I come to praise the sub prime mortgage. It has had such a bad press in the last eight months. Sub prime is now used as an excuse to explain why banks fail, shares go down and why fear stalks the markets. All the wise acres and most of the commentators now know the world will not be right until the sub prime is no more. The Regulators are busily slamming doors long after the horse of confidence has bolted. They wish to root out sub prime wherever they find it, put off balance sheet lending back onto stretched balance sheets, and warn people off lending to people who need the money. The new conventional wisdom is that banks should only lend money to people and companies who are already rich. They have discovered that the problem with lending to the poor is they might not be able to pay it back.

I have no time myself for sub prime salesmen who pushed the hopeless and the helpless into a mortgage they could not afford by offering a year or two of easy terms and seeking to play down the reality that at some point a commercial rate of interest kicked in. Nor do I have time for the many who now seem to think people on low incomes should not be able to buy their own home. Home ownership is one of the great breakthroughs an individual or a family can make. There is nothing like the freedom of being able to shut your front door, and then do what you will with the property inside. I welcome all positive moves to make mortgages and homes more affordable for all.

In the USA the authorities do seem to have realised that pushing thousands of sub prime mortgagees into default is not a clever – or pleasant – thing to do. The cuts in interest rates have come thick and fast from the Fed, as they fight to get rates down to a level where more people can hope to pay the mortgage and keep their home where they have mortgage rates linked to market rates. On this side of the Atlantic, we have authorities who see the time as suitable to preach a few homilies about the evil of debt. They are keeping interest rates high to “teach borrowers and bankers a lesson”. They risk bringing house prices down, and with them the dreams of many a heavily mortgaged home owner.

The Credit Crunch so far is a story of two rival traditions responding in very different ways. When the UK experienced a run on Northern Rock it took six months to offer financial support, look around for a private sector buyer and eventually to nationalise the luckless institution. When the US saw a run developing on Bear Stearns it took a week-end to find a private sector buyer, put in place a Fed package of loans and announce confidence boosting proposals to markets, including another interest rate cut.

The US authorities are fully into recession fighting mode. The President, the Treasury Secretary and the Fed act as one, supervising a tax cut plan, boosting the market with substantial liquidity and slashing interest rates. They work together, they each have their clear responsibility, and they give the impression they will do whatever it takes.

The European authorities look paralysed by comparison. The UK budget deficit is too high to allow easy tax cuts. There is little effort to root out the waste and unnecessary spending that would allow tax cuts. The Bank of England and the ECB both have to concentrate on low inflation, unlike the Fed which has a general duty to help sustain economic health. The European Banks keep interest rates inflexibly high, and are sparing with any extra liquidity to their markets. For Northern Rock it was a sad case of too little too late supplied to the market, to be followed by a colossal bill for the taxpayer. The ECB remains mesmerised by the divergent behaviour of the different Euroland economies under its gaze. It watches as the Euro soars, making great swathes of European industry uncompetitive.

Some love the sense of the rich and mighty in the financial world being brought low. Prosecutors sharpen their pencils to take evidence in possible fraud and corporate irregularity trails. Regulators thumb through their huge rule books to see which rules in practise had been broken during the heady days of off balance sheet loans and sub prime mortgages. Politicians sound off with all the certainty of hindsight about the errors of the bankers and the mortgage companies. They should all calm down and grasp these self evident truths.

Lending is important to help the economic wheels go round. You do need to lend to people who need the money, and the poor have every right to expect a mortgage service as well as the rich. Lending was overdone, thanks in no small measure to monetary authorities who kept interest rates too low for too long, and thanks to Regulators who through the Basel rules encouraged banks to push their loans off balance sheet.

We need to get from our current fragile over borrowed condition to a position where normal levels of transaction can take place again. To do so we will need lower interest rates on both sides of the Atlantic, not just in the USA. The banks have to recapitalise quickly, raising money from shareholders, bringing in new shareholders with new capital or by cancelling dividend payments. The authorities have more to do in the days ahead to make the markets more liquid. The problem now is not inflation, but too rapid a deflation.

On the overtaxing of small businesses

Mr. Redwood: I am a company director and a shareholder in companies, as I have declared in the register, but not, I think, of a company that will be paying this particular tax in the current year.

I rise to support the idea that the tax should be 20 and not 21 per cent. and that it should not go up to 22 per cent. subsequently, and I ask the Government to think again about their extraordinary U-turn in their policy towards lower tax rates for people on lower income and for smaller and start-up companies that earn less profit than more mature companies that have gone on to grow for longer and perhaps more successfully.

The Government produced an attractive package when they decided to encourage incorporation by having a zero tax rate on small profits for companies that had recently incorporated, and when they decided to have a 10p capital gains tax charge on people who set up companies, who took founder shareholdings in companies or who decided to buy into companies that were small and growing and could take advantage of that privileged capital gains tax regime.
We saw a response to that favourable tax regime in the improvement in the rate of new company formation. A lot of people in the small business groups around the country were saying to Opposition representatives, as well as to Government representatives, that the Government had got something right and that that part of the tax regime was favourable. It was an encouragement that those people very much welcomed, so it is strange and extremely disappointing that the Government should have backtracked on both elements of that attractive regime and that they have not learned the lesson from a country such as Ireland, which has persevered with a much more favourable tax regime for business across the board—businesses large and small—and has had the phenomenal success that we see in the Irish growth rate, the development of Irish business within the Republic and the collection of so much more tax revenue in general by the Irish Treasury.

As more people have got better jobs and taken more income out of smaller and larger companies, and as more smaller and larger companies have grown, been successful and produced capital gains, dividends, income and good jobs for people, so the economy as a whole has benefited from that process, and so the Irish Treasury has benefited, having more money to spend per head on public services as a result of that growth than has been available from the British Treasury’s attempts to find ever more stealth taxes to sustain more rapid growth in spending per head on public services here.

Mr. Brooks Newmark (Braintree) (Con): I appreciate my right hon. Friend’s comments about the Laffer curve, which I have gone on and on about in the three years that I have been a Member of Parliament. However, what bothers many small businesses—with which, like me, my right hon. Friend has been involved—is the timing of the tax increase. At a time when we should be supporting small businesses, it appears that we are attempting to undermine what they are trying to achieve in extremely difficult times by increasing taxes while, across the pond, the United States is doing everything it can to lower them.

Mr. Redwood: My hon. Friend is right. Ministers must know from their conversations, as he and I know from our conversations with the British Chambers of Commerce and the bodies representing small businesses in Britain, that it is becoming much more difficult to be a successful competitor from a British base. Smaller companies are feeling the increase in taxation and the growing weight of regulatory cost even more than the larger ones, but that population of small businesses must be allowed to grow more rapidly so that we can experience success in the future.

All the studies show that if there is to be sustained rapid growth in employment in private-sector activities, a lively and growing small business sector is essential. New jobs are much more likely to come from that sector than from the larger companies that have the money to automate, to mechanise and to take their labour-intensive activities offshore. They do not generate the same pace of business growth and job growth as small companies.
As the hon. Member for Taunton (Mr. Browne) observed, although we unfortunately often hear of very large casualties in the corporate world—factories closing, or large numbers of people being made redundant by the larger companies—we never hear of redundancies of the same scale in the smaller companies. They do not employ as many people to start with and, when conditions are reasonably benign, they do not sack people. As a whole, they are a growing sector, adding jobs as they find better ways of doing things and creating new activities that the public wish to buy into. The danger is that the Government will take small businesses to tipping point with too much tax and regulation, so that, largely unseen, many jobs will be removed or new jobs will not be created and we will have a worse problem with unemployment.
Mr. Jeremy Browne: It should also be borne in mind that nearly every large business that employs vast numbers of people started off as a small business. We are not only potentially compromising the small business sector of the economy, but running the risk that tomorrow’s big businesses will never be able to get off the ground.

Mr. Redwood: The hon. Gentleman is right, and it can be deduced from his argument that we need to lower tax and regulation on all populations of business if we want a really successful economy like the Irish economy. That is especially important in the incubator world of small business. Among the mighty population of small businesses in a vibrant economy will be a limited number that will go on to become the mega-corporations of the future. As Silicon valley demonstrates, businesses can grow from very small to very big in the space of a decade, with stunning implications for the success of the economy and the success of tax-raising on those populations of businesses, and job generation.

Mr. Newmark: We might quip that the way in which to create a small business under new Labour is to start with a big business. However, on a more serious note, let me say that my right hon. Friend has not touched on another important issue. One of the hallmarks of new Labour has been the chopping and changing, but what businesses like is consistency. Only through consistency of policy, particularly tax policy, can they thrive.
Mr. Redwood: I am grateful to my hon. Friend, although the number of interruptions makes developing the argument as quickly as he would like a little more difficult. He is giving me friendly help and assistance to make sure that I do not forget the important arguments. I am genuinely grateful to him and he is absolutely right that consistency is important. Being able to forecast the tax rate to be paid not just this year but next year and the year after is extremely important when it comes to drawing up a business plan. Any small business that wishes to grow relatively quickly will need access to outside finance; a bank loan, other investors, business angels or another way of raising capital. Any of those would immediately want a business plan, not just for one year but for, say, three.

An important element of that business plan would be to know what the net profitability would be after three years, after the start-up costs and losses. The net profitability obviously requires an assumption about the Government’s tax rate. If the tax rate is changing every year—or goes up every year—it makes forecasting accurately more difficult. It also means that net profits will be less at the three-year stage, or at the five-year stage in a five-year business plan. That makes it more difficult to raise external capital; the banks and others living through the credit squeeze may say that they are unable to help because the net returns are not sufficiently good. Altruistic as many financiers are, they are not normally interested in how much money a business generates to pay the tax man; they are interested in how much money a business generates to pay the shareholders and other private stakeholders, which is why the tax rate is so important.

I am delighted that my Conservative Front-Bench colleagues are strongly in favour of simplicity and lower taxes and they are right to want a 20p tax ceiling on small businesses. I hope that they will also want—I am sure they will—to bring down the rate of corporation tax on larger companies closer to the 20p band. That is very important to the enhanced competitiveness of Britain that we will wish to see after the damage being done to it by higher taxes and more regulation.

I trust also that Governments will start to look at the idea, revolutionary for current political times, that we can perhaps save some of the waste and unnecessary expenditure in Governments so that we do not always have to pay for these tax reductions by finding other ways of increasing taxes. It was exactly that route of tax reform that got the Government into such difficulty on the 10p band.

Mr. Browne: I am grateful to the right hon. Gentleman for giving way to me a second time. Does he share my unease that the Conservative party is committed to taxing at exactly the same overall rate as the Labour party at the next general election? The total amount of Government spending as a percentage of GDP will be identical, if the Conservative party wins the election, to the level it would be were Labour to win. That sounds like mimicking the Government, rather than providing an alternative to them. Does he think that that is a wise approach for his party?

Mr. Redwood: The hon. Gentleman must have forgotten that I am a Conservative MP, so I do not share his unease at all, nor do I accept his premise. I am quite sure that the shadow Chancellor and his senior colleagues are serious when they say that they wish to have a lower-tax Britain than we would have under Labour. I am quite sure that we would have a lower-tax Britain than we would have under a Lib-Lab pact, because we know that Liberals are very liberal with other people’s money. Normally in the House they do not make the wonderful case for lower taxes as the hon. Gentleman seemed to be doing this afternoon. Normally they make the case for spending all sorts of sums of public money on things that may not even be desirable and are very often quite wasteful.

There is only one party that seriously believes in lower taxation for the whole of the UK and has a chance of winning a national general election in this country and that is the Conservative party. The Scottish National party now seems to believe in lower business taxation, but it is not in a position to do very much about it because most of the powers on these matters rest in the UK Parliament.

I say to my hon. Friends on the Front Bench that it is a privilege to be able to support this very sensible proposal for a 20p tax on business. It would be to the benefit of the small business community, and the Government’s relations with it if the Government listened, in the way that we hear the Prime Minister is now listening on the 10p tax band. It is another example of how dangerous the Government’s tax reform can be, particularly now they are destroying the only good tax ideas that they ever had. I was with them on the 10p income tax band and on zero tax on smaller businesses and they are throwing it all away.

Speaking about the payment of redundancy money tax free to a former Mayor of London.:

Mr. John Redwood (Wokingham) (Con): I do not wish to use this opportunity to refer to the present Mayor and to try to have last-minute influence over an election in which many of our colleagues are probably participating on the streets as we speak. I wish to raise the issue of principle. We face a public expenditure crisis in this country; the Government have overspent, and they are borrowing too much, taxing too much and spending too much money on purposes with which the public do not agree. The proposal before us today is another small example; it is an extension of payment in tax relief to former Mayors should they lose office, one way or another. It legislates not only for one Mayor or one particular payment, but for all future Mayors of London.

I do see the mayoralty of London as a mayoralty; it is the mayoralty of by far and away the biggest city in the United Kingdom. However, the Mayor of London is only one of many mayors of London, because there is a mayor of the City of London and a mayor of the city of Westminster, and there are many borough mayors. Most important local government in London is still carried out by the boroughs, rather than by the rather grand Mayor that was created more recently. It is difficult to see how one can sustain the argument that if it is fair to have severance payment for the grand Mayor of London, no severance payment is offered to the mayors of the individual cities in London, who are, in many ways, responsible for bigger budgets and more important services; they are responsible for education and social services, unlike the overall Mayor of London. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) has said from the Front Bench, it would be difficult to say that the mayor of Manchester or the mayor of Birmingham should not be given something similar.
I have a challenge for the Government: why do they think that, in the middle of this crisis of over-taxing, overspending and over-borrowing, this is a worthy clause on which to spend more public money? Why do they think that they can hold the line at saying yes to the Mayor of London, but no to the other mayors in London and to the mayors of other great UK cities? They will find it extremely difficult to hold that line.

Let us examine the question of justice and the contrast with the arrangements for Members of Parliament. We live in world in which people often come into the House of Commons at a much earlier age than they would expect to become an elected mayor, and they might be a Member of Parliament for 20 or 30 years. If they suddenly and abruptly lose their seat—perhaps in circumstances outwith the control of individual Back Benchers, because of the performance of their party or Government—one can see how that could prove a dreadful disruption to their lives. They may not be especially well known or have alternative skills, because they have put everything into their life as politicians. That is why that rule, which is unpopular with the public, was introduced, and people stood for election knowing that it was the rule.

It is very different with the Mayor of London. Again, I do not wish to personalise the debate, but I point out that anyone who stood last time round knew that that was not the rule. Why is it fair to change the rules after the election? If such a rule were thought necessary, it should have been introduced at the time that the mayoralty was established and before we had any idea of who would be the first or subsequent Mayor of London.

The other difference is that the mayoralty of London has turned into a celebrity activity, certainly as conducted by the first Mayor. We have already heard from the current Mayor that were he to lose, he thinks that he could have a good life appearing on chat shows and writing articles. I do not think that anyone who has an exciting enough personality to become Mayor of London would be short of a penny or two, should the electorate terminate their contract. They would become famous—

Mr. Jeremy Browne: Is not the right hon. Gentleman focusing too narrowly on the Labour and Conservative candidates, who I acknowledge are driven entirely by a love of being on television and the celebrity culture, and overlooking the Liberal Democrat candidate, who has a powerful and persuasive record of reducing crime and tackling the serious threat of criminal behaviour in our capital city?

Mr. Redwood: I do not think that we need to have such petty political debate when I am trying to discuss the principles of the matter. However, if I may be slightly partisan for a minute, I would say that in the totally unreal world in which there could be a Liberal Democrat Mayor—that is not what the polls and the public are saying—he too would become a celebrity and would, in due course, be in exactly the same position as the existing Mayor. Should the electorate tire of such a Mayor, he would be able to command good fees on the speaking circuit.

Given that the length of time that someone is Mayor is likely to be rather different from the length of time for which people may have the privilege of being a Member of Parliament, and because an ex-Mayor would be far better known and have more earning power when the job leaves them or they leave the job, I do not think that the same case can be made as is made even for Members of Parliament. The proposal also has to be set in the context that any payment to any politician is questionable and unpopular. We should not extend such privileges, but seek to cut them back.

On the issue of carbon zero homes:

Mr. Redwood: I rise to support my hon. Friend the Member for Putney (Justine Greening). Her amendment makes a lot of sense, and I hope that the Minister will simply concede that. I am sure that the Government intend the tax exemption to be available only on the first sale-and-purchase transaction. The drafting in my hon. Friend’s amendment would ensure that rather more accurately than the drafting in the Bill, so it would make sense to accept it.

Like the hon. Member for Wolverhampton, South-West (Rob Marris), I wish to concentrate more on amendment No. 20 and what constitutes a zero-carbon home. I approach the issue from the proposition that it is better to try to change people’s conduct using tax incentives than through tax impositions or compulsion. The principle in the amendment is therefore welcome. It is right that the Government should try to address emissions related to the home environment as well as transport emissions. We well know why that is important: many more of the typical family’s emissions come from the family home. The problem is a difficult one, but it can be addressed using a series of incentives and proposals, of which this would be just one.

I understand my hon. Friend the Member for Putney’s worry that the measure will have a small impact. Part of the reason it will have a small impact is to do with the definition, which lacks clarity about what is a zero-carbon home. There might be a feeling out there in the marketplace that zero-carbon homes are unachievable, and that we should move our targets to what might better be called low-carbon homes as technology develops and the marketplace responds. That is what we do with motor vehicle manufacturing, the regulation of which is tightened progressively over the years, so that each generation of cars is successively better. As a result, exhausts have been cleaned up, and there have been changes regarding the production of fuel to give a certain level of performance. We could have a similar trajectory with housing and the improved performance of our homes, preferably through an incentive scheme.

The hon. Member for Wolverhampton, South-West rightly said that the zero-carbon home of the Government’s imaginings is not truly zero-carbon because the construction process will entail a certain level of carbon dioxide emission. He could add to his list the emissions of vehicles used on a site to dig the ground and move the earth, as well as any pile-driving and concrete mixing required to provide the foundations and a stable platform on which to build.

Another aspect of all building processes that causes, perhaps, even more carbon emissions is the manufacture of building materials. Most of the building materials going into a typical British house have been produced using energy-intensive processes. The cement industry is a big energy user, as is the brick industry. That consideration needs to be fashioned into a policy. Although it will be good news for those who wish to cut carbon emissions if homes can be constructed that emit few or no carbon emissions, it will not be such good news if the building materials used to achieve that degree of insulation and that carbon-free standard were produced using energy-intensive methods or if they had to be transported quite far. Such homes would take many years to break even on the carbon account.

These issues are difficult. Carbon accounting is a rudimentary science at the moment, and all too many people considering it think that there are silver bullets and easy answers. They think, for example, that stopping people driving would make the problem go away, but it would not. The issue is more complicated than that. All sorts of processes and circumstances involve carbon dioxide emissions, and a sophisticated carbon account is needed before sensible policy conclusions can be reached. I hope that the Minister will produce rather more sophisticated research—perhaps not today but in the months ahead, as this policy develops—so that we can have a better idea of what the true carbon account would be on a so-called zero-carbon home. I hope that the Minister will be able to provide a little more definition today, as my hon. Friend the Member for Putney requested. If the policy is to have any chance of working, the wider world, interested in building new homes, needs a clearer idea of what is required, and we need a clearer idea of whether it is achievable.

I would regard as a failure a policy under which only 10 homes qualified in more than half a year, and, if I were a Minister, I would regard it as my important duty to tweak and change it until I had a decent number of homes coming forward, so that I could claim that the policy was some kind of success. I put it to the Minister either that it is a problem of persuading the market that what she has in mind can be done—the Government are meant to be good at putting out messages through the media—or that perhaps more work needs to be done on the sort of home that is envisaged, working in conjunction with the industry, so that we can roll out a policy for the hundreds and thousands rather than the one and twos as we seem to have at the moment.
I think that a stamp duty tax break is a very attractive tax break, as stamp duty is very high on the more expensive houses and still a lot of money on the relatively cheap houses because house prices have increased so much. We would expect to have something for the expenditure of tax revenue forgone; we do not seem to be getting it at the moment, so I hope that the Minister will use amendment No. 20 as an opportunity to clarify and improve the definition so that it delivers on the carbon front, taking into account the production of carbon in building the house as well as in subsequently living in it, as well as delivering the number of homes needed to fulfil the targets.

Speaking about the increase in vehicle excise duty on old vehicles:

Mr. Redwood: I am glad that my party tabled the amendment. It is important to see whether there would be a reduction in carbon emissions from the rather large further increase in taxation on motorists. I cannot see how such a proposal can change behaviour when it applies to cars that people have already bought, because by definition they cannot change their behaviour—they have already bought their cars—unless it is the Government’s intention to have all those cars scrapped prematurely, in which case one needs to do proper carbon accounting to see how much carbon would be emitted in the manufacture of the replacement vehicles, which should be taken into account. That would have to be amortised over their shortened life, if one is to continue the practice of ratcheting up the vehicle excise duty on vehicles already purchased and out there in the vehicle park.

If the main aim of the Government’s policy is to reduce emissions from vehicles, surely tax should be placed on use of vehicle and on fuel, which the Government are doing in huge measure anyway. They recently increased that greatly by stealth as a result of the increase in petrol and diesel prices at the pumps, rather than putting the tax on ownership of the vehicle. There is nothing environmentally unfriendly about owning a vehicle once it has been made and purchased, whereas using the vehicle can be environmentally unfriendly.

I hope the Government will think again and will understand that this is another rather difficult equation where we need better carbon accounting in order to know what the true impact of the policy is. We should not let the debate go by without somebody saying that motorists have been clobbered time and again by the Government, who do not seem to understand that many people need working vehicles, and that many people have to go by car because there is no public transport alternative. The provision is just another sign that the Government regard the motorist as a source of massive revenue and are hitting them for owning a car, buying a car and using a car—

Robert Key (Salisbury) (Con): Does my right hon. Friend agree that there is another group of poorly paid workers who are hit doubly? I am referring to community nurses, for example, in large rural areas such as mine. The HMRC tax-free allowance on mileages has not risen in line. When I pursued the matter with Treasury Ministers, the answer came back that they were trying to change people’s behaviour and encourage them to get out of their cars. Try selling that to the district nurse in Tisbury.

Mr. Redwood: My hon. Friend is right. There are other low-paid workers who work antisocial hours and clearly need their car to get to and from work. People often have to take their children to school by car because there is no alternative. I hope that Ministers will think again about the overall magnitude of tax. After all, Ministers must have some spare money to play with, because we know that far more will be collected from diesel and petrol than was in the original Budget forecast. I tabled a question elsewhere to try to get at that figure. Why cannot some of that money be used to abate some of the severity of the proposal?

Speaking in yesterday’s debate on the Finance Bill, John Redwood joined the shadow minister in stressing the advantages of keeping taxes on small business down. Using the example of Ireland, he illustrated how such a measure would benefit the economy as a whole. Small businesses are fundamental for economic success: they are often the big businesses of tomorrow. Allowing them to grow through a favourable tax regime would result in better paid jobs for people, which would bring more money into the Treasury to then be spent on providing better schools, hospitals and transport.

The speech in full, taken from Hansard, follows.

Mr. Redwood: I am a company director and a shareholder in companies, as I have declared in the register, but not, I think, of a company that will be paying this particular tax in the current year.

I rise to support the idea that the tax should be 20 and not 21 per cent. and that it should not go up to 22 per cent. subsequently, and I ask the Government to think again about their extraordinary U-turn in their policy towards lower tax rates for people on lower income and for smaller and start-up companies that earn less profit than more mature companies that have gone on to grow for longer and perhaps more successfully.

The Government produced an attractive package when they decided to encourage incorporation by having a zero tax rate on small profits for companies that had recently incorporated, and when they decided to have a 10p capital gains tax charge on people who set up companies, who took founder shareholdings in companies or who decided to buy into companies that were small and growing and could take advantage of that privileged capital gains tax regime.

We saw a response to that favourable tax regime in the improvement in the rate of new company formation. A lot of people in the small business groups around the country were saying to Opposition representatives, as well as to Government representatives, that the Government had got something right and that that part of the tax regime was favourable. It was an encouragement that those people very much welcomed, so it is strange and extremely disappointing that the Government should have backtracked on both elements of that attractive regime and that they have not learned the lesson from a country such as Ireland, which has persevered with a much more favourable tax regime for business across the board—businesses large and small—and has had the phenomenal success that we see in the Irish growth rate, the development of Irish business within the Republic and the collection of so much more tax revenue in general by the Irish Treasury.

As more people have got better jobs and taken more income out of smaller and larger companies, and as more smaller and larger companies have grown, been successful and produced capital gains, dividends, income and good jobs for people, so the economy as a whole has benefited from that process, and so the Irish Treasury has benefited, having more money to spend per head on public services as a result of that growth than has been available from the British Treasury’s attempts to find ever more stealth taxes to sustain more rapid growth in spending per head on public services here.

Mr. Brooks Newmark (Braintree) (Con): I appreciate my right hon. Friend’s comments about the Laffer curve, which I have gone on and on about in the three years that I have been a Member of Parliament. However, what bothers many small businesses—with which, like me, my right hon. Friend has been involved—is the timing of the tax increase. At a time when we should be supporting small businesses, it appears that we are attempting to undermine what they are trying to achieve in extremely difficult times by increasing taxes while, across the pond, the United States is doing everything it can to lower them.

Mr. Redwood: My hon. Friend is right. Ministers must know from their conversations, as he and I know from our conversations with the British Chambers of Commerce and the bodies representing small businesses in Britain, that it is becoming much more difficult to be a successful competitor from a British base. Smaller companies are feeling the increase in taxation and the growing weight of regulatory cost even more than the larger ones, but that population of small businesses must be allowed to grow more rapidly so that we can experience success in the future.

All the studies show that if there is to be sustained rapid growth in employment in private-sector activities, a lively and growing small business sector is essential. New jobs are much more likely to come from that sector than from the larger companies that have the money to automate, to mechanise and to take their labour-intensive activities offshore. They do not generate the same pace of business growth and job growth as small companies.

As the hon. Member for Taunton (Mr. Browne) observed, although we unfortunately often hear of very large casualties in the corporate world—factories closing, or large numbers of people being made redundant by the larger companies—we never hear of redundancies of the same scale in the smaller companies. They do not employ as many people to start with and, when conditions are reasonably benign, they do not sack people. As a whole, they are a growing sector, adding jobs as they find better ways of doing things and creating new activities that the public wish to buy into. The danger is that the Government will take small businesses to tipping point with too much tax and regulation, so that, largely unseen, many jobs will be removed or new jobs will not be created and we will have a worse problem with unemployment.

Mr. Jeremy Browne: It should also be borne in mind that nearly every large business that employs vast numbers of people started off as a small business. We are not only potentially compromising the small business sector of the economy, but running the risk that tomorrow’s big businesses will never be able to get off the ground.

Mr. Redwood: The hon. Gentleman is right, and it can be deduced from his argument that we need to lower tax and regulation on all populations of business if we want a really successful economy like the Irish economy. That is especially important in the incubator world of small business. Among the mighty population of small businesses in a vibrant economy will be a limited number that will go on to become the mega-corporations of the future. As Silicon valley demonstrates, businesses can grow from very small to very big in the space of a decade, with stunning implications for the success of the economy and the success of tax-raising on those populations of businesses, and job generation.

Mr. Newmark: We might quip that the way in which to create a small business under new Labour is to start with a big business. However, on a more serious note, let me say that my right hon. Friend has not touched on another important issue. One of the hallmarks of new Labour has been the chopping and changing, but what businesses like is consistency. Only through consistency of policy, particularly tax policy, can they thrive.

Mr. Redwood: I am grateful to my hon. Friend, although the number of interruptions makes developing the argument as quickly as he would like a little more difficult. He is giving me friendly help and assistance to make sure that I do not forget the important arguments. I am genuinely grateful to him and he is absolutely right that consistency is important. Being able to forecast the tax rate to be paid not just this year but next year and the year after is extremely important when it comes to drawing up a business plan. Any small business that wishes to grow relatively quickly will need access to outside finance; a bank loan, other investors, business angels or another way of raising capital. Any of those would immediately want a business plan, not just for one year but for, say, three.

An important element of that business plan would be to know what the net profitability would be after three years, after the start-up costs and losses. The net profitability obviously requires an assumption about the Government’s tax rate. If the tax rate is changing every year—or goes up every year—it makes forecasting accurately more difficult. It also means that net profits will be less at the three-year stage, or at the five-year stage in a five-year business plan. That makes it more difficult to raise external capital; the banks and others living through the credit squeeze may say that they are unable to help because the net returns are not sufficiently good. Altruistic as many financiers are, they are not normally interested in how much money a business generates to pay the tax man; they are interested in how much money a business generates to pay the shareholders and other private stakeholders, which is why the tax rate is so important.

I am delighted that my Conservative Front-Bench colleagues are strongly in favour of simplicity and lower taxes and they are right to want a 20p tax ceiling on small businesses. I hope that they will also want—I am sure they will—to bring down the rate of corporation tax on larger companies closer to the 20p band. That is very important to the enhanced competitiveness of Britain that we will wish to see after the damage being done to it by higher taxes and more regulation.

I trust also that Governments will start to look at the idea, revolutionary for current political times, that we can perhaps save some of the waste and unnecessary expenditure in Governments so that we do not always have to pay for these tax reductions by finding other ways of increasing taxes. It was exactly that route of tax reform that got the Government into such difficulty on the 10p band.

Mr. Browne: I am grateful to the right hon. Gentleman for giving way to me a second time. Does he share my unease that the Conservative party is committed to taxing at exactly the same overall rate as the Labour party at the next general election? The total amount of Government spending as a percentage of GDP will be identical, if the Conservative party wins the election, to the level it would be were Labour to win. That sounds like mimicking the Government, rather than providing an alternative to them. Does he think that that is a wise approach for his party?

Mr. Redwood: The hon. Gentleman must have forgotten that I am a Conservative MP, so I do not share his unease at all, nor do I accept his premise. I am quite sure that the shadow Chancellor and his senior colleagues are serious when they say that they wish to have a lower-tax Britain than we would have under Labour. I am quite sure that we would have a lower-tax Britain than we would have under a Lib-Lab pact, because we know that Liberals are very liberal with other people’s money. Normally in the House they do not make the wonderful case for lower taxes as the hon. Gentleman seemed to be doing this afternoon. Normally they make the case for spending all sorts of sums of public money on things that may not even be desirable and are very often quite wasteful

There is only one party that seriously believes in lower taxation for the whole of the UK and has a chance of winning a national general election in this country and that is the Conservative party. The Scottish National party now seems to believe in lower business taxation, but it is not in a position to do very much about it because most of the powers on these matters rest in the UK Parliament.

I say to my hon. Friends on the Front Bench that it is a privilege to be able to support this very sensible proposal for a 20p tax on business. It would be to the benefit of the small business community, and the Government’s relations with it if the Government listened, in the way that we hear the Prime Minister is now listening on the 10p tax band. It is another example of how dangerous the Government’s tax reform can be, particularly now they are destroying the only good tax ideas that they ever had. I was with them on the 10p income tax band and on zero tax on smaller businesses and they are throwing it all away.

Over the last two days we have been discussing the Finance Bill in the Commons. It has given me the opportunity to remind the government just how successful Ireland has been by setting low company tax rates. The Irish economy has grown much faster than the UK economy as a result, and has generated more tax revenue from the lower rates. Today we learn that more large companies are thinking of leaving the UK for a more favourable tax jurisdiction – they don’t have far to go given the Dublin offer.

It gave the chance to speak out for the motorist, highlighting the successive tax raids this government has launched against people driving to work, taking their children to school, and bringing heavy shopping back in the boot.

It allowed me to expose why so many people think green taxes are a scam, because the government does not always undertake proper carbon accounting, or decides to increase taxes that cannot have the desired impact on people’s behaviour. The decision to lift Vehicle Excise Duties on older cars is a good example of this.

During the course of the debates it also reminded me that Labour’s most successful campaign in opposition to the last Conservative government was surprisingly for them an anti tax campaign. Labour’s attack upon the Community Charge led to the removal of a Prime Minister, and the decision to abolish the tax. It meant I as Local Government Minister had to perform the last rites for the tax, and introduce the slightly less unpopular Council Tax.

It is instructive to look back at why this greatest Opposition campaign of the last thirty years worked. Labour decided early on to rename the tax the Poll Tax. In a rare foray into England’s rich and argumentative history, Labour at one fell swoop conjured images of the Poll Tax riots of the fourteenth century, and the injustice of taxing the poor that hazy memories might manage. The attack worked because the Poll Tax brought a lot of people into paying a local tax who up to that point had avoided it. Labour thought it was time for another Peasants’ revolt, time to unfurl the banners of 1381.

The Conservative government adopted the Poll Tax (against my advice) because opinion polling told them people said they would pay more for better services, and because some households had three or four earners but still only paid one lot of rates. Why not give them all a chance to contribute to local services which they said they valued? I never thought making so many more people pay tax would go down well, and for once Labour also thought a tax would be unpopular. They were right.

It is interesting that 18 years on from the great Poll Tax rows, the Labour government is so desperate to get its hands on more of our money that they are now taking more income tax from low earners,(poll tax on working) taking more VED and petrol tax from low income motorists (poll tax on wheels) and taking more Stamp duty from people trying to buy a home (poll tax on home).

One of the things we need to do to get the message across to the government that they are taxing too much is to change the names of the taxes. I would like your contributions so the taxes can be more accurately described. I have some proposals for starters:

Income Tax - Work Tax
Stamp Duty - Homes Tax
Petrol and diesel duty - Travel Tax
Congestion Charge – Poll tax on wheels
VAT - Shopping Tax
Capital Gains Tax - Enterprise Tax
Corporation Tax - Investment Tax
Climate Change Levy – UK industry Tax
Tax on interest and dividends – Savings Tax.

Click here to read the full text of John’s contributions to the Finance bill.

Nor did they tell us at the last budget they would be charging us more than 70p a litre in tax on unleaded with a pump price of 110p.

Who would have thought that a few months into Gordon Brown’s premiership the main Forties pipeline would be closed down owing to an industrial dispute that stems from his taxation of pension funds and the consequent closure of many funds to new members?
The more the government says “Don’t panic” the more people worry that the government is not in charge and there may be shortages at the pumps. You can feel the authority draining away from the government by the hour.

The government did not tell us when first elected in 1997 that they would want to damage our liberties in the name of security. They did not stand for election as the party that would give us more surveillance cameras than a communist state, nor did they campaign strenuously for much longer detention without charge or trial, yet that is now their stock in trade.

The government did not tell us in 1997 that putting education first meant changing the exams system into a succession of short term cramming exercises to get through modules so schools could hit their targets. Never before have children been so often examined, in so many different exams, to so little purpose.

The government did not tell us in 1997 that they would spend unparalleled sums of money on public services, spending so much on spin doctors, glossy brochures, management consultants and extra administrative staff. Can the Prime Minister really need £2 million a year of spin doctors as recently reported? Wouldn’t spending more time on sorting out the underlying problems be a better way?

They did not tell us that their anti poverty programme would entail large armies to take tax off many people, and more large armies of officials to give some of it back in the form of tax credits.

They did not tell us they would give away so much power to Brussels, claiming each time an unpopular law came in from the EU that Britain was winning the argument.

They did not tell us that lop sided devolution for Scotland would fuel English nationalism, creating resentment at the better financial deal many English people now think Scotland gets from the Union.

They did not tell us their idea of local government devolution was to seek to create uniformity of policy and approach through hundreds of rules, regulations and guidance notes, and a star system to grade the results as if the electors had no role in judging.

They did not tell us they would face headlines in papers complaining of fraud and error in our electoral systems.

They did not tell us that government to them meant a continuous conversation with the media, rather than seriously trying to identify and solve economic and social problems that government can tackle.

Banks and oil companies are the corporations many people – and governments – love to hate.
In a way it in unfair on them. Both industries find it best to organise through very large companies. Because the companies need to employ huge sums of capital, they will tend to make profits that look large. You need to have lots of shareholders and substantial resources to build the large refineries, or to have the branches and balance sheet strength to handle the transactions of millions of customers. When you split the large profits up amongst all the shareholders it looks rather different.

The oil companies carry an additional burden – the government. Two thirds of what they charge people at the pumps goes to the UK Treasury, yet so often the oil companies get it in the neck for the high prices the high tax requires.
In the good times for the companies when the oil price is high they make good profits, but these are paid out in dividends to millions of small savers, pension fund members and the like, or go to reinvest in the business so capacity keeps up with demand.

The Banks must be wondering what has hit them with the tidal wave of criticism that has washed over them in recent months. Much of it is pointing in two different directions. On the one hand their critics say they made too many incautious loans and are having to write off too much lost capital, so they should lend less and at higher profit margins to rebuild their financial strength. On the other hand, if the banks start to do that then critics say the banks are profiteering by raising their margins, and are being unfair on the less well off who cannot get a loan any more.
Being a banker must be a hit like being a politician – you can’t win!

Banks were reporting very good profits in the 2003-6 period, and paid out good dividends. Now they are having to report substantial losses, writing down the value of assets they hold which turn out in these conditions to be worth less than they thought last year. At the same time as they announce these losses and write-offs, the regulator is demanding that they keep more money at the Bank of England and as a cash reserve, compounding the pressures on the banks to lend less and be more cautious. This is the mechanism by which the credit crunch is tightening.
Some banks have decided that to provide the extra cash the Regulators want them to have, and to pay for the losses they are announcing in their write-offs, they will raise more money from their shareholders. In effect the shareholders will be paying their own dividends for a bit, as the regulators want the cash generated from the profits to improve the solvency and liquidity.

Ws there a better way? Yes, of course. If the Regulators had demanded more capital in the good times, rather than in the bad times, we could have avoided some of the boom and bust. If there was a better way of assessing the worth of loans and other assets on the balance sheets, they could smoothed, to avoid big changes when markets change dramatically. Getting shareholders effectively to pay their own dividends by putting up more capital is not a great idea, but once a bank has paid out a good dividend it fears for its reputation if it were ever to cut it in a following year. Dividends turn out to be have been too high in the good years, because the high profits they were then making turned out to be unsustainable on some of the business they were writing. The regulators, as so often, are now making it worse by tightening conditions when the market has already tightened it substantially for them. Bolting doors after the horse has gone is so often what regulators

For much of the last twenty years pollsters and pundits alike have told me and anyone else who would listen that people do not want lower taxes. We have been told that whenever asked, people would rather have better public services.
Therein lies the problem. For years Labour, the pollsters and others in the political world have lectured people that there is a choice – you either have lower taxes or you have better services. Faced with such a choice most people would tell a pollster they want the better services. That does not mean they will vote for the higher taxes, or
will be pleased when they have to pay them.
It ignores the way the private sector allows you to have both – better quality and lower prices, as manufacturers worldwide continue to offer better, faster and cheaper as a matter of course.
Margaret Thatcher’s government cut income tax rates and was re-elected easily on two occasions. When she offered people the opportunity to pay more for schools and social services locally, by asking everyone and not just the ratepayer to pay a contribution through the Community Charge, the public turned against her – and so did her colleagues.
When John Major, as an early green , imposed VAT on fuel, that too turned out to be unpopular with those who had to pay it.
The elder Bush offered lower taxes, and then in office did the opposite. He only got one term as President. The younger Bush offered lower taxes and delivered, and got two terms, despite the war.
Last night the faces of many Labour MPs said it all. Called upon to vote for a doubling of the income tax rate of the lowest paid to collect the revenue to pay the benefits, some did it through gritted teeth, and some threatened their front bench with future rebellion if they do not come up with a good package of help for those who have to bear the burden.
Labour is already unpopular for its stealth taxes, for its soaring Council taxes and for its sneaky charges. They are pillaging us at the petrol pump, robbing us every time we need a licence or permission, and plundering our wallets and purses. They have seen a huge decline in their vote from 1997 to 2005, and face an even bigger drop if the latest polls are accurate.
The Conservatives have illustrated just how important tax now is to the electorate. Last autumn things were not looking good for the main Opposition party when the Prime Minister was considering an early election. The Shadow Chancellor announced he wanted to take all but the very rich out of Inheritance Tax. It was as if someone had turned the light on in the Opposition’s darkened room. The Conservative party surged in the polls, and the Prime Minister realised he might not win an election. From the moment of that speech British politics was transformed. The government went from the front foot to endless scrambles before the stumps hoping they will not be given out as the ball whistles past them or into their pads.
The 10p issue is more of the same. In a way it is a defining issue. Labour seems to think all it has to do is collect more and more cash off everyone, and then distribute it to groups it favours through tax credits and benefits. It seems to have forgotten that many of its supporters in the heady days of 1997 were single people and childless couples on modest incomes. The government has shown it no longer speaks for them and no longer seems to sympathise with those many people who want to be self reliant, but need to keep enough of their income at the end of the week to pay the bills.
As Bill Clinton might have said, “It’s tax, stupid”. People may go on telling pollsters, if asked which they would rather have, that they would rather have better public services. The trouble is these do not seem to be on offer, however much is spent, because the promised reform is never delivered. Meanwhile privately people are seething about just how much government is costing them.
Boris should remind people that a Conservative mayor would be a lot cheaper than Livingstone. It beggars belief that a typical London household has to pay £300 just for the Mayor and his entourage. Running a separate foreign policy for London does not come cheap.

I have just met a Japanese author writing about the UK’s difficult relaitonship with Europe to help inform his own country’s approach to China. I explained why I thought the positions were very different. It did occur to me during the course of the conversation that a country is partly defined by its history and common understanding. On that basis the Uk is 200 years old - thanks to Labour ’s attacks on it through devolution - whilst England is 1100 years young, and growing stronger by the day in its common feelings as a result of this government.

The government did not tell us that it was going to be so cold with all this global warming.

Nor did they tell us at the last budget they would be charging us more than 70p a litre in tax on unleaded with a pump price of 110p.

They did not say that within a few months into Gordon Brown’s premiership the main Forties pipeline would be closed down owing to an industrial dispute that stems from his taxation of pension funds and the consequent closure of many funds to new members.
The more the government says “Don’t panic” the more people worry that the government is not in charge and there may be shortages at the pumps. You can feel the authority draining away from the government by the hour.

The government did not tell us when first elected in 1997 that they would want to damage our liberties in the name of security. They did not stand for election as the party that would give us more surveillance cameras than a communist state, nor did they campaign strenuously for much longer detention without charge or trial, yet that is now their stock in trade.

The government did not tell us in 1997 that putting education first meant changing the exams system into a succession of short term cramming exercises to get through modules so schools could hit their targets. Never before have children been so often examined, in so many different exams, to so little purpose.

The government did not tell us in 1997 that they would spend unparalleled sums of money on public services, spending so much on spin doctors, glossy brochures, management consultants and extra administrative staff. Can the Prime Minister really need £2 million a year of spin doctors as recently reported? Wouldn’t spending more time on sorting out the underlying problems be a better way?

They did not tell us that their anti poverty programme would entail large armies of officials to take tax off many people, and more large armies of officials to give some of it back in the form of tax credits.

They did not tell us they would give away so much power to Brussels, claiming each time an unpopular law came in from the EU that Britain was winning the argument.

They did not tell us that lop sided devolution for Scotland would fuel English nationalism, creating resentment at the better financial deal many English people now think Scotland gets from the Union.

They did not tell us their idea of local government devolution was to seek to create uniformity of policy and approach through hundreds of rules, regulations and guidance notes, and a star system to grade the results as if the electors had no role in judging.

They did not tell us they would face headlines in papers complaining of fraud and error in our electoral systems.

They did not tell us that government to them meant a continuous conversation with the media, rather than seriously trying to identify and solve economic and social problems that government can tackle.

On Monday 27th April 1992 the House of Commons elected its first woman Speaker, Betty Boothroyd.
I was a rare government Minister voting for a Labour Speaker. I did so because I thought it time a good woman candidate should have the job after 700 years of men, and thought it important that Labour held a great office of state again after 13 years in the wilderness.
The mood was strange. Many of my Ministerial colleagues were buoyed up by the fourth election victory in a row, and had not detected the feelings of unease and unhappiness on the doorsteps. They did not seem to grasp that the Conservatives won the 1992 election despite the background and the ERM policy, not because of it.It seemed to me it would have been wrong to have flaunted the narrow victory by using the majority to have another Conservative Speaker, especially if that Speaker had been a Cabinet member in the recent past in the same administration that he would need to preside over.
Enough of my backbench colleagues took the same view, so Betty was elected easily.She proved to be a good Speaker, who brought a fresh approach to the job and was widely liked and respected on all sides of the House.

When I heard from a constituent complaining of persecution by the TV licensing authority, who not believe him when he told them he did not have a television, I was sympathetic and took up his case. The response I received from the Authority was typical of this government’s revenue arms – inflexible, and determined to raise the maximum cash it can from the long suffering public. As usual I did not take the matter to the press, as the issue came to me in confidence and many constituents do not want their personal details splashed across the local – or sometimes the national – newspapers.

Today I can vouch for the hectoring behaviour of this body, backed up from my personal experience. I have a studio flat in Westminster, which I use when I have to vote after 10 pm in the Commons – or attend a working dinner in London – and then need to be up and out early the next morning for a breakfast meeting or the like. It is not a place I plan to spend my evenings in. I decided not to buy a TV partly because I deeply resent having to pay a poll tax to the BBC for the TV coverage of public issues they choose to put out, and have no intention of paying them two, one for home and one for the flat.I do not like the way they use so many voices who want higher taxes, more European government and more regulation for every problem.I also tire of the very large number of self advertisements on the BBC, when no-one else can buy the advertisement time.

When I moved in they sent me a letter reminding me of the need to take out a TV licence. I wrote back telling them I did not have a TV. For my pains I received another couple of standard letters telling me I needed a TV licence, and that inspectors might call unannounced to check up on me. I wrote back again complaining of the harassment. They replied saying they were sending me another standard letter, that inspectors would be calling unannounced, and they were sorry I was cross about it. They said they would be writing to me in a similar vein at least annually.

It is typical of this government and its state broadcasting corporation that the only thing they care about is extracting more money from the public, and they cannot believe that anyone could possibly live without their TV output. They clearly regard anyone who says they do not have a TV as a liar, and spend large sums on writing them endless letters and sending out inspectors. Their inspectors will, of course, be wasting their time in my case, as I am most unlikely to be in any time they call, unless I am to experience the knock at the door at 2 am, to confirm that I am living in a version of the Soviet Union circa 1960.

We see the daily incompetence and waste of most branches of government, where letters go unanswered for months, where people have long waits to get on a waiting list for a hospital appointment, where many parents and pupils cannot get into the school of their choice, and where the roads are constantly disrupted by the authorities who are meant to look after them. It is galling to discover that the only thing they are persistent about is taking money off us. Life in a democracy requires civil exchanges between the government and the governed, and a framework of trust. Governments should assume honest conduct by citizens unless there is evidence to suppose otherwise, and should have a framework of sensible laws and requirements that most people most of the time respect and wish to follow. As soon as government becomes heavy handed and imposes too many laws – and too many laws that do not seem reasonable to the governed – there is more chance that more people will deliberately or inadvertently break them, and more likelihood that government will then intensify its snooping and heavy handed enforcement. Such a progress makes public life coarser, and creates a growing gap between government and governed. The UK now is suffering from rapacious government, seeking ever larger sums of revenue to feed the bureaucratic monster. It will in turn create an angrier electorate, resentful of how the money is spent and cross about the bullying techniques used to extract it.

The TV licensing website - with comments in 16 languages - tells us they spent over £130 million last year on collecting the revenue and enforcing the charge. They also claim that around 5% of the public with TVs do not bother to buy a licence. It is difficult to know how they work out such a figure, yet still fail to collect the money from them. In this multi media digital age the licence fee is looking increasingly out of date and expensive to collect. It is time for rethink.

The old Labour knocking copy against the Conservatives is being retailed against them, and recycled by a government in a hole against its “rebels”. It really is too absurd.
In the 1990s Labour put around the idea that the Conservatives were too divided to be able to govern. The Conservative Prime Minister echoed these sentiments, constantly briefing the press about the need for unity – around his view of what we should do and say next. Now we have a Labour government in trouble. The pollsters ask the public if they think the governing party is divided – of course it is. They ask if the governing party is unpopular – of course it is. The Prime Minister then yells at the rebels for daring to disagree, blaming them for the poor showing in the polls and the probable poor results in the forthcoming local elections. Everywhere from the super loyal Mirror to the leader page of the Daily Telegraph we see the old fib wheeled out – what is wrong with the government is the persistence by the rebels in disagreeing with their Prime Minister.
How stupid! The Conservative party of Margaret Thatcher at the height of her powers was both popular and deeply divided between wets and dries, pro Europeans and Eurosceptics. The Conservative party of Michael Howard was uniquely united in the run up to the Election of 2005, but it did not make us popular. The Labour government of Tony Blair was hugely divided between modernisers and traditionalists, between Brownies and Blairites, between old left and new left, yet it kept on winning.
Very often when a government is in a deep hole of its own digging it is the so-called “rebels” who are the true friends of the party and the government. If the “rebels” who were angry about the abolition of the 10p tax band had been taken seriously earlier, and concessions made before the row became so public, the government would be more popular than it is today. The government is not unpopular today because it has rebels. It is unpopular because it has failed to see that the rebels are usually on the popular side of an argument.
The main cause of the government’s current unpopularity is the state of the economy. People feel squeezed by higher taxes and higher prices. Some now fear for their jobs – as do some Labour MPs as they look at the opinion polls. People know that the government has taken too much money from them, and spent much of it unwisely. That is what is making them angry. They welcome the fact that some Labour MPs understand, and are trying to get the government to think again.
It is never easy trying to get an obstinate government to understand the sources of its unpopularity, as I well remember from my experiences in the 1990s. What you can be sure about is if you do not try to point out the errors of a failing government’s ways you will go down with the ship. If you succeed, you can help right the ship. I admire the Labour “rebels” who want to save the Brown government, but listening to the rhetoric coming out of Downing Street - and from Tesssa Jowell – they cannot be saved because they think the rebels are just being difficult. At their best the rebels speak for Britain.

I am told the service provider needs to install more capacity as the site is growing rapidly. This may mean some interruptions to service over the week-end, so please be patient.

Today we mourn the dead of Guernica, killed in the first air raid which rained murder from the skies on a civilian population during the Spanish civil war. Guernica became a focus for outrage and shock at the way the new power of aerial bombardment could be used to destroy the buildings of towns and kill the men,women and children who lived there. The later barbarisms of the twentieth century were first enacted on that fateful April afternoon seventy one years ago.

I can understand why people were so shocked. The mass slaughter of the First World War had revolted people enough as they saw heavily mechanised death on an industrial scale meted out to young men crouching in muddy trenches. In a throw back to the morality of medieval warfare where knights were meant to help damsels in distress, not rape or murder them, there was still a feeling that at least that barbarism was confined to combatants who had some means of fighting back. The murder from the air at Guernica was meted out to unseen people in their homes, attacking men, women and children indiscriminately. All were defenceless, as the town had no anti aircraft weaponry in place. Waves of Luftwaffe planes flew in to discharge their bomb loads unchallenged. Just in case they were supported by Italian fighter planes.

The Condor Legion’s raid killed many. There have been disputes ever since about just how many, with estimates ranging from 250 to 1500. At the time the perpetrators sought to give a very different impression, and pointed out that Guernica was also a military target as the fascist forces sought to prevent the retreat of the opposing army. The event has been remembered both because at the time world opinion was affronted by such bestiality, and because Picasso produced his famous painting lest we should forget.

I share the feelings that the bombing evoked. It was another lurch to a more brutal age, a celebration of the naked power modern technology can hand to governments, a further decline in the standards of governments handling disagreement and conflict. It did point to the murderous pounding London and other British cities received from the Luftwaffe in the Second World War, and the retaliatory death the Allies dished out to Germans in their cities. Neither long and damaging bombing campaigns against civilian populations and whole cities changed the course of the war. London was not bombed into submission. The Germans were not forced to an early surrender by the ferocity of the later Allied bombing. Wars still required men in arms to hold or seize territory on the ground, fighting village by village, street by street for control.

Bombing munitions factories, armies on the ground, weapons development establishments, bridges and railways to be used by opposing forces may all be necessary as part of traditional armed conflict between men in arms in a modern setting. There are conventions seeking to limit the use of weapons of mass destruction. Guernica and its aftermath has led many to think there should also be a convention against the mass bombing of civilian populations.

I understand why Guernica evokes such strong passion. I myself have never been able to find those passions properly captured by Picasso’s painting. Most people think it a masterpiece. I cannot see it. I would love to be told why it is in a way I can appreciate too.

On Wednesday the 23rd April the two winners and two runners up of the Wokingham Schools’ Parliamentary Debating Competition 2007 were treated to a day out in Westminster as part of their prize. Adam Connell and Dominic Lister, the two winners from Emmbrook School, were joined by Amber Anderson and Rebecca Knowlson of Luckley-Oakfield. After a cup of tea in Portcullis House, John Redwood gave a tour of the palace to the four students and their two teachers, Pam Pierce and Marie Pearce, guiding them through its history, from the medieval Westminster Hall to the impressively gilded nineteenth-century Lords chamber.

They then headed towards the Commons for Prime Minister’s Questions, where they were able to observe first-hand professional Parliamentary debaters pitting their wits against each other. The debate amongst the pupils over which of the party leaders got the upper hand continued into lunch, where the students and teachers enjoyed the delights of the Commons’ cuisine.

Speaking after the visit, John Redwood said “I was delighted to welcome the winners of the 2007 Wokingham Schools’ Debating Competition to the Palace of Westminster.

The pupils from Emmbrook and Luckley-Oakfield performed to a very high standard last year. The annual debating competition is an excellent opportunity for pupils to practice their public speaking and debating skills. The competition encourages participants to think on their feet and formulate arguments in a clear and concise manner. These are important life skills which will be valued by any future employer.”

For making such a memorable trip possible the Competition organisers would like to thank its sponsors, 3M, Classicstone Properties, The Royal Bank of Scotland, Mr William Clark, Clifton Ingram LLP and Titcheners.

Notes to editors:

The Wokingham Schools’ Parliamentary Debating Competition is an annual event which takes place in the Autumn term and is open to all secondary schools in the Wokingham constituency. It is organised by The Rt Hon John Redwood MP to encourage sixth-form pupils to develop public speaking and debating skills.

The attached photos are taken of the two teams and their teachers, with John Redwood, in Westminster Hall. Front row, from left to right: Dominic Lister, Adam Connell, John Redwood, Rebecca Knowlson and Amber Anderson. Behind them, from left to right, Marie Pearce (Luckley Oakfield), and Pam Pierce (Emmbrook).

How many Labour MPs thought it would come to this? Many of them wanted Gordon Brown with a passion, preferring his more socialist approach to Tony Blair’s Third way ambiguity. Many of them thought he was too decisive and powerful to be stopped. Even the minority of loyal Blairites who privately predicted disaster before he was crowned did not have the courage to put up a candidate against him and expose the obvious weaknesses in advance, to spare their party and our nation the agony we are now living through.

Yesterday’s news was a new low for a government which lives by the news and is judged by the headlines.

We had 8000 schools on strike, making a mockery of Labour’s claim to be the party of “education, education, education”.

We saw the Grangemouth refinery closing down to prepare for a strike over pensions, highlighting the immense damage the government has done to private pension schemes.

A government Minister on TV told us they were taking an active part in ensuring proper supplies of diesel and petrol to Scotland, whilst the same TV programme showed five out of six filling stations they visited had already run out of diesel, with some rationing of petrol.

Over in the City there was more news of the mortgage famine, preventing many young people from buying their first home. Ministers tell us helping such people is one of their aims.

News came of a leading housebuilder announcing it would not be starting work on any new housing sites, as demand was so poor. Ministers have spent the last couple of years lecturing us all on the need to build more homes, and trying to find greenfields they can insist we build over.

In the corridors of Westminster Labour MPs were heard asking if the PM and Chancellor’s climb down the previous day over compensation for some of the losers from Labour’s Income Tax rise was a “con”.

Ministers were still cobbling together some way of sending some money back to people they now admit they are overtaxing, but were unable to explain how much would be sent to how many on what date – and this is sorting out a problem created by a budget delivered a year ago.

The problem for Mr Brown is how to break this desultory cycle of bluster, incompetence and climb down. He wants to avoid looking like James Callaghan bedevilled by strikes, visits to the IMF and high inflation in the 1970s. Clearly the spin strategy this week has been to seek to isolate the 10p tax band problem, make the minimum concession to see them through the otherwise difficult vote next week, and then show resolution in the face of future rebellions. Unfortunately for the PM his backbenchers are suspicious, and will demand more detail before they finally settle the tax question. Meanwhile, the rebels over the ghastly 42 day detention policy have not gone away, and will have learnt from this that The PM does change his mind under pressure. Journalists are already circling the issue, looking forward to dramas ahead.

I enjoyed some of the BBC coverage of the strikes. With a hint of incredulity in his voice, one reporter said it was Labour voters (Meaning NUT members) striking against a Labour government. It was an interesting slip. NUT members were never all Labour voters, even in 1997. They are certainly not all Labour voters today! The left is watching as one arm of the Labour movement, the public sector Trade Unions, turns on another, the Labour party in office. It is not a pretty sight, and it is most disruptive for members of the public caught up in the consequences of the battle. Yesterday it was areas that voted strongly Labour in recent elections which were most affected. Diesel is in short supply in Scotland, and more teachers were on strike and more schools closed proportionately in places like Wales, where people had chosen mainly Labour MPs.

To recover from here the Prime Minister needs to change his character and approach. He needs to become more interested in the underlying problems and seek to solve them. The number one problem is people are short of cash to pay the ever rising bills – he needs to understand the damage tax poverty is doing to his reputation. To solve this he needs to lower taxes, which requires running a more efficient public sector. He needs to show more flexibility and more honesty in dealing with Parliament. Where his whips tell him there could be problems he needs to listen and adapt, rather than talking tough and then conceding. He should not conclude from all this that reform is impossible or undesirable. He should understand that public sector reform requires persuasion, strategy and tactical skill.

Professor Anand Menon of the University of Birmingham has responded to John Redwood’s article, Britain in Europe, published on the e-International Relations website. The text of Professor Menon’s criticisms can be found here, and John Redwood’s response, is reproduced below.

I thank Professor Menon for his apology and change of tone. He may not agree with my views, but they are sincerely held and based on a sustained argument and a view of how the world works. In a democracy it is best to meet such positions with courteous and well argued disagreement.

I am also delighted to learn that Professor Menon agrees with me that the Uk should not join the Euro, and wishes to rule out any idea of more political Union or the creation of a country called Europe. Like him, I think such a course wrong for the UK. Unlike him, I do think that is the direction of travel of many of our partner countries and the Commission. The language and centralising powers of recent Treaties underlines this point.

I do argue strongly for different and better policies from the EU. I want to see the end to the protectionist CAP, which puts up food bills at home and deprives developing countries abroad of markets for their produce. I want to see many regulations withdrawn, as they are not necessary to be able to trade with each other. They can limit competition, choice and innovation. I want to see lower taxes, which requires less government at all levels including the European one.

It is good to know that the Professor too, shares some of these aims. The problem is, I see no chance of achieving them in the near future given the attitude of the main political parties on the continent of Europe.

Teachers are on strike. Civil servants are on strike. University lecturers are on strike. The Grangemouth refinery which supplies much of Scotland with oil products is on strike and closed down. The Labour government is taking us back to the wild 1970s, when workers resorted to strike action against a Labour government in a destructive frenzy, which kept the UK firmly near the bottom of any list of richer countries for investors thinking of where to create jobs and do business.

I remember thinking how absurd strikes could be as a young University teacher. We were confronted by a student strike! Some of my colleagues saw it as extra holiday, some as a welcome opportunity to do some more research instead of teaching. One of my abler students in advance of the strike asked if he could shift his tutorial from a strike day to a non strike day, as he was kind enough to think the tutorial of value but he wished to show “solidarity”. I explained that he had to face the moral dilemma. If he wanted to show solidarity he also had to show sacrifice – so I would not change the tutorial date. He asked if he could come to the tutorial on the standard date by the back gate so no-one would see. I said that was fine by me. He became an incognito strike breaker. The students were, of course, striking against themselves. There was no need to give any ground over whatever their issue was.

I finally decided to leave University teaching when an unexpected visitor turned out to be a Union organiser wanting me to join a Trade Union. It reminded me that University teaching, for all the diversity of Higher Education institutions in Britain, was in many respects a nationalised monopoly. The state was the principal paymaster and in some ways the ultimate employer. Governments were likely to squeeze university pay in the long run, and were unlikely to welcome pay systems which rewarded individuals prepared to offer better work or more energy in performing their tasks. I left for employment where I could negotiate my own deal based on what I could contribute to the organisation, working alongside others who would never dream of going on strike.

The four different groups of workers on strike today all have the same grievance at base: they think the government is too mean. The Grangemouth workers will gain the most attention, because their conduct will visibly and quickly inconvenience a very large number of people in Scotland and will soon disrupt other businesses trying to work there. They will be an international advert to footloose industries and investors to avoid Scotland as it descends into industrial anarchy. The University teachers will have the least impact.

The Grangemouth strike is about the closure of the final salary pension scheme to new employees. It is a late example of a wave of pension fund closures brought about by the government decision to tax pension funds. The sad collapse of many final salary schemes is an all too predictable consequence of Brown’s high tax policies, and yet another route by which this government is driving people into tax poverty.

The teachers will only be striking in some schools, through the actions of just one Union. The strike ballot produced a minority vote for the strike allied to widespread abstention. The teachers are right that their pay award is below the increase in the Retail Price Index, but wrong to think that they are being treated badly in comparison to most workers. The majority are settling for pay awards below the current rapid rate of inflation, and below the rate of increase of the RPI. The whole public sector, including MPs, has to accept that the government has overspent and over borrowed, and now has to rein back. We should all expect a period of falling real salaries and wages as the government struggles to adjust after its excesses. MPs voted for a lower increase for themselves than recommended by the Pay review body.

It is sad that relations between the state as employer and its employees has reached this sorry impasse. Private business now experiences far fewer strikes, as employers have learnt to keep talking and to take the interests of their staff more seriously than they used to, and employees have learnt that if you strike in a competitive business you may damage the company to the point where there is no longer a job for you. The public sector is meant to believe in providing a public service. You enter it knowing that in times of expenditure restraint all have to make a sacrifice. It is a pity the Labour government made such a mess of the finances, and a bigger pity that a Labour Education Secretary cannot get on with the NUT.

At least Labour Ministers do not have to worry about the Opposition’s view on this. When Conservatives were in power Labour MPs were always tempted to support strikes and strikers and to side with them. The Conservative Opposition today is united in condemning strike action. It recommends to all the strikers to talk and to use democratic protest, whilst returning to work. It advises the government to listen, and to see what it can do within the difficult financial constraints its budget mismanagement has created.

Following strong representations from several MPs including John Redwood about continuing confusion between national and local agencies over responsibility for surface water flooding, Sir Michael Pitt (Chairman of the Flood Review) has suggested he will be recommending legislation to clarify responsibilities in his final report. Speaking today at a meeting in Westminster alongside Baroness Young of the Environment Agency, Sir Michael suggested the purpose of such legislation would be to map out the statutory obligations of all the relevant authorities, including water boards, Local Authorities and private landowners. Baroness Young fully supported the need for legislation as part of the national framework of flood protection and response they are currently developing.

In several areas of the Wokingham constituency, confusion over responsibility for infrastructure maintenance has yet to be clarified. Speaking today, John Redwood said: “Nine months after the floods we still are witnessing arguments from the top down over who is to blame and who should carry out the remedial works. I am urging the government to clarify these matters as quickly as possible, and to give the Environment Agency the means and the requirement to tackle the outstanding problems promptly.”

This government just doesn’t get poverty. Rather, it begets it.

The government thinks there is child poverty and fuel poverty. Today – and next week in Parliament – the pressing issue is tax poverty.

Poverty is a shortage of income for people to pay the necessities and have a decent lifestyle. There are three ways of tackling it.

The political parties all agree the best way is to create a climate in which the economy generates enough well paid jobs, so people can go to work to earn what it takes to afford to keep themselves and their dependents.

They agree that for some, it is necessary to take money from the many to give to the few who cannot find or hold a job.

The third way would be for the state to let people keep more of their money, instead of taking so much from them in tax. If those on lower incomes paid less income tax they could afford the fuel bills and could manage the food and housing bills without requiring a benefit top up.

The government is hoist on its own targets to cut so-called child poverty. It is a curiously misnamed set of targets. Practically all children are poor. We have legislated to make sure they remain so, as we believe we should prevent children under the age of 16 from working for pay to take them out of poverty. (Please note, I support the banning of child labour!) We also usually prevent children from inheriting or receiving larger sums from relatives with property and money to give them an independent savings income which they control as minors. This government wishes to take this approach further, by preventing 16-18 year olds from entering full time work for pay without an educational component, something I do not support. I want 16-18 year olds to have opportunities for more education if that is what they want, but I do not favour compulsion.

What the government means is it wishes to cut parent poverty. That’s a good thing to want to do. I also want to cut it, along with cutting poverty for childless couples and for single people. The government’s determination to tackle parent poverty has led it into the dangerous political quagmire of abolition of the 10p tax band, offering compensation to some parents through benefits and tax credits, whilst taxing single people and childless couples more. Transferring money from one group of low income earners to another is not what a lot of Labour MPs came into politics to achieve. It is certainly not what I am about. I want to tackle the low net incomes of all.

Today there is a summit on fuel poverty. Yes, the fuel bills are spiralling upwards. No, there is nothing in the short term the government can do about the ever higher oil, gas and coal prices. Yes, the fuel companies have to pass on most of the increased costs of fuel to them. Yes, that will make them unpopular and the objects of political diversionary attacks.

Yet if you buy fuel for your car or van, for your working vehicle or for the delivery vehicle to your home, more than two thirds of the rip off price is tax. The energy companies are great tax collectors, taking money from poor and rich alike for their product, only to hand over lots of it to the government. People could afford even today’s high bills if they kept more of their own income. The government’s removal of the 10p tax band undermines everything and more besides that it is trying to do to alleviate fuel poverty. There would be no fuel poverty for the many if taxes were cut.

I believe the best anti poverty programme you can have is cutting taxes. Under this government, far from playing Robin Hood and taxing the rich to pay the poor, as socialists would like, the government is playing Sheriff of Nottingham. It is taxing the poor to give to the new rich, the Chief Executives of the ever expanding state, to the well paid bureaucrats, to the legal advisers, the management consultants, the spin doctors, pollsters and focus group masters, to the computer contractors and the PFI/PPP providers who cluster attentively around Labour’s great public sector money making machine. Labour even wants to add the political parties to the list of those who deserve more tax cash from the poor to sustain their expensive habits. There are just not enough multimillionaire footballers and movie stars to take the money off, especially when they can leave the country at the very whiff of higher taxes on their fabulous incomes.

If the government were serious about tackling parental poverty and fuel poverty, if it understood that it needs to tackle single person and childless couple poverty as well as pensioner and parent poverty, it would curb its own insatiable appetite for cash for the grandees of the public sector. It would cancel or seek value from all those consultancy, research, financing and management contracts that festoon in the profligate public sector. Ministers would curb the Ministerial drinks cupboard and cut back on the air travel.

So come on Labour. Put in place a real anti poverty programme. Understand poverty is a shortage of spending power for anyone who is poor, whether they are young or old, single or married, with or without children. It is bad news for anyone suffering from it. The best and quickest way to get more people out of it is to lower taxes. That means reining in the excesses of the multilayer government and the quango state.

John Redwood was among those MPs scrutinising the Bank of England’s attempt to improve liquidity in the financial markets and its likely impact on mortgage borrowers when the Chancellor made his statement to the House yesterday. The exchange, taken from Hansard, follows.

Mr. John Redwood (Wokingham) (Con): How much extra cash do banks in the UK now have to deposit or keep for prudential reasons, as a result of the regulator’s change of rules? That will offset the beneficial effects of some of the package. Will the measures be enough to bring mortgage rates down?

Mr. Darling: In relation to the first point, the right hon. Gentleman is aware that the FSA is responsible for the prudential supervision of the banking system and specifying what arrangements are required, first under Basel 1 and then under Basel 2, which is in the process of coming into force.

In relation to the right hon. Gentleman’s wider point about mortgages, we want to make sure that financial institutions are in good f