaine Kellett-Bowman

Is my right hon. Friend aware that unemployment in Lancaster has fallen twice as fast as the regional and national drop? Does not the CBI survey to which he referred destroy the Opposition's pessimism, which says that every time people have more money in their pockets they will spend it on foreign goods?

§ Mr. Major

My hon. Friend clearly illustrates the fact that prosperity is increasingly spreading to all regions of the United Kingdom and that unemployment is now falling in every region. I appreciate that the Opposition do not know how to achieve success, but it is a shame that they cannot even recognise it from time to time.

What is vital, and unusual for post-war recoveries in the United Kingdom, is that this continued improvement in the labour market and sustained growth in the economy has been achieved without a resurgence of inflation. Retail prices in the last three months are less than 3.5 per cent. higher than a year earlier, and 1987 was the first year since 1964 when the rate of growth exceeded the rate of inflation.

It is a welcome fact, moreover, that the economic resurgence is not confined to London and the south-east. The unemployment figures show that every region is sharing in the strength of the economy. That is reflected in the fact that the steepest falls in unemployment during the 216 past year have been in the west midlands, the north-west and Yorkshire and Humberside. I hope that that is exceedingly welcome to the whole House.

Throughout the country, there is increasing evidence of improving performance and a spread of the enterprise culture. Between 1979 and the first half of 1987. manufacturing productivity in Scotland increased by an average of 5.5 per cent. a year as compared with overall growth in the United Kingdom of just under 4 per cent. Over the decade to 1986, output in high technology manufacturing in Scotland increased by 170 per cent. and in electronics by 210 per cent. In Wales, the number of self-employed people has gone up by nearly one third since 1981, and now stands at more than 14 per cent. of the working population—one of the highest proportions in the United Kingdom. Since 1983, employment has risen in every region of the United Kingdom.

There is a further factor—confidence in the United Kingdom is increasingly attracting overseas investment into this country. Since 1983, direct investment in the United Kingdom from abroad—leaving aside the North sea—has grown on average by 13.5 per cent. a year in real terms. By contrast, it fell between 1974 and 1979 when the Labour party was in office. This investment is benefiting every region. The Bill is designed specifically to encourage that process to continue.

Wales now has the greatest concentration of Japanese manufacturing units in Europe. Japanese car manufacturers are a valuable part of the economy in the north-east. The west midlands has picked up fast in the plastics industry and instrument engineering. In the north-west, old industries are adapting to new technology and new industries are being introduced.

§ Mr. John Smith (Monklands, East)

What has this to do with the Finance Bill?

§ Mr. Major

The right hon. and learned Gentleman clearly does not understand the interaction between financial measures in this Bill and others and the success of the economy.

The image of the parts of the country that I have mentioned, which is sedulously cultivated by Opposition Members as scandalously depressed, is gradually being changed. Business men and investors know better than the Opposition what is now happening in the regions.

§ Mr. D. N. Campbell-Savours (Workington)

To what extent does the right hon. Gentleman believe that the British economy is dependent on the United States economy? What would be the impact on the British economy if, for example, there was a political change in the United States next year and the budget deficit and the trade deficit were cut during the next few years?

§ Mr. Major

The principal impact and concern regarding the British economy is the success of our economic management, our competitiveness and our practices. Those are the matters that are wholly within our control and they are the matters which have been dramatically improved during the past few years.

§ Mr. John Battle (Leeds, West)

The right hon. Gentleman did not include Yorkshire in his list of regions and successes. Would he care to comment on the fact that I can guarantee that most of the jobs advertised in the window of the Bramley jobcentre are part-time, low-paid 217 jobs? Is that not the reality of the increase in employment? It is not the increase in full-time, permanent work which the right hon. Gentleman suggests.

§ Mr. Major

As it happens, I did mention Yorkshire, several parts of which are growing exceedingly rapidly. There is growth in part-time jobs, for which there is genuine demand. Many people welcome that growth. I do, and I hope that the hon. Gentleman does. There is also substantial growth in full-time jobs which is reflected in all the available statistics.

The confidence that we can now see is the direct result of our economic management over the past nine years. The attractiveness of the United Kingdom as a place to invest was given an enormous boost by the changes that my right hon. Friend the Chancellor of the Exchequer made to corporation tax in 1984, which gave the United Kingdom what is still one of the lowest corporation tax rates in the industrial world. This Budget gives a further boost to businesses that are already here and it will make the United Kingdom yet more attractive to businesses that are still thinking of coming here.

Again, the House need not just take my word for it. ICI called it the most radical Budget since the war. The CBI said: This is the Budget we have been waiting for … it will promote enterprise … it will provide greater incentives for all in British business. The Association of British Chambers of Commerce said: We wanted incentives. We have got them. Now let us make them work". The Small Business Bureau's description was: A shot in the arm for the smaller business". The message is crucially and critically clear—the Budget provides a challenge which British business men are ready to grasp. We look to them to do so in the months and years ahead.

That is the economic backdrop to the Bill. The Opposition may not welcome it, because economic success for Britain means political oblivion for them, but the economic success is a reality.

This is a substantial Bill. It runs to 139 clauses and 10 associated schedules. The centrepiece is the income tax changes in clauses 22 to 24 which affect all taxpayers. They create in Britain the lowest basic rate of income tax since the second world war. The basic rate is now down to the same level as the reduced rate under the last Labour Government and personal allowances are now 25 per cent. higher in real terms than they were in 1979. The United Kingdom will also have one of the simplest personal tax structures in any country and one of the lowest top rates.

The logic of these reforms is accepted throughout the world by Governments across the political spectrum. It is plain common sense that incentives are vital to improve economic performance. The Opposition do not necessarily accept that. Their anxieties about tax changes are consistent and have been with them for many years. We have been in this situation before. Last month's' ritual denunciation of the higher rate cuts had a familiar ring about it.

I remind the House of what the Opposition spokesman —the right hon. Member for Bethnal Green and Stepney (Mr. Shore)—said when winding up the debate after the Government's first Budget in 1979. He justified voting against cutting the top rate of tax from 83 to 60 per cent. with these words: 218 the Chancellor of the Exchequer is looking for … an effort, in income terms, by the existing elite of British industry, commerce and administration. For several reasons, I believe that is a nonsensical expectation. Of course, the recipients of his largesse will be pleased. However, will they work harder and more productively than at present? Will they be galvanised, to use that new and fashionable word? Will they be encouraged to invest more? … Previous experience, when Tory Chancellors cut surtax and income tax, reveals no correlation in the United Kingdom between the performance of economy and the levels of personal taxation."—[Official Report, 18 June 1979; Vol. 968, c. 1028.] As we have cut taxation, the economy has continued to improve. The right hon. Gentleman now has his answer, which is clear to everyone. The evidence is that, far from the then Chancellor's expectations being nonsensical, the right hon. Gentleman's strictures were wrong. The result of the increased effort, high productivity and, indeed, galvanisation, is an upsurge in revenue from higher rate taxpayers. Despite the top rate cuts, and despite the abolition of the investment income surcharge, the top 5 per cent. of taxpayers paid one third more in income tax in 1987–88 than when we took office.

Now, even the right hon. Member for Islwyn (Mr. Kinnock) says that it is "highly unlikely" that Labour would reimpose a top rate of 80 or 90 per cent. It is highly unlikely, of course, that Labour would have the opportunity. It is limping along in the wake of Conservative policy. Even now, after nine years in Opposition, Labour has no coherent tax policy. All it offers is a tone of envy in general and nothing in detail.

§ Mr. Graham Allen (Nottingham, North)

Does the Minister consider the reduction in income tax as the jewel in the Conservative crown? Has he seen the figures that his right hon. Friend the Chancellor of the Exchequer gave me in answer to a parliamentary question? The burden of taxation as a whole, including national insurance and VAT and everything else has hardly moved since 1979. It is 39.3 per cent. at the moment. It was 39.36 per cent. in 1979. In virtually every single year that the Government have been in office, the real tax burden has been higher than it was in 1979.

§ Mr. Major

Do I take it that the hon. Member for Nottingham, North (Mr. Allen) will encourage Opposition Members to vote for the tax reductions in the Budget and then to vote for more tax reductions? When one costs their programme, it is clear that taxes would go up beyond any capacity to pay.

I make a prediction to the hon. Gentleman. Just as no credible economic spokesman for the Labour party now proposes a return to 83 per cent. or 98 per cent. taxation, nor, after their next election defeat, will any Labour economic spokesman demand the reimposition of a 60 per cent. top rate. For by then we will have seen the economic benefits which flow from this further measure to boost enterprise, effort, productivity—indeed, as the right hon. Member for Bethnal Green and Stepney once put it, to "galvanise" our most talented and skilled people.

f by then the Labour Front Bench has still not learnt that lesson, we may find a place in our public expenditure plans to buy them one-way tickets to Australia and New Zealand for urgent discussion with their Labour colleagues who have discovered the advantages of cutting taxes. It would be money well spent to send them there. If they learn the lesson, it might even be worth paying for return tickets to bring them back.

219 The controversy over the higher rate cuts has overshadowed the important measures in clauses 22 and 24 —the reduction in the basic rate of tax to 25p in the pound and the double indexation of allowances. Clause 22 means that we have achieved the target we set in 1979: to provide a marginal rate of tax of 25p not just for the 4.5 million who were in Labour's reduced rate band, but for 23 million taxpayers—94 per cent. of the total. Clause 24 takes further the increases in allowances.

The married man's allowance is now at its highest level since the war. We could have achieved our basic rate objective far earlier had we not devoted resources to increased income tax allowances. But we believed then and we believe now that allowances in 1979 were too low, and that too many people paid tax on too modest incomes and we wished to take action to alleviate that. The effect of those increases is that 1.7 million people, nearly one quarter of them elderly, who would have been paying tax if we had simply kept allowances constant in real terms, now pay no income tax at all as a result of the changes.

Lower personal income tax opens the way for further reform to the tax system. There are provisions in the Bill to clamp down on a range of unjustified tax breaks—clause 44 reduces the under-taxation of company cars. Even so, the tax valuation for tax purposes will still fall far short of the true value of the benefit.

Clause 63 will bring to an end the abuse of forestry relief as a tax shelter. In future, Government assistance to forestry will be better targeted through a new grant scheme which will better realise our environmental objectives. Under the new scheme, grants will be available for planting to improve landscape, habitat and recreational amenities as well as timber production. All woodlands will be subject to clear environmental guidelines. Some people have criticised the fact that conifer planting will continue to receive support. They should remember that broadleaves cannot be grown in all areas and that the main market for timber in this country is for soft wood.

Clause 42 abolishes mortgage interest relief for home improvement loans, thus targeting relief on the main objective of home ownership and removing the scope for abuse about which the Public Accounts Committee has expressed concern. The Bill also removes top slicing reliefs for lump sum payments such as golden handshakes, which are no longer justified with lower tax rates.

§ Mr. A. J. Beith (Berwick-upon-Tweed)

The Minister spoke about unjustified tax breaks. Does he regard higher rates of tax relief on mortgage interest as a more justified tax relief than tax relief on home improvements?

§ Mr. Major

The point about mortgage interest relief is that it should be put to the purpose for which it was intended. The Public Accounts Committee expressed concern that that was not necessarily the case for mortgage interest relief on home loans. I draw that distinction for the hon. Member for Berwick-upon-Tweed (Mr. Beith).

The Finance Bill also contains important measures to simplify the tax system—not least in the nightmarishly complex area of non-charitable covenants and main-tenance. Clauses 35 to 39 will sweep away a complex set of rules which involve the taxpayer in a lengthy process of claiming relief or repayments from the Inland Revenue. New covenants, apart from covenants to charity, will be 220 taken out of the tax system altogether. New maintenance payments will be free of tax, and tax relief for the payer will be subject to a limit.

These changes will make the system much simpler all round. In particular, they will reduce the tax burden for separated and divorced wives on modest incomes, and limit the tax relief available to wealthy husbands. They will also remove a disincentive on wives who want to work, who will no longer have some of their personal allowance used up by their maintenance.

Clauses 31 to 34 and clause 98 introduce independent taxation for married women—perhaps the single most important innovation in the 1988 Budget. I must say that I am a touch surprised that the Opposition have given this measure so little recognition. I will not dwell in detail on the anachronisms of the present system, which treats a married woman's income and gains as if they belonged to her husband, nor shall I attempt to explain in detail the new provisions, which we shall have the indubitable pleasure of discussing in Committee.

The crucial point is that the system we propose will give all married women full independence and privacy and achieve this sooner than the other alternatives canvassed. It will continue to recognise marriage. It will give all women a personal allowance and capital gains tax annual exemption in their own right.

There is a further point. It will bring significant financial benefits to a very large number of elderly married women with small incomes who receive pensions on the basis of their husband's contributions. At present such a pension is taxed at the husband's rate. Under independent taxation it will be treated as the wife's income and elderly wives will have their own age-related personal allowance to set against it. I think that the effect has not yet been fully appreciated but, in fact, around 160,000 elderly couples —nearly 15 per cent. of the total—will be taken out of tax altogether as a result of the change.

§ Ms. Marjorie Mowlam (Redcar)

The Minister is not telling the whole story. The marriage tax allowance is still given to the man and can be transferred to the woman only with his consent. If the Minister is serious about creating equality of opportunity for women, why is there no tax incentive for workplace nurseries, as that would stop the taxing of toddlers?

§ Mr. Major

The hon. Lady's latter point is a non sequitur. Her first point raises the problem that to allow choice would place substantial cost on the whole system of independent taxation. That is the difficulty that we face. The rules would be more complicated for taxpayers and for the Inland Revenue and would compromise privacy and independence. Most important, it would not have been possible to implement the scheme by 1990. I understand and appreciate the hon. Lady's point, but we had to take a judgment, so we took the choice to which the hon. Lady refers. Her second point was not a matter arising out of this Finance Bill.

There is a further point concerning the penalties on marriage, which the hon. Lady nearly encouraged me to forget. As well as removing the unjust treatment of married women, the Bill also removes, for all practical purposes, the discrimination against marriage which exists in the tax system. Clause 41 will apply the limit on mortgage interest relief to the house or flat so that married and unmarried couples will get the same amount of relief. 221 Under clause 29, an unmarried couple living together with children will get only one additional personal allowance between them, so that they get no more tax relief than a married couple.

In addition to these substantial reforms of the income tax system, the Bill includes a number of significant changes in capital taxation which build upon earlier reforms. Clause 91 will mean that only real capital gains are taxed, ending the injustice of taxing paper gains. This will benefit the economy by unlocking many assets acquired pre-1982 and free the resulting capital for new and productive investment.

Clause 92 will charge gains at income tax rates, reducing the incentive to convert income into gains, purely to avoid tax. It will mean that basic rate taxpayers see a reduction of five percentage points in their rate of tax, while higher rate taxpayers will see an increase of 10 per cent. on their capital gains. That reform is possible only because we have reduced the top rate of tax.

The Bill also contains provisions to reduce the burden of inheritance tax significantly. Clause 127 introduces a flat 40 per cent. rate with a threshold over twice as high in real terms as in 1979. And the number of tax-paying estates will be reduced by one quarter, allowing many more people to inherit the family home entirely free of tax.

These changes will be of particular and enormous help to those running family businesses. They are of social as well as economic importance, too, because they allow the family business, the small shop, or the small farm to be passed on intact between generations. That is critical to maintaining the social fabric of many of our small towns and villages. We have come a considerable way from the capital transfer tax that we inherited, with its threshold of only £25,000 and its 17 rates on gifts and 14 rates on bequests.

§ Mr. Campbell-Savours

Will the right hon. Gentleman give way?

§ Mr. Major

No, I shall not give way to the hon. Gentleman on that point.

The Bill makes a number of improvements to the business expansion scheme. The Opposition profess to regard the scheme as no more than a tax shelter for the rich. They ignore the boost the BES has given to investment and enterprise.

§ Mr. John Smith

The Minister has passed over clause 128. What is the purpose of that clause, which releases from inheritance tax gifts to political parties in excess of £100,000? Why is that change being made?

§ Mr. Major

The change is being made for a variety of sound reasons. If, one day, the right hon. and learned Gentleman is able to produce satisfactory policies, he may find that even his party benefits from the provisions of that clause.

§ Mr. Smith

For what reasons is the change being made?

§ Mr. Major

Because, among other reasons, it places bequests of that kind on the same sort of level playing field as bequests made by legatees to other bodies. It is no doubt a matter that we shall discuss next week in the Committee of the whole House and on other occasions.

§ Mr. Smith

Is one to understand from the justification offered by the Chief Secretary that this inducement to people to leave money to the Conservative party is because the Conservative party is to be incorporated into a charity?

§ Mr. Major

Before the right hon. and learned Gentleman grows too excited about that, I remind him that when the last Labour Government were in power charities and political parties were treated in precisely the same way for tax purposes. The position is exactly the same now. The right hon. and learned Gentleman ought to look at the history of his own party before criticising the Government's legislation.

So far, over 3,000 companies have raised over £750 million under the business expansion scheme. An independent study in 1985 by Peat, Marwick, McLintock found that only a third of BES finance would have been raised as equity without the scheme. When my right hon. Friend introduced the scheme in 1983, the venture capital industry in this country was still in its infancy, and unquoted companies of all sizes often found it difficult to raise equity finance from outside investors. Five years on, we have now reached a point where the United Kingdom venture capital industry has been so revitalised that larger companies can now readily raise equity finance without the need for special tax relief.

Accordingly, clause 50 reduces the relief available by introducing a limit of £500,000 on the total investment in a company which can qualify for tax relief in any one year under the scheme. That is intended to concentrate relief on investment in smaller local companies who find it more difficult to raise equity capital outside the business expansion scheme.

There is a further change to BES in clause 49, which extends the business expansion scheme to investment in companies specialising in letting residential property on new-style assured tenancy terms only. As the House knows, these will provide security of tenure for tenants. Landlords will be able to obtain possession on only limited grounds, broadly similar to those applied by existing Rent Acts.

The lack of a private rented sector has long been a barrier to job mobility and job creation. People who want to move to find work have been prevented by the difficulties of obtaining council housing and by the problems and cost of buying new homes. This new relief will give a kick start to the provision of readily available rented housing to help people move to new jobs more easily. Moreover, by increasing mobility around the country, it will ease skill shortages and help to reduce the disparities of regional unemployment.

We are determined that there should be a flourishing private rented sector to give people a real alternative to owner-occupation or to what is all too often simply a place on a council waiting list.

The Opposition will seek to conjure up the vision of a return to Rachman.

§ Mr. Alistair Darling (Edinburgh, Central)

Precisely.

§ Mr. Major

The hon. Gentleman says, "Precisely." He makes the point extremely eloquently, but to do so is to trivialise the debate.

It is only in this country that the very existence of a private rented sector is a matter of political dispute. Elsewhere a choice between owning and renting in the private or public sectors is the accepted norm because it 223 allows people a flexibility which our system does not permit. In Germany, the latest figures show that 43 per cent. of property is privately rented, in France the figure is 36 per cent. and in the USA it is 33 per cent. In the United Kingdom it is less than 10 per cent. because of the hostility of the Labour party to the privately rented sector. We are absolutely determined that British families should enjoy not only the right to buy but the right to move. This will provide it for them.

§ Mr. David Winnick (Walsall, North)

I am grateful to the Chief Secretary for giving way in his usual courteous manner. Is it not a fact that the Rent Act 1957, introduced by a Conservative Government, was supposed to lead to a far greater amount of rented accommodation in the private sector? However, it led to the Rachmanite scandal and to a reduction in the amount of privately rented accommodation.

Is the right hon. Gentleman aware that apart from the Rachmans of the past there is Nicholas Hoogstraten, a notorious landlord whom the Secretary of State for the Environment has been trying to get into court, but to no avail? It is precisely that person, and those like him, who will do best out of this legislation.

§ Mr. Major

The hon. Gentleman is wrong about that. I share his distaste for the Rachman-like methods of years ago. This provision applies to assured tenancy schemes only. I agree with what I take to be the hon. Gentleman's view, that the impact of Rent Acts over a period of time has severely diminished and destroyed the privately rented sector. We wish to deregulate and to provide a privately rented sector, not least to expand choice and to provide an opportunity for mobility. We hope that the Opposition will not place the same impediments in the way of success as they have placed in the past.

§ Mr. George Howarth (Knowsley, North)

What does the Chief Secretary have to say about the view of the Institute of Housing about this matter? Its view is that it will not really have much of an impact in terms of meeting housing need. Our concern is its short-term nature (5 years) and the obvious incentives to obtain vacant possession at the end of that period.

§ Mr. Major

If the hon. Gentleman is making the case that at the end of the five-year period we should extend it, am content to listen to any representations that he has in mind, but this is a time-limited scheme. The intention is to give a kick start to the privately rented sector.

We wish to ensure that a good deal of the accommodation that could be made available is made available, to provide a better total quantity and quality of accommodation for people to live in. It is one of the great tragedies of post-war social history that for dogmatic and theological reasons the Labour party has constantly opposed the provision of privately rented property.

§ Mr. Darling

If the Chief Secretary is serious about increasing mobility and choice, rather than giving a tax handout to those who would speculate in providing rented property, would it not be better to restore the same amount of money to individuals by way of housing benefit so that they would have beter purchasing power and would be able to exercise choice, including being able to move to 224 this part of the country where houses are so expensive? All that the Chief Secretary seems to be doing is exhuming Rachman and wishing him the best of luck.

§ Mr. Major

It is not so much the purchasing power as the supply of accommodation at which this measure is aimed.

§ Sir Eldon Griffiths (Bury St. Edmunds)

My right hon. Friend has been more than polite in pausing on this point because I know that he wishes to speak on many other matters. However, he may take it from me, as one who has lived for many years in the United States, that that very mobile society has been able to provide a rental market of a quality and price that is attractive to large numbers of ordinary people who wish to move, because the rented sector has been able to work out the market. This country has been damaged by the inability of the market to work. I wish my right hon. Friend well with his clause.

§ Mr. Major

I am grateful to my hon. Friend. I agree without qualification with his remarks and I am content to rest on them.

§ Mr. Ian Gow (Eastbourne)

Does my right hon. Friend recall that when we introduced the right to buy in what is now the Housing Act 1980, the Opposition were strongly opposed to that provision? Will my right hon. Friend reflect on the fact that now that the Opposition are opposing our measures to bring into use property that is at present empty or underused, and to attract private money into building new property for renting, they are just as out of touch about the prospective tenants whose champions they claim to be as they were about the right to buy?

§ Mr. Major

My hon. Friend, who is a distinguished former Minister of Housing, is entirely right. I confirm the message that he essentially gave. We need no lectures from the Labour party about how to produce good housing or about the right either to enjoy ownership or to rent. The Oposition were wholly wrong about the right to buy, and they are wholly wrong about the right to move.

The Bill contains a range of other useful measures affecting businesses. I shall mention only the most important—and I may say to the right hon. and learned Member for Monklands, East (Mr. Smith) that I am moderate by instinct. That is a virtue I offer Opposition Members as well.

In parallel with the basic rate tax cut, the small companies' rate of corporation tax falls to 25p, which is the lowest level since the war. Capital gains tax rebasing will enable many companies to unlock pre-1982 assets for new investment and reduce their tax bills by £235 million in 1989–90. Clause 132 will abolish the capital duty levied on companies being formed or expanding, so removing a significant proportion of the cost of capital issues. That is the fifth major tax to be abolished by my right hon. Friend the Chancellor of the Exchequer, who has now abolished more taxes than the right hon. Member for Leeds, East (Mr. Healey) introduced. In all the circumstances, the House may consider that to be a remarkable record.

The Bill will modernise also the rules on company residence and migration, removing the Treasury's outdated discretionary powers and replacing them with new, straightforward and objective rules. It will respond to representations from the building societies by removing the present tax obstacles in the way of societies seeking to convert to public limited companies. The Bill will improve 225 administrative arrangements for taxing Lloyd's members in line with our objective of ensuring that they are taxed effectively but fairly, in a way that reflects the special features of Lloyd's operations.

The Bill contains a package of measures designed to implement reforms of tax administration advocated by the Keith committee. It is a balanced package providing for both relaxation and tighter rules where justified. Clauses 112 to 121 give the Inland Revenue appropriate powers to uncover tax defaulters. Those measures result from extensive consultation with representative bodies and with the public, and they have received overwhelming support.

Clauses 11 and 12 increase Customs and Excise powers for dealing with fraud and commercial smuggling, bringing the legislation more closely in line with mainstream criminal laws. As well as those tightening measures, the Bill includes some easements of the VAT civil penalty regime, which will be of considerable benefit to businesses.

Clause 10 updates the Customs' power of search of person contained in section 164 of the Customs and Excise Management Act 1979. That section has remained virtually unchanged for 30-odd years—a period during which drug smuggling has become a widespread and serious problem. The clause will bring Customs' power of search more closely into line with the police, with the various additional safeguards proposed by the Keith committee. It clearly defines categories of search and provides necessary powers of detention for search.

No one likes being searched—it can be extremely distasteful. Nevertheless, that power is necessary if we are to have any power over smuggling. The updated power provided by clause 10 will equip Customs officers with sensible methods of detecting and deterring smugglers while reinforcing the statutory safeguards provided for suspects.

Last month's Budget repeated 1987's economic hat trick of tax reductions, higher public expenditure and sharply reduced borrowing. This year my right hon. Friend is planning for a public sector debt repayment of £3 billion. That is a remarkable achievement by any yardstick.

§ Mr. Gordon Brown (Dunfermline, East)

rose——

§ Mr. Major

I have given way sufficiently; the hon. Gentleman must catch your eye, Mr. Deputy Speaker. In last month's debates on the Budget—[Interruption.]

§ Mr. Brown

Can the Chief Secretary confirm that he has the money to relieve the suffering of pensioners as a result of the changes made to housing benefit? Can he confirm also that instead of giving tax cuts to the 1,000 richest people in the country, he could have paid the £70 million that is the cost of relieving the capital level for pensioners from £6,000 to £10,000? Can he further confirm that it is not an absence of cash that prevents the Government from acting on this important issue but a complete absence of compassion?

§ Mr. Major

I assume that that was a trailer for the hon. Gentleman's speech, and we shall await it with considerable interest. I may tell the hon. Gentleman that the results of the Government's economic policies have enabled us in the past few weeks to meet in full the pay 226 review awards to nurses, doctors, dentists and those serving in the armed services.. That could not have been done if the public finances were not in good order.

§ Mr. John Smith

indicated dissent.

§ Mr. Major

The right hon. and learned Member for Monklands, East could have spoken in this debate, had he wished to do so. Perhaps he will permit me to finish— [Interruption.] The Chancellor is not shouting like a banshee from a seated position.

In our debate on the public expenditure White Paper, the hon. Member for Dunfermline, East (Mr. Brown) said that to exclude an increase for the National Health Service from the Budget would be an unprecedented act of malice."—[Official Report, 24 February 1988; Vol. 128, c. 319.] The hon. Gentleman now has his answer. More importantly, the nurses, the doctors and the dentists have their money, and the hon. Gentleman was wrong as usual. Not only will they benefit from the 2p cut in the basic rate of tax in the Finance Bill, and from the doubling of personal allowances, but they will now receive a pay increase everaging 15.3 per cent.—ranging as high as 60 per cent.

Much of that is the direct result of the agreement on the grading review reached with the nurses as long ago as last December. It is a cost that the Government will fund in full and a cost that the Government can meet in full only because of the strength of our public finances and the control we have kept over expenditure.

Only the British Labour party retains its dinosaur attitude to tax reductions. It is ironic that in the same week that the Labour party in Westminster was digging into its entrenched opposition to the higher rate cuts, one of the party's paymasters—the Transport and General Workers Union—was robbing the Scottish people of 1,000 jobs in Dundee. That is a timely reminder of Labour's priorities of increased taxation and a return to trade union restrictive practices—both calculated to destroy jobs and not create them.

Our Budget encourages enterprise and creates incentives and it stimulates success and promotes jobs. It is a Budget designed to achieve greater opportunity and prosperity. The measures to achieve them are in the Finance Bill and I commend it to the House.

§ Mr. Gordon Brown (Dunfermline, East)

The one point on which both sides of the House are agreed is the fundamental importance of this Finance Bill. However, what the Chief Secretary described as an economic miracle will be unknown to 2.5 million people who are unemployed, and to 18 million who are on low incomes. In his naive belief that the nurses' settlement, however welcome, will solve the problems of the National Health Service, and in his vigorous defence of the Bill—as befits a Minister marked out as the Cabinet's fastest rising star since the Secretary of State for Social Services—the Chief Secretary seemed to go out of his way to avoid mention of the central fact that informs the entire Bill. That central fact is that, as a result of the changes in top rate tax and personal allowances——

§ The Financial Secretary to the Treasury (Mr. Norman Lamont)

Did we mishear, or did the hon. Gentleman mention 18 million low-paid people?

§ Mr. Brown

I said 18 million, and I defend that figure. That is the figure published by the Department of Health and Social Security, which gave 16 million as the number of people on low incomes, on the latest figures that were available to it. When that figure is updated as a result of all the changes made because of the social security cuts, we arrive at a figure of 18 million people on low incomes. That includes mothers, children and wage earners—[Interruption.] I should have thought that Conservative Members would be concerned about the poverty and destitution throughout the country. I should have thought that, instead of laughing about housing benefit cuts and the freezing of child benefit, they would be anxious to do something about problems that affect 18 million people.

The central fact that underlies the entire Bill is this. Taking together the top rate tax reductions and other changes, the top 1 per cent.—who are uniquely privileged as a result of previous decisions by Chancellors of the present Government—gained more than the majority of people in this country put together. In one line of one sentence of one clause of the Bill, £2,100 million in a full year is given away to those who previously faced taxation at the very top rates.

§ Mr. Phillip Oppenheim (Amber Valley)

Can the hon. Gentleman tell me straightforwardly whether he prefers a higher top rate of tax for high earners, which none the less produces a lower return for the Exchequer, or a lower top rate of tax that produces a higher return?

§ Mr. Brown

I am grateful to the hon. Gentleman for intervening at this stage. I had expected the question, but thought that it might come later, when we had addressed some of the problems in the Bill. Obviously the hon. Gentleman has been told to ask it very early.

Having expected the question, Opposition Members did some research. Let me say to the Chief Secretary and the Chancellor that if the top 5 per cent. in this country are paid increases which they advocate that their own workers should not receive, but which amount to 300 per cent. over the past eight years, and if the rest of the country receives substantially smaller increases, we would expect—even with the reduction of top rate taxes in the economy—the share raised from the top 5 per cent. to be higher.

If the hon. Member for Amber Valley (Mr. Oppenheim) thinks that it is axiomatic that the reduction of top rates will raise higher revenues, let him look at the Red Book produced by the Chancellor, in which the Treasury sought to make the best estimate of the effect of the top rate tax reduction in a full year. The answer that it came up with was not an increase as a result of the change in revenues but a reduction of some £2 billion.

§ Mr. Norman Lamont

The hon. Gentleman has quoted the Red Book, but he has not quoted the footnote that says that the figures assume no change in behaviour.

§ Mr. Brown

Let the Financial Secretary give me proof of what those changes in behaviour are likely to be. I had thought that the Treasury was under some obligation to produce the best estimate that it could deliver. If the best estimate that can be delivered is that £2 billion is being sacrificed as a result of the top rate tax cuts in a full year, that is the estimate that we must go on.

Let me also say to the Financial Secretary that the last budget director who gave us the impression—in America —that top rate tax reductions would raise far higher 228 revenues was Mr. David Stockman, who had to recant just about everything that he had said about the Laffer theory and everything else in a highly publicised book. He spoke the truth when he said that the agreements for top rate tax reductions that were extended on the basis of some such economic theory as the Laffer curve were simply a Trojan horse to allow the rich to get richer without making any increased contribution to the economic efficiency of the country.

§ Mr. David Shaw (Dover)

rose——

§ Mr. Brown

I shall give way in a minute.

The fundamental feature of this Bill is the growing gap between rich and poor that will result from the tax changes announced by the Chancellor. That commitment to widening inequality—even at the cost of those who will experience deepening poverty—infuses just about every major clause of the Bill. Only 35,000 people will benefit from changes in inheritance tax that will cost the rest of the nation £200 million. No more than 100,000 people are likely to benefit from the £235 million exemption on capital gains before 1982. Only a few hundred are likely to benefit from the changes in the business expansion scheme described by the Chief Secretary this afternoon, to which we shall return later.

I predict that the biggest gainers from what should have been a major reform in independent taxation will be couples with substantial sums of unearned income and capital gains, both of which will be disaggregated as a result of clauses in the Bill. That will be its most costly feature.

§ Mr. Shaw

rose——

§ Mr. Brown

Let me finish.

The Bill widens the gap between rich and poor so much, and inequality is so much its central feature, that it is hardly surprising that a Conservative Member said on Budget day, "There are just not enough noughts on my pocket calculator to work out my winnings."

I shall give way to the hon. Member for Dover (Mr. Shaw)—and I do not take his intervention as an admission that he is the guilty Member.

§ Mr. Shaw

The hon. Gentleman said that the tax reductions in the United States of America had had no serious effect. Does he deny that there has been an increase of 8 million in the number of people employed in America while those tax reductions have taken place? Has not unemployment in this country fallen by 1 million because there have been tax reductions, and because those who benefit from them are the people who invest in and expand new businesses?

§ Mr. Brown

I do not know whether the hon. Gentleman is advising the Chancellor how he should run his economic policy. I must tell him, however, that one reason for the substantial budget deficit in the United States is that the predictions made in the early years of the Reagan revolution that top rate tax reductions would yield massively increased revenues have not proved correct.

The Chancellor is unique among Chancellors through-out the world in regard to change in the top rates of tax. We are mentioned in New Zealand, Australia and everywhere else, because he alone has chosen to cut the top rates without making any substantial impact on the number of tax loopholes that make it possible for people 229 earning substantial sums to avoid tax liabilities. If the Chancellor doubts what I am saying, let him read the parliamentary answers that I have been given by the Financial Secretary.

In one instance I asked the Chancellor what would be the tax liability of someone earning £1 million who chose to use many of the tax devices invented by the Chancellor and his predecessor since 1979, such as the business expansion scheme and enterprise zones, in which unlimited sums can be set against tax. The answer that I received from the Financial Secretary was that a person earning £1 million, if he used all the loopholes available to him, could end up with a tax liability of nil. How does he defend the fact that someone earning more than £50 a week pays tax at a rate of 25 per cent., that a couple earning more than £80 a week pay tax at 25 per cent., but that a person earning £1 million a year can end up with a tax liability of nil?

§ Mr. John Butterfill (Bournemouth, West)

How could such a person obtain an income on which to live?

§ Mr. Brown

The Chancellor's changes have not been so inventive that they have prevented people from taking out loans on the basis of their investments and having sufficient spending power as a result, for example, of off-setting the rents that they earn from enterprise zone properties against the interest they have to pay to the banks. Uniquely, such people not only have the capital gains in the future and the tax reductions in the present, but sufficient money to live on at the same time, giving them a high standard of living.

I want to look at how the Budget will affect the majority of my constituents as well as some Conservative Members. I have to tell the Chancellor that, despite the talk that everybody will receive a 2p tax reduction, helping those at the bottom end in exactly the same way as those at the top, there are people on £100 a week, low wage earners, getting by on family credit and housing benefit, whose net gain from the Budget, after the withdrawal of housing benefit because of the tax cuts, will only be about 9p a week, or £4.68 a year. Then there is the family on £120 a week, with housing benefit not yet taken away by the Chancellor and family credit, who will receive about 30p a week as a result of the tax changes in the Budget and the resulting withdrawal of benefits.

If the Chancellor and Conservative Members believe that I am talking about special cases or isolated instances, as they thought when we first mentioned the problems of the housing benefit changes, let me tell them that, in addition to the 8 million or so people who cannot benefit from a tax cut because their earnings are so small, there are 2.5 million people throughout Britain whose average gain as a result of the Budget changes is 13p a week—a gain that is almost entirely wiped out by the electricity price rise that was ordained by the Secretary of State for Energy just before the Budget.

But the real beneficiaries of the Budget are those at the top. I do not know whether the Chancellor realises it, but if someone is earning £50,000 a year his net gain from income tax is £75 a week; on £70,000 a year it is £152 a week—more than £7,500 a year; on £100,000 a year, it is £268 a week, or more than £12,500 a year. The man on £200,000 a year is getting £650 a week as a result of the 230 Budget changes and the richest earner in Britain will receive an automatic windfall as a result of the Chancellor's changes of £500,000 a year.

The real truth about the biggest beneficiaries of the Budget was admitted in an answer given to me by the Financial Secretary on 28 March when I asked him who gained most from the top rate tax reductions. It is not the scientists, the engineers, the teachers and the lecturers—the people whom the Chief Secretary continues to mention —who are the true beneficiaries of the Budget. What the Financial Secretary had to tell me was that the real beneficiaries, those who gained the most, those who received windfall sums, were the 140,000 people on the top rate tax band of 60 per cent. who cumulatively received £1,700 million in a full year as a result of the Budget. In other words, 80 per cent. of the gains from the top rate tax reductions have gone to a small number of people—140,000; less than 1 per cent. of the population of Britain.

Why did the Chancellor decide that those people were to be so uniquely privileged that they should be targeted for special help? Since 1979 they have already received more than £13 billion in tax cuts. As a result of this Budget they have received an extra £1.7 billion.

A few weeks ago I heard the Chief Secretary telling ordinary earners that, as a result of the Budget tax cuts, to keep pace with inflation they need ask for wage rises of only 2 per cent. a year. He was suggesting, as the Secretary of State for Trade and Industry did in the other place, that, the proper negotiating level for wage increases in the next year should be in the order of 2 per cent.

When the Chancellor made his decision about the top rate tax reductions, did he consider the position of those people in that 1 per cent? Did he recall—as is confirmed most recently in the top salaries review document—that those very people, at the same time as they have been telling others to mitigate their wage demands, have been awarding themselves rises of up to 20 per cent. a year? Did he look at the Treasury's own calculations that the very same people would this year be awarding themselves wage rises of about 12 per cent?

Did he then say that, as a result of the wage rises that he expected them to have in order to keep pace with inflation, there should be a levelling through the tax system? Not at all. What the Chancellor did was to accept that the top people in Britain, those earning £50,000, £70,000, £100,000, had been paying themselves wage rises of between 10 to 20 per cent. every year, and will pay themselves a wage rise of 12 per cent. in the coming year, and then he awarded them a tax cut worth 10 per cent.

§ Mr. Nicholas Bennett (Pembroke)

The hon. Gentleman has been talking about high earners, but will he turn his attention to a man on average earnings with two children who, under the Labour Government, had an increase of 0.5 per cent. in real terms, compared with a 27.5 per cent. increase in real terms under this Government? Does not that underline why men on average earnings vote Conservative?

§ Mr. Brown

That is exactly what the Chief Secretary was suggesting to us at Treasury questions only a few days ago, and I have no doubt that his supporters have been briefing the hon. Gentleman. But let him look at the Government's record on taxation since 1979. Let him look at the cumulative effects of income tax, national insurance and VAT. He will no doubt find—this is something that 231 horrified the Institute of Directors, which demanded before the Budget that the average tax rates be cut—that the total tax take from the average earner with two children has risen from about 23 per cent. to 25 per cent., despite our being told that every Budget of the past nine years has been a tax-cutting Budget. The share of the ordinary earner's income taken in income tax, VAT and national insurance has risen, and that is the real position under this Government.

§ Sir Eldon Griffiths

I have listened carefully to the hon. Gentleman and he is making some important points. However, as one who has had the fortune, or misfortune, to listen to some 24 Budget debates in the House, let me say that there is one big difference. The hon. Gentleman is saying that some people at the top gain too much and others at the bottom gain too little. I understand what he is saying, but does he accept that the time was, when the Labour party was in office, when everybody lost—the disabled, small businesses, pensioners and the country? Now we are arguing about who should gain. That is the big change: we are talking about gains, not losses.

§ Mr. Brown

Tomorrow, during the debate on housing benefit, the hon. Gentleman will realise that not everybody has been a gainer under this Government.

The issue of this debate is this. When I see that, as a result of the social security changes, an unemployed young person in my constituency will receive £26.05 a week; when I see that a pensioner will receive only £41.15 a week; when I see that a family of four will receive only £79 a week, and when at the same time I see Conservative Members defending a situation whereby people at the top are given tax cuts that are worth more in a week than such families and pensioners will receive in total benefit in a year, I ask myself what possible justification, in merit, in need, in contribution to the community, in anything to do with the ideology of incentives, there can be for such inequalities.

I find that there is no respectable evidence; there is no authority to study; there is no definitive survey. There is nothing at home or abroad that can justify the ideology of incentives producing the results that have been claimed for it by this Government.

I want to look at one of the main arguments that the Chief Secretary has used, because the Prime Minister made great play of it immediately after the Budget. We are told by the Chief Secretary and the Government that, as a result of these top rate tax cuts, people who left this country will return and people who may think of going will no longer leave. We are told that these people are doctors, scientists, engineers and university academics. We are told, further, that those people can be persuaded to stay or persuaded to return to this country.

Let us leave aside for the moment the issue that the average engineer earns £19,000, the average doctor between £25,000 and £30,000 and the university lecturer between £20,000 and £25,000. That is according to the figures that we have available. Let us also leave aside the fact that these people are not the big gainers from the Budget. The big gainers are those people earning £50,000, £60,000 or £70,000, which are salaries that engineers can never hope to have in this country.

Let us look at the argument on its own merits. We were told after 1979 that top rate tax cuts would bring all these 232 people back—the engineers and the scientists. However, the evidence is that they have departed at even a faster rate. When the Prime Minister told us a few days ago that since 1983 more people than ever had returned to this country, she forgot to tell us that more people than ever were leaving. We know that the number of professional and managerial employees leaving this country has doubled. Britain contributes more scientists and engineers to what is called the transatlantic brain drain than all other European countries put together.

We also know that a former Minister with responsibilities for higher education, when writing in The Times in 1987, said quite specifically about the top rate taxes and everything else—[Interruption.] Perhaps the hon. Member for Pembroke (Mr. Bennett) will listen to me. A former Minister with responsibilities for higher education said that young scientists and engineers are refugees, not from the Treasury but from the cumulative effects on British science of educational, fiscal and cultural failing. If doctors are moving abroad, it is not because of the top rate taxes that have to be paid. It is because the facilities are not here for them to do the research that they want to do.

The House of Lords Select Committee confirmed that only a few days ago. If scientists and academics are leaving the country it is because, as the Vice-Chancellors' committee has said, they no longer have any reliable career structure and they find they have better facilities abroad. The most worrying aspect of all, as the Royal Society said recently, is that if academics in the science sector are leaving it is because they believe that cuts in basic research and scientific support mean that science in Britain is being progressively marginalised.

The answer to the problem that the Chief Secretary identifies is not that we impose top rate tax cuts on those earning more than £50,000 a year. The real answer to that problem is for that money to be used properly to fund science, technology, education and training, our univer-sities and colleges, our Health Service and our medical research. This was not a Budget for meritocracy but a Budget geared more to the aristocracy in Britain. [Interruption.] I have to say to the Chancellor that he perhaps has not looked at all the calculations that he has made.

He probably knows that, having halved the number of people, for example, liable to inheritance tax, he is proposing very substantially to reduce the numbers again. Someone who inherits an estate of £1 million would get a benefit of £150,000 as a result of this Budget. However, some of these people do not pay the tax at all. The changes in capital gains tax give substantial amounts of money to people who were the beneficiaries of the property booms of the late 1970s.

I answer the point of the Chancellor and the Chief Secretary by saying that in this Budget they have not closed the tax loopholes. If they look at the enterprise zone scheme and the business expansion scheme, and look at all the schemes that exist for people to set their earnings against their tax, they will find that for every loophole closed by the Budget, another has been opened, which the tax planners and the tax avoiders will use to the full.

§ Mr. Tim Smith (Beaconsfield)

rose——

§ Mr. Brown

No. I will not give way again.

233 The Chancellor of the Exchequer is unable to argue that these top rate tax cuts can he justified on the grounds of incentive, because he has produced no evidence whatsoever. He cannot say that they will prevent migration. He cannot say that they will prevent evasion, which has risen sevenfold during this Government's period of office, according to the published figures. He cannot look at the figures and argue any of these things.

In that case, what is the Chancellor's new argument? His new argument was launched again on Sunday in the programme "This Week, Next Week". It is that, somehow, by top rate tax reductions, the poor will benefit through the increase in charitable donations. That seems to be the best argument that the Chancellor can put forward—as The Financial Times, in a recent headline to one of his other speeches, said, The moral basis of tax cuts". The right hon. Gentleman may think that the key fact is that charitable donations have increased twofold since 1979, but to people on the Opposition Benches the key fact is that the need for charitable donations has increased as a result of this Government's policy. Charitable donations may have increased twofold, but poverty among families has increased fourfold according to the estimates of the Government. Evictions have increased tenfold.

§ Mr. Major

I am sure the hon. Gentleman will not wish to mislead the House. May I say to him that the definition that he is using of poverty is a definition that is distorted by rising levels of benefit that this Government have introduced. That is a matter that is demonstrably clear to anyone who cares to look at the income support levels upon which he is basing his definition.

§ Mr. Brown

That point will be entirely lost on the pensioners of this country, whose income support level, which the right hon. Gentleman says is generous, is £44.05 as a result of the changes in the Social Security Act. It will be entirely lost on the many thousands of pensioners who, because of the capital limit that has been imposed—imposed during the time that the Minister was a Minister in the Department of Health and Social Services—have lost housing benefit because of the removal of exemptions. The truth is, as the Chief Secretary knows, and as the Chief Secretary is ashamed of, that the numbers of people in poverty in this country are rising. The social security changes have resulted in the numbers of people in poverty rising even further.

The Chancellor says that the number of people giving to charities has doubled, and that the amount of money given to charities has doubled. I accept that point. Is he saying that, in future, charity has to bridge the gap between the rich and poor in this country? Does he believe that charitable donations can make up for the £800 million lost through all the changes in social security benefit? Does he believe that charitable donations can pay the £1 billion and more that is still needed properly to fund the National Health Service this year? Does he say to Conservative Members on the Back Benches who have troubled consciences and who have many constituents affected by the housing benefit changes, that the best hope for the future is not to ask the Government to change the wrong policy, but that these people should beg and borrow from charities and voluntary organisations?

§ The Chancellor of the Exchequer (Mr. Nigel Lawson)

indicated dissent.

§ Mr. Brown

Well, if the Chancellor thinks that is not the case and that is not the policy that has been pursued by the Government, what do the new regulations that govern the social fund really mean? In the Act which governs the social fund and in the regulations, social fund officers are asked to look at how voluntary organisations and charities can help. That is exactly the position in which members of the Department of Health of Social Security have been put as a result of this Government's policies. I hope that the Chancellor—who appears to be in total ignorance of what has happened as a result of these regulations—will read the social fund regulations and respond to them in this House.

No industry is better prepared for the future as a result of this Finance Bill. No health authority is better funded as a result of the changes in the Finance Bill. Many health authorities throughout the country are waiting to know what the Government will do about increasing the number of nurses and about improving the capital programme for these hospitals. I advise the Chancellor that none of the poorest in our society are better off as a result of the Budget.

Last weekend, like many Conservative Members and many of my hon. Friends, I held constituency surgeries. In the years that I have been a Member of Parliament and involved in politics, I have never seen so many people so demoralised, so desolate and so devoid of hope—and that after the path-breaking Budget about which the Chief Secretary boasts.

A widow came to see me who has a pension of £41.15, who has received, and still receives, industrial death benefit because her husband died of asbestosis. She told me that she had counted the pennies for years and that she had made every economy that the Prime Minister had asked of her. She said that she had prepared herself for a rent rise of £1.50 but suddenly found that she was facing a housing benefit cut of more than £20. She said, "I thought that the Prime Minister had already taken from me everything that she could. I did not think that she would take any more."

What is the Government's response to the problem of poverty? The training manual for social fund officers suggests that such a pensioner lives on stale food, buys dented tins, grows her own vegetables, invests in tinfoil, avoids biscuits and jams, and states: Don't shop when hungry, you may be tempted to buy more than you need. What sort of society is the Chief Secretary justifying when a widow in my constituency, on £41.15, loses £20 per week as a result of the housing benefit changes? What sort of society is he justifying when that happens and when, in one line of one sentence of one clause of this Finance Bill, so few people get so much?

In the past, Chancellors have come to the House to say that because revenues are rising, all will benefit and all will share. Other Chancellors have had to come to the House —from both parties—and say that because revenues are falling or because the economy is in difficulty, all must make sacrifices—[Interruption.] Conservative Chancellors as well—and that the sacrifices will be equally shared. No Chancellor until this one has come to this House and said that because revenues are rising as a result of North sea oil and everything else, the rich will get the benefit——

§ Mr. Norman Lamont

rose——

§ Mr. Brown

No, I am not giving way—the rich will get the benefit——

§ Mr. Lamont

Is the hon. Gentleman not aware that North sea oil accounts for less than 2 per cent. of revenue?

§ Mr. Brown

Is the right hon. Gentleman aware that North sea oil accounts for around £4 billion? Is he aware that no Chancellor until this one has had £5 billion a year in privatisation revenue? Is he aware that the reason he has been able to give tax cuts, mainly to those at the top, is that revenues from North sea oil and privatisation were available to him that were not available to any Labour Chancellor in the past?