Pre-Budget Report

The hon. Gentleman has just made one silly party political intervention: he does not get a chance to make a second. The second reason is the possible effect of the risk premium, even for Government borrowing. My right hon. and learned Friend made the point that the Government now have to pay more to borrow than private companies, and even French banks. The third reason, which is not often mentioned, is the fear among the general public that the additional money they receive from the Government borrowing more will have to be paid back through increased taxes. The public therefore save that money to pay the taxes in future. I have always found the idea of Ricardo equivalence—that the general public can estimate the likely tax effects of borrowing in the distant future and predict on whom they will fall—very unlikely. But in the present circumstances, when the Government have spelled out that the short-term boost will be followed by specific and immediate increases in taxation, and when we know from what they have been trying to hide that any uncertainty is only that taxes may be even higher than so far revealed, it is all too likely that people will increase their saving to meet their future tax bills, thereby negating the effect of this attempt at expansion. Having said that, I hope that it works. The Government are relying on an increase in taxes, and they will withdraw the personal allowance for people who earn more than £100,000—or £1 for every £2 of extra income. In effect, that will restore a 60 per cent. marginal tax rate for income above £100,000. In the past, that had a negative yield. We got more money when we reduced the top tax rate than when we maintained it. The Government have learned nothing and forgotten everything, and I hope that they will give us more time in the next Session to rub their noses in what is a very dangerous and risky Budget.