Budget Resolutions and Economic Situation

Debate between Lord Redwood and Charlie Elphicke

Wednesday 19th March 2014 Commons Chamber

[Charlie Elphicke (Dover) (Con)]

It was a rant.

[Mr Redwood]

The Leader of the Opposition’s rant, as my hon. Friend says, had just one basic message: the wrong belief that the Conservatives want tax cuts for the rich and misery for everybody else. What we want is tax cuts for everyone, and what this and the previous Budget offer is tax cuts for everyone.

Let me explain how we have different types of tax cut for people at different levels of income. We take those on the lowest incomes out of tax altogether, so they get a genuine tax cut: they go from paying something to paying no income tax at all. The House is, I think, united on the wisdom of that. At the top end, we cut the rate, and what happens is that the rich and successful people actually pay more tax, not less. That seems to me to be magic, because then everybody is happy—or they should be. Only the very jealous should be miserable, because what we then have is the rich staying here, investing here, creating jobs here, creating more money here and paying more tax because the rate is lower. What is not to like about that proposition?

What is odd is that the Labour party in office, until the last couple of days, knew that and kept the top rate of tax below the level that we inherited and below the level we have now fixed. It is a bit rich that Labour is now complaining that we are light on the rich, given that our tax rates are collecting a lot more tax from the rich and are higher than the rates that Labour imposed. Indeed, we could collect even more tax from the rich if we brought the rates down a bit more, which I hope, come a Conservative Government, we might be able to do. Surely what we want is to maximise the revenue from such people, not to make a political point and drive them abroad, so that we have a society with less money, fewer jobs and less creativity.

I am pleased that the Chancellor made some moves on energy. We need a much bigger and stronger industrial recovery than we have generated so far. The first thing we need to do to have such a recovery is to ignore the advice of the Green MP, and to go for cheap energy. America is going for cheap energy, and it is re-industrialising very quickly. America is now super-competitive against companies in the European Union. A leading chemical major in Germany has recently said that it will put more of its investment abroad, outside the EU altogether, because, in the light of the energy crisis, the gas feed stock is uncompetitive. We need to find that gas and to get it out as quickly as possible. We need to match the United States’ shale revolution if we wish to save our high-energy-using industries and to re-industrialise and give some hope to the northern cities in particular, with their long tradition of industrial activity, because they need much cheaper energy.

We need to do more for savers, and I am delighted by an elaborate and interesting set of measures from the Chancellor on saving. Savers have had a miserable time after the collapse. Rightly, successive Governments and Governors of the Bank of England have kept interest rates on the floor, as they had to do, to try to stimulate activity and to prevent a worse collapse than we experienced in 2008, at the height of the crisis. That has been very bad news for savers. The tax changes will help savers, and the pensioner bond offer, if the rates are around the level we are now looking at, makes sense and would be a bit more attractive and something for pensioner savers to look forward to. I also welcome more flexibility for pensioners generally. Annuities are not good news at the moment, and if people can put that off or have a better choice, that may well be an excellent answer.

This Budget needs to be good for savers, for industry and for exports, and we are going in the right direction. It will help to promote a bit more growth, and only if we get a lot of growth will we get out of this debt bind.

Water Industry

Debate between Lord Redwood and Charlie Elphicke

Tuesday 5th November 2013 Commons Chamber

[Charlie Elphicke]

My hon. Friend is a passionate advocate for more reservoirs. Reservoirs are not only important for water storage; they are important places for the angling community. Many hon. Members here are passionate anglers who enjoy fishing, and reservoirs provide an opportunity for that pursuit.

[Mr John Redwood (Wokingham) (Con)]

I am glad that my hon. Friend is going to talk about the need for competition to provide better quality and low prices, but why does he think that there is a natural monopoly? Surely anyone, under a suitably liberated regime, could build a reservoir or drill a borehole and provide water to the customer through a piped system.

[Charlie Elphicke]

My right hon. Friend makes an interesting point. The planning system obviously means that such things take time. It is certainly important to have more of a national planning framework, which has been discussed by some and is worth considering. The view of water professionals is that competition is important but, in terms of customer service, it does not necessarily reduce costs because the infrastructure represents about 90% of the cost base.

Budget Resolutions and Economic Situation

Debate between Lord Redwood and Charlie Elphicke

Wednesday 20th March 2013 Commons Chamber

[Mr John Redwood (Wokingham) (Con)]

It is important first to understand what the Government strategy is, because there have been a number of misleading interpretations of it. Some have said that the reason the economy did not grow last year and is still growing very slowly is that there have been massive public spending cuts that have reduced national output. There is a helpful table on page 53 of the Office for Budget Responsibility report which shows that growth was indeed only 0.2% in real terms last year. However, it shows that the Government sector made a positive contribution of 0.6%, which is far more than overall growth, and that growth was reduced by disappointment in private sector housing investment, changes in stocks in private sector companies, reflecting an absence of confidence, and a poor performance on trade. A similar position is reported in forecasts for the current year, in which it is assumed that the Government sector will still make a positive real contribution to a rather low rate of growth, while it is hoped that the private sector will not have as disappointing a performance this year as it did last year.

The strategy was never about massive cuts in public spending overall; it was about modest growth in public spending. The idea was to get the deficit down through some very large tax rises. Unfortunately, as the latest documents reveal, the 50p and the other income tax changes were especially damaging to revenue. A loss of more than £7 billion has been recorded by those on the Front Bench. The overall figures imply that it was probably even more than that. In the most recent year, tax revenues from income tax overall are down on the previous year, not up. The strategy has not miscarried because it cut too much or because the Government overspent compared with what was planned—they have done a rather better job this year of controlling spending. Rather, the strategy miscarried because the big increase in tax revenue that had been forecast did not come through. That was partly because tax rates were set that did not work, such as the high rate of income tax. Also, the capital gains tax rate is too high, so we will get less in capital gains tax receipts this year than in the previous year. The reason is also partly that growth in the economy was very disappointing.

[Charlie Elphicke (Dover) (Con)]

Does my right hon. Friend agree that it is important to have capital gains tax rates that are lower and more competitive, particularly for business assets?

[Mr Redwood]

I entirely agree. There would be much more activity if people could free some of those assets by taking profits and moving them on to people who could use them better and build on land, for example. I hope my right hon. Friend the Chancellor will think about that in due course, because it would make him revenue and help to grow the economy.

Nor has there been any lacking in flexibility by my right hon. Friend the Chancellor in applying his strategy. He has been flexible over the deficit; indeed, we see in the latest figures that he plans to borrow £48 billion more in 2013-14, £60 billion more in 2014-15 and £67 billion more in the following year than in the original plans. He has reflected the fact that the economy has not performed well in the way that the independent forecasters assumed and the fact that tax revenues had a big wobble because of wrong rates and low growth, and he is allowing the state to borrow more to try to pick up the slack. I therefore welcome the fact that in this Budget he is concentrating on things that he can do to promote growth in the areas that subtracted from our growth in the most recent year.

The Chancellor is right to look at ways of trying to promote more housing activity. Many of us represent constituents who would love the opportunity to buy their first flat or house. They have been priced out of the market by the boom and now they are kept out of the market by an inadequate supply of mortgage finance and tough conditions. We need to be careful, because we do not want to fuel another housing bubble, but we also need to recognise that the banking system is not delivering finance for many of our constituents at the moment, and there are people who could borrow prudently and sensibly to buy their first home. I do not want to live in a society where people have to be in their late 30s before they can own their first home. I think we need to do better than that.