John McDonnell
Finance bill debate
Mr. Redwood : The Chief Secretary tonight made a bad fist of a very bad case. He dared to tell the House that the Budget is about stability, enterprise and fairness. It is about none of those things.
Let us take the case of enterprise. Can the Budget be said to be a Budget for enterprise, when all the moves on corporation tax are to increase the tax and make it more difficult for business to shield its hard-earned and dwindling profits? Can it be said to be a Budget for enterprise when the cornerstone of the Government's policy this year is a big hike in employer and employees national insurance? Labour introduced a tax on jobs, and dares to tell the House that the Budget is a Budget for enterprise and jobs. Can it be said to be a Budget for enterprise when we see a fundamental restructuring of stamp duty and land taxes, in a way that is likely to be damaging to retail and property, two of the have so far survived rather better than others from the depredations of the Chancellor, who is always taking more and more money away? Can this year's Budget be said to be a Budget for stability? Of course not.
The Finance Bill contains the seeds of the Government's own undoing. They have foolishly decided to use their huge majority to grant themselves the powers to start to tax the property sector, particularly people's homes, more highly as a means of regulating the economy. I give them this warning tonight: if they do that-if they increase stamp duties on homes under the powers that they are taking, or if they decide at some future date to introduce capital gains on the principal residence, as they have threatened to do in recent documentation-they could well overshoot and destroy the one remaining thing that is keeping the economy going.
It is higher house prices that are keeping up confidence to some extent. It is higher house prices that are enabling people to borrow to supplement their squeezed incomes and keep up their spending patterns. It is higher house prices that are sustaining a modest level of confidence in a corporate sector that has otherwise been sandbagged and knocked badly by the Chancellor's tax depredations in recent Budgets. If the Government use their enhanced powers and new taxation base to take more money out of the housing sector, they will rue the day. They will do themselves considerable political damage as well as undermine the one remaining part of the British economy that still survives and works in their favour.
I do not think that the Government have yet learned the brutal lesson that they should have learned from their previous higher taxes. This year's Budget and Finance Bill are about higher tax. They are based on the proposition to which the Government have worked for the past four years, which is if they see a stream of income or money going into the private sector, they can take as much of it they like and do no damage-the private sector deserves such treatment. In the moral universe of the Chancellor and the Chief Secretary, it is necessary to take a big chunk of that money away from the private sector and use it for their own spending purposes.
Mr. Boateng: That is absurd.
Mr. Redwood: The Chief Secretary says that, but he should look at the evidence. At the end of the 1990s, the Government saw a successful telecommunications industry, so they imposed a £22.5 billion windfall tax on that industry and more or less destroyed it. They destroyed jobs, investment and prosperity-they destroyed the very engine of growth at the peak of that market's growth. Then, the Government saw pension funds and thought, "What an easy target. Let's take £5 billion a year off pensioners-they won't notice, they're too old to complain." That, of course, did grave damage to pension funds and helped to produce a bigger collapse in the stock market in Britain than was seen overseas.
This year's Budget and Finance Bill threaten to do the same thing to employment and to housing, so I renew my warning to the Government that they should back off from the housing market. They should understand that it is the last remaining thing that makes part of their growth forecasts credible. No private sector forecaster thinks that the Chancellor has a hope in hell of achieving the growth in the economy that he forecasts for the next two years. We all know that his revenues will fall short and his expenditures will exceed his Budget. We all know that this Finance Bill, the biggest tax bill ever presented to the British people, will not be enough. I promise the Government that if they go ahead and use the extra powers that they are taking over the housing market, not only will the taxes not be enough, but they will fall short by a massive amount and trigger a substantial disaster.
The Chief Secretary says that this year's Budget is a Budget to produce fairness. What is fair about a Government who tax the poor to pay the fat cats in the quangos and the government sector? What is fair about a Government who expand the bureaucracy and the government sector-
