Banking Reform

Lord Watts Excerpts

Monday 4th February 2013 Commons Chamber

[Greg Clark]

I agree with both parts of my hon. Friend’s question.

[Mr Dave Watts (St Helens North) (Lab)]

The Minister says that he wants to establish new bodies to set bonuses and pay in banks. Can he guarantee that on those boards will be ordinary customers and businesses, and that they will not be stacked with bankers’ friends?

[Greg Clark]

I think it important for the responsibility exercised by remuneration committees in particular to have regard to the experience of ordinary working people up and down the country. I see no reason why the way in which bonuses are thought about in boardrooms in the City should be any different from the way in which they are thought about in any other industry.

Professional Standards in the Banking Industry

Lord Watts Excerpts

Thursday 5th July 2012 Commons Chamber

[Ed Balls]

All my experience—and there are many Members on both sides of the House who have more detailed experience than I have—is that Select Committees find it much harder than a judge-led inquiry to secure the release of necessary and essential documents and, more importantly, to find out which documents they should ask for in the first place.

Finally, and above all in our view—and I note that the Attorney-General did not correct me on the calling of witnesses, but perhaps he will advise the Chancellor for his speech—only a judge-led inquiry can truly persuade the public that the inquiry is properly independent and objective and, given the Chancellor’s behaviour, non-partisan.

[Mr Dave Watts (St Helens North) (Lab)]

Is it not clear that the Government, stacked with bankers and payrolled by the bankers, are frightened of a judge-led inquiry because they want to cover up the scandal?

[Ed Balls]

My hon. Friend makes his point in his own particular way. I was saying that the inquiry needed to be independent, objective and non-partisan, so I understand his concerns. I would probably also understand his bafflement about why the Chancellor and Prime Minister seem to be unwilling to appear before a public inquiry looking at wider issues of culture.

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[Mr Andrew Tyrie (Chichester) (Con)]

The rigging of the LIBOR market is shocking. It is the worst case of City malpractice I can recall. The Chancellor proposed the idea of a Joint Committee to me in several phone calls over the weekend. It was an honour to be considered. None the less, I made clear right from the start what ingredients I viewed as required to make a success of it.

First, the Joint Committee’s terms of reference should be tightly drawn and forward looking. This cannot be a witch hunt. Having an exhaustive and inquisitorial committee of inquiry, whether it be within or outside Parliament, into the respective roles and responsibilities for mistakes of Ministers, civil servants, the Bank of England, regulators and commercial banks would do more for the history books than for the quality of legislation. The job of the Joint Committee must be to concentrate on how to get one part of the banking Bill into better shape, and in quick time. For that purpose it will need tightly drawn terms of reference, focused on improving standards and corporate governance in banking, and it can and should do the work quickly.

Secondly, as I said in that conversation, any committee of inquiry, particularly a parliamentary Committee, must have the support of the major parties across the House of Commons. It appears from what I am hearing here that it does not have that support at present.

[Mr Watts]

Is it not the case that any inquiry will have public support only if it is carried out on a cross-party basis? It is amazing that a Chancellor who seeks such co-operation from the Opposition should go out and the first thing that he does is tell lies about—

[Hon. Members]

Withdraw!

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Sit down, Mr Watts. I am on my feet.

Mr Watts, you will have to rephrase that last bit. You will do it briefly, and then Mr Tyrie will continue his speech—and that includes withdrawing the accusation of lying.

[Mr Watts]

I will withdraw that comment, Madam Deputy Speaker. I will say that the Chancellor gives the impression that he did something that he did not do, and then refuses to apologise. How does he think that he can secure co-operation across the Benches when he does that?

[Mr Tyrie]

I shall not address the second part of the hon. Gentleman’s question, but the first part was absolutely right. I think it essential for us to have cross-party support for any inquiry of whatever type.

Let me now refer to a tiny bit of history. A hundred years ago, partisanship made a mockery of an attempt by a Select Committee to investigate the Marconi scandal. The Conservative Opposition killed any value that that inquiry might have supplied, and as a result Select Committees were written out of the piece for inquiries for nearly 100 years. I think it vital for Parliament that another clash of the Titans—which seems to be going on now—does not leave us in a position in which we, as Parliament, cannot subject this issue to an inquiry of any type.

Finance (No. 4) Bill

Lord Watts Excerpts

Wednesday 18th April 2012 Commons Chamber

[Mr Dave Watts (St Helens North) (Lab)]

Is it not right that the people who caused financial problems and hardship for many families and created mass unemployment pay a fair amount of tax to compensate for the damage they did to the economy? Is that not exactly what the amendment would provide for?

[Mr Redwood]

Many people would think that the outgoing Government had a lot of responsibility for the crash, along with their professional advisers, the quangos and the Bank of England, who apparently did not see it coming. They had very light regulation in the lead-up to the credit crunch and then very tough regulation. [Interruption.] Labour Members feel there is some justice in my response, as they are getting very heated, but we are straying rather far from amendment 5.

The point of the amendment is that the Labour party wants to raise an unspecified amount by taxing unspecified people who apparently earn more than Labour thinks is good for them. The Opposition would spend that on youth measures, and they want the Government to come back with a report on how that money could be spent.

My hon. Friend the Member for Staffordshire Moorlands (Karen Bradley), who rightly said that she could support a bank levy to try and get the deficit down, was speaking sense, but this, as she will have realised, is not the proposition of the Labour Opposition. They do not want to get the deficit down. They want to find another pot of money to increase spending. I am with them in their aim of reducing youth unemployment. We will make much more progress in reducing youth unemployment if we have stronger banks able to finance a more vigorous recovery. I urge the Government to work more strongly on that. The more money they take off the banks in taxes, however tempting that is, the less the banks will be able to lend to people to get the recovery going, so the proposal could be self-defeating.

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[Mr Bailey]

Perhaps we should. Perhaps we should introduce a tax on certain members or major funders of the Conservative party, too.

[Mr Watts]

Does my hon. Friend not think that it a bit ironic that people who are suggesting that the previous Labour Government’s problems created the financial crisis are the same people—the Liberal Democrats and the Conservatives—who were calling for less regulation? It is interesting how the Government are trying to rewrite history.

[Mr Bailey]

I have often made the same point myself. I was on the Government Benches at the time of the so-called financial crisis and the run-up to it, and I do not remember any demands whatsoever from the then Opposition for us to introduce heightened regulation of the banking system. It is very easy to be wise in retrospect.

Tax Avoidance (Public Servants)

Lord Watts Excerpts

Thursday 2nd February 2012 Commons Chamber

[Danny Alexander]

I think the hon. Gentleman should be careful about how he characterises these arrangements, given that they are currently subject to a review.

[Mr Dave Watts (St Helens North) (Lab)]

On a day when another 100 of my constituents have lost their jobs because of the failed economic policy of this Government, how does the Chief Secretary to the Treasury think those people will feel about the Government allowing tax dodges, and allowing Ministers to take no responsibility for their actions? When are the Government going to come clean?

[Danny Alexander]

I suspect that they will feel, as I do, that urgent action needs to be taken. We have changed the arrangements in this case, and the review will root out whether any other such arrangements were put in place either under this Government or when the hon. Gentleman’s party was in office. He should wait carefully for the results of the review.

Oral Answers to Questions

Lord Watts Excerpts

Tuesday 24th January 2012 Commons Chamber

[Danny Alexander]

Of course, the burden of the deficit reduction is fair overall, and we know that the burden falls most highly on the richest 20% of the population. However, with spending cuts needing to continue for longer—another two years—we need to redouble our efforts, both to tackle tax avoidance and to deliver the income tax cuts that we have promised, by lifting the personal allowance as rapidly as the nation can afford. Those are, of course, issues that we shall be considering in the run-up to the Budget.

[Mr Dave Watts (St Helens North) (Lab)]

Why does the Minister not look at employing more tax inspectors, given that billions of pounds are going unpaid because there are not enough tax inspectors to do the job?

[Danny Alexander]

Not only have we looked at that; we are doing it. In the spending review, we announced an extra £900 million for HMRC, which is creating an extra 2,000 specialist posts to tackle tax avoidance and tax evasion. It took the hon. Gentleman’s party 12 years just to set up a specialist unit at HMRC to deal with high net worth individuals. We have extended that to ensure that there is a specialist unit to deal with the tax affairs of all those who pay, or should pay, the 50p rate.

Fuel Prices

Lord Watts Excerpts

Tuesday 15th November 2011 Commons Chamber

[Mr Dave Watts (St Helens North) (Lab)]

I am sorry that my amendment was not selected by Mr Speaker, because I believe that the motion is wishy-washy. I will explain the reasons for that later. My amendment went into some of the details that need to be addressed to help hard-working families.

Like many Members, about four or five weeks ago I started to receive letters from constituents on this issue, mainly prompted by the FairFuelUK campaign. At the time I wrote back to my constituents to tell them that I could not support the campaign because it called for tax cuts without saying how they would be paid for. I have little time for campaigns by the Daily Mail, the Daily Express, FairFuelUK or the TaxPayers Alliance, which are extreme right-wing organisations that promote tax cuts at the expense of public services.

However, I have now changed my mind after speaking to some of my constituents. There is no doubt in my mind that high fuel prices are having a tremendous impact on many low-paid and middle-paid families in my constituency. It is clear that the Government have no idea about the impact that high fuel prices are having on many constituents around the country. It is also clear that they have no understanding of the impact that wage freezes, high inflation, tax increases and high unemployment are having on the general public and the economy. Many of my constituents will have no pay increase for two years. Prices go up in the shops virtually every week. Heating and petrol prices are a particular problem for many of my constituents, and many of them are struggling to stay afloat.

The second reason I support the campaign is the decision by the Liberal Democrats and the Tories to raise VAT to 20%, which has had a massive impact on the cost of living and on my community. It has made the situation worse. We have now had a flatlining economy for 18 months and unemployment is at a 17-year high. Those who believe that the motion will address those issues are sadly mistaken. What we need is a complete review of economic policy in this country, taking on board something like the Labour plan for jobs and growth. Unlike Labour, the Government parties have no policies for growth. Labour’s policies of providing 100,000 jobs for young people, bringing forward investment in major projects and schools, a temporary reversal of the VAT rise—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We need to stick to fuel prices.

[Mr Watts]

I am sticking to them, because the people promoting the motion believe that it will address their constituents’ problems. We have heard many Members talking about the impact that high fuel prices are having on their constituencies. I know that to be the case, but it is only part of the problem that people face on a daily basis. We need a review. At the last election the Tories promised to cut fuel costs and to stabilise them in the immediate future and the long term.

Many families depend on cars to get themselves to work and to deliver their children to school—

[Mr Deputy Speaker]

Order. I call Mark Garnier.

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[Martin Vickers]

I entirely agree with my hon. Friend, who strengthens my case.

I was discussing fairness. In the two unitary authorities that cover northern Lincolnshire, it is estimated that constituents pay £167 million a year in motoring taxes, compared with the £95 million that is spent on roads infrastructure—again, that is clearly unfair.

[Mr Watts]

Will the hon. Gentleman give way?

[Martin Vickers]

I think that I am running out of time.

I said earlier that my constituency is a major centre for the road haulage industry. Most large commercial vehicles do about 8 miles per gallon. The planned increase due in January will add £15 a week to the running costs of a single vehicle, which will impact not only on individual businesses but on the supply chain. The Federation of Small Businesses has produced figures that detail the impact on businesses in that category.

I recognise, as I said earlier, that the Government must protect their income streams. There has been much talk in recent weeks about the 50p tax rate. That must be secondary to a reduction in car taxes. Very few people in my constituency can even dream of earning an income that would demand a 50p tax rate. I want to get rid of it as soon as possible, but now is not the time. Rural bus services have been reduced. The Government understand the impact on local people in northern constituencies in particular, and I urge them to act as soon as is practicable.

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[Fiona Bruce]

My hon. Friend makes a very good point.

Let me give the House some specific examples of small businesses in my constituency that are suffering in that way. Smallwood Storage Ltd is a transport and storage business in Sandbach employing nine people. This week it told me:

“We need a level playing field, the price of fuel has become too high as a percentage of our overheads and is out of proportion with the rates we charge. As a small business, we do not have the power of larger companies and are being squeezed from all sides.”

Another local company, B Lakin Transport, a haulage businesses in Somerford employing 10 people, said:

“Increased fuel costs have knock-on effects on everything…as the price continues to creep up, customers will go elsewhere and even look to foreign drivers who can use cheaper fuel from the continent; avoiding the extortionate prices in Britain.”

It continued:

“A driver from Luxembourg can fill up their petrol tank in Luxembourg at a fraction of the cost here. In October 2011, 1000 litres of unleaded fuel would cost £1130 in Luxembourg compared to £1350 in the United Kingdom—that’s a saving of £220 each time the tank is filled.”

Let us remember that haulage competitors from Luxembourg can fill their tanks there, drive to the UK and then return to Luxembourg without having to fill up here at all. B Lakin Transport tells me:

“Combine this with the exemption from road tax for foreign drivers, and we are clearly at a significant disadvantage to these foreign drivers from the outset.”

[Mr Watts]

Does the hon. Lady agree that it is very important that we are honest with the British public in saying exactly what sort of cut we are looking for? I expect that the level that the Chancellor will look at will be a lot less than is being suggested here today.

[Fiona Bruce]

Through the motion, we are asking the Government to explore a number of ways in which they could assist small businesses, such as the ones that I am describing, with this predicament.

I will cite another business in Cheshire. It is not a small business, but it is an interesting comparison, because it is not a haulage company. Roberts Bakery is a large family business that produces bread in Northwich, just outside my constituency. Just yesterday, it informed me that the increase in fuel prices since last year alone has added £10,000 a week, or £500,000 a year, to its delivery costs. That is a serious additional overhead for such a family company.

The price of fuel is hindering such businesses from playing their essential role in the economic recovery and job creation that we so desperately need in this country. It is effectively pricing UK businesses off the road, driving people out of work, preventing companies from taking on and holding on to contracts, and fuelling further economic difficulties.

I signed up to support the motion, and I applaud all the other Members who have done so. I ask the Government to consider as a matter of urgency the impact that high fuel duty rates are having on local economies such as the one in my constituency, and to take action to address the issue accordingly.

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[Mr McCann]

That gives us the real picture. I shall say more about that in a moment.

My constituents know that the price of oil is linked to the complexities of production, of exchange rates and of international stability, and that interference in one or more of those factors can cause prices to spiral out of control. They lose comprehension, however, when they see little evidence of price reductions when those factors are reversed. I remember well that in 2008 the price of oil was $147 a barrel and the price of unleaded in my town was £1.15. Yesterday, the price of oil was $114 a barrel, and the price of petrol £1.35.

[Mr Watts]

Will my hon. Friend give way?

[Mr McCann]

I have already taken a couple of interventions. If my hon. Friend does not mind, I want to allow a couple of other Members to get in.

We need some answers from the Minister to explain the phenomenon that I have just outlined, because the public just do not understand it. If this debate is to have any credibility, it also needs to address some other issues. I do not believe the hon. Member for Harlow’s simplistic proposal that reduced prices will bring in more income. If he believes that we need to reduce fuel duty, he must tell us where the resulting cuts would be made. Or would he advocate increasing other indirect taxation, or direct taxation, to fill the gap?

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[Mr Llwyd]

It is difficult enough to find a bank that will provide the money in the first place—when it rains, the banks want their umbrellas back—but I take the hon. Gentleman’s point.

Of course, it is not just businesses that are suffering. Families have been gravely hit by the rise in fuel prices, and, as has already been pointed out, fuel duty has a disproportionate impact on those who are least able to pay it.

[Mr Watts]

Does the right hon. Gentleman agree that the difference between this and earlier fuel price rises is that the Government’s present policy is to impose a pay freeze, while also allowing inflation to run at 5%? Families are being hit by the treble whammy of higher prices, inflation, and the increased price of petrol and other fuels.

[Mr Llwyd]

That is true. As we heard earlier from the hon. Member for Ynys Môn (Albert Owen) and others, families are being squeezed from all directions. According to figures issued yesterday by the Office for National Statistics, the poorest 20% of households pay proportionally twice as much in duty as the better off.

In rural areas such as my constituency, the cost of running a car is as important to people as their food budgets, because they cannot do without a motor vehicle. We have proposed the introduction of a fair fuel duty regulator that would prevent unexpected spikes affecting people at the pump through increased VAT, which is then pocketed by the Treasury. We suggested that an estimate be made of the fuel price over the coming six months, showing the amount of revenue that the Government would expect to receive, and that a cap be imposed if the price reaches an upper limit and VAT and fuel duty be frozen until the end of that period. The Government would, of course, receive their predicted amount, rather than a windfall from consumers who are already squeezed by the price hikes and unable to spend their income elsewhere.

Unfortunately, the then Labour Government in London stubbornly ignored the problems of rising fuel prices, and the motions in 2005 and 2008 addressing the issue were defeated. The Conservatives abstained in the vote on the 2008 Finance Bill, but decided only a few weeks later—in July 2008—that they would support a fuel duty stabiliser, a move that we welcomed at the time, believing that if they came to office they would introduce a mechanism similar to that we had been advocating. Sadly, when the matter was put to the vote in February this year, the voting pattern was reversed: the Conservatives and Liberal Democrats voted down our motion, while the Labour party abstained. This ever-changing position on a fuel duty stabiliser shows the political expediency of many politicians.

In March 2011 the UK Government cut fuel tax by 1p per litre and delayed some future rises, but the VAT increases have had a significant impact on prices. We voted against that move in summer 2010 and recommended a cut in June this year. The stabiliser model that we suggested is not the one that has been introduced by the UK Government, and it is clear that the problem has not yet been solved. Two further duty rises are scheduled for 2012, which could have dire consequences for business and motorists alike, especially given the ongoing economic difficulties, which are not likely to be solved in the near future.

We therefore need an effective and fair fuel duty stabiliser, and we must also look at pricing in rural areas. We must address the amount of VAT being levied, too. Most importantly however—and moving away from the impact of future fuel duty price rises—we also need to invest in renewable energy alternatives, to reduce our reliance on oil and other fossil fuels.

I heard the arguments about so-called Chelsea tractors. Where I live such vehicles are an absolute necessity—although they are often more downmarket than most Chelsea tractors. When I drive around the country, I have to do so because I cannot take public transport. In London and other conurbations, including Cardiff and Swansea, there is a choice. We need to make that choice viable. We urgently need to address this issue.

Eurozone Crisis

Lord Watts Excerpts

Thursday 27th October 2011 Commons Chamber

[Mr Osborne]

I agree with my hon. Friend that we have to be alert to the danger of the 17 eurozone members, which will have a qualified voting majority, caucusing on areas that are legitimately the preserve of the 27 member states. When this country, under the previous Government, allowed the eurogroup of Finance Ministers to be established and accepted that Britain would not be at that eurogroup, there was the fear that the eurogroup would caucus. That was one of the concerns of the then Government and Opposition. That actually has not happened. If anything, they have not co-ordinated and worked together closely enough over the past decade or so. However, he is absolutely right that we need to ensure that they do not caucus in the future in a way that undermines our voice and influence or that bounces all 27 member states. All member states not in the euro are alert to this challenge. Indeed, last night the Prime Minister had dinner with the Polish and Swedish Prime Ministers to discuss precisely that issue.

[Mr Dave Watts (St Helens North) (Lab)]

Will the Chancellor be crystal clear? Is he guaranteeing that no British money will be used for this bail-out directly, through the IMF or through any other vehicle?

[Mr Osborne]

I can guarantee that British money is not going into the special purpose vehicle.

Jobs and Growth

Lord Watts Excerpts

Wednesday 12th October 2011 Commons Chamber

[Ed Balls]

I will make some progress before giving way again. A year ago we warned that a global hurricane was brewing and that it was exactly the wrong time to rip out the foundations of the house here in Britain.

[Mr Dave Watts (St Helens North) (Lab)]

Will the shadow Chancellor name one country that has managed to get out of recession without growth?

[Ed Balls]

By definition, it is impossible to get out of recession without growth, which is why in the past nine months we have seen no growth at all. We were told we were out of the danger zone, but we do not hear that very often now.

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[The Chancellor of the Exchequer (Mr George Osborne)]

I welcome this opportunity to discuss the very difficult economic situation that this country and the rest of the western world face at the moment. After that vaudeville act, I am trying to remember whether the shadow Chancellor actually set out the five-point plan. He did not actually go through it, so we will go through it for him.

Of course, the concern of everyone here is to see growth, support jobs and get Britain through this debt storm; that is what we are talking about and working on. As this is an Opposition day, however, before I turn to what the Government are doing it is worth considering what the Opposition propose, and what the shadow Chancellor did and did not say. We should consider what his political friends, as well as his political opponents, are saying about him.

The right hon. Gentleman dismissed the intervention by one of my hon. Friends about Charles Clarke—[Interruption.] Well, there you go. It was not picked up by the microphones, but the shadow Chancellor just dismissively said, “Charles Clarke!” The Opposition dismiss everyone with whom they served in government. They boo their ex-Prime Ministers, they dismiss their ex-Ministers. Here is what the man who was the Labour Home Secretary said, not weeks ago but yesterday:

“I think the Labour conference failed to come across strongly with an alternative to what the Government is doing. I think the economic proposition that Labour puts at the moment is unconvincing…we are simply dismissed by most people thinking about the most central question facing the country today, which is the economy.”

That is the verdict not of the Conservative party, the Liberal Democrats or anyone else but of former members of the Labour Cabinet.

If we want to know why the shadow Chancellor is failing to convince the country, let alone his own party, of why he has not come forward with a convincing alternative, I suggest that we focus on three things that were not in his speech. I will cover each in turn. First, there was absolutely no plan to deal with the deficit. There was a not a single suggestion of how public expenditure could be saved. Let us remember what he said—

[Mr Dave Watts (St Helens North) (Lab)]

Will the Chancellor give way?

[Mr Osborne]

I will in a moment, because perhaps the hon. Gentleman can respond to this point.

The shadow Chancellor said, when we debated the matter in August, that he would set out

“a tough, medium-term plan to get our deficit down”.—[Official Report, 11 August 2011; Vol. 531, c. 1110.]

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[Mr Osborne]

I will take the hon. Gentleman’s intervention in a second.

Last week, the Opposition tabled an amendment to the Welfare Reform Bill that would have cost this country £11 billion. That one amendment on one day in this House of Commons shows how completely incredible they are.

[Mr Watts]

The IMF is changing its policy and calling for a plan B, as is business, the general public and everybody else. When will the Chancellor introduce a policy that will deliver growth?

[Mr Osborne]

The policies that we have set out deliver the low interest rates that are essential for economic growth.

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[Mr Osborne]

My hon. Friend is absolutely right. The previous Chancellor’s memoirs reveal the very divisive role that the shadow Chancellor played in stopping the previous Labour Government coming up with a coherent economic policy and a credible economic plan, and even in stopping Nos. 10 and 11 talking to each other.

[Mr Watts]

Will the Chancellor tell the House what level of growth he inherited and what it is now?

[Mr Osborne]

I shall tell the hon. Gentleman what I inherited as Chancellor and what this country inherited from the previous Government: we inherited the second deepest recession in the entire world. The hon. Gentleman talks about GDP, but we had the biggest fall in GDP of any country in the world with the sole exception of Japan.

Amendment of the Law

Lord Watts Excerpts

Thursday 24th March 2011 Commons Chamber

[Ed Balls]

I accept my hon. Friend’s point. I was tempted earlier to go down that road, because the fact is that in 2006, 2007 and 2008, the credit rating agencies entirely failed to spot the financial crisis in the first place. The Conservative party and the Liberal Democrats are keen to quote credit agencies when they support their case, but not when they do not support their case. The truth is that the credit agencies failed in the crisis, and quoting them at all is very risky indeed.

As I said, the Chancellor should have adopted our plan for deficit reduction, growth and jobs. He also ought to have adopted our plan to repeat the bank bonus tax for a second year, and used it to give immediate help to young people and jobs, rather than cancelling—in fact abolishing—the future jobs fund. As I have also argued, he should have cut VAT on fuel. That would have been a fairer and more substantial approach. However, the fact is that this year, as a result of the Chancellor’s tax decisions in the Budget, fuel tax will not fall; it will rise by 2p per litre. That is the reality.

The Chancellor should have reversed the VAT rise. That was a big mistake. Two years ago, when we proposed a cut in VAT, which got growth moving and unemployment down, he said, “People won’t notice the VAT cuts.” I am sure that he did not notice them himself, and he probably thinks that people will not notice the VAT rise either. The fact is, however, that with consumer confidence and growth down, and unemployment up, people are noticing what is happening and what he is doing. That is why they are so worried.

[Mr Dave Watts (St Helens North) (Lab)]

Does my right hon. Friend agree that the Government are yet to spell out how they will ensure that the increases for fuel companies are not passed on to motorists?

[Ed Balls]

There has been some confusion on this over the past 24 hours. We know from the OBR that it was told of the 1p cut in fuel duty so late that it could not even get it into its economic forecast. The Chancellor realised at the weekend that he was behind the curve, that he was not setting the agenda, that living standards were a rising issue and that Labour was making the case for fuel tax cuts, so he jumped in late with his 1p cut, but he did not have the courage to reverse his 3p rise. That is the reality. Had the Chancellor done things properly—I can give him some advice on this, because I know how to do things properly on North sea oil tax—he would have consulted the oil companies in plenty of time, explained what was happening, made the case, got their agreement, and then announced the policy in the Budget. I think that many of the oil companies did not find out about it until it was announced in the Budget. That was the problem.

Yesterday afternoon the Chief Secretary to the Treasury—as always, he is not here—was on a television programme about the Budget. He was asked, “How will you stop the oil companies simply passing on the cost in consumer prices?” He said that he did not know, but that he would monitor the oil companies closely. That was the problem. The Government did not do the work, and this was cobbled together at the last minute. That is why it has caused so much confusion and consternation in the past 24 hours. He needed a headline and a flourish to his speech, but he did not want to announce that they were cutting the winter fuel allowance—an announcement we would never have had at the end of a Labour Budget—so instead he announced a cobbled-together, last-minute 1p cut in petrol tax.

The Chancellor is not listening.

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[Vince Cable]

For six of those 10 years, we were dealing with an artificial boom based on a property bubble, an overweight banking system and, as the shadow Chancellor has acknowledged, gross levels of personal debt. That was why there was rapid growth in the early part of that period. However, if we look at that period as a whole, including the last period of Labour Government, we see a decline in per capita income that was unprecedented even in 20th-century history. That is the record that we are dealing with.

Let me deal with the shadow Chancellor’s pessimism about employment. We are all rightly concerned about unemployment—we have to be—but let us remember that last year growth was 1.3%, which is lower than the projected growth for the coming year. In that time, there were 428,000 new private sector jobs—300,000 were in the second half of last year—which by a long way more than offset the 132,000 job losses in the public sector, many of which, incidentally, were a result of the cuts that the last Government were starting to introduce. Our responsibility—this was the purpose of the Budget—was to ensure that we have sufficient private sector confidence so that companies hire people and invest.

[Mr Watts]

If the economy delivers lower growth, as is likely, and if unemployment continues to increase, does the right hon. Gentleman believe that the Government need to adopt a plan B?

[Vince Cable]

We are sticking very firmly with plan A, because plan A is right. The hon. Gentleman will know that flexibility is built into economic management, primarily through monetary policy, and that is the mix that we will continue.

The shadow Chancellor is right. There is of course concern about a squeeze on people’s living standards, and we are concerned about that no less than he is. The Chancellor has tried to alleviate the problem through action on fuel duty and by lifting the income tax threshold. I would like to spend a few moments looking at the two proposals that the shadow Chancellor has made—he has repeated them today—to deal with the problem. The first proposal turned out to be illegal under European Union law. Like me, he is a good European—we would both like to observe European Union law—and to change that law would have taken roughly five years, which will not provide much relief.

After the fiasco of the shadow Chancellor’s “VAT relief on petrol” idea, his other big idea, which he elaborated on today, was to finance jobs through the tax on bank bonuses. I remind him that he and I have some form on this issue. When the last Government were in power, I was critical of the idea of taxing bank bonuses as I did not think it would work. It is to the credit of the former Chancellor that, through his ingenuity, he made it work. In the year in which the measure operated, he raised £2.5 billion—not the £3.5 billion that is often cited, because that takes no account of the offset in corporation tax. Because of his skill in making the bonus tax work, we have to listen to his advice when he says:

“I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and…find all sorts of imaginative ways of avoiding it in…future”.

He has counselled very strongly against a repeat of the bonus tax. He was—to use the word—wise.

There is another reason why I am surprised that the shadow Chancellor has returned to the bonus tax issue. He may remember that back in 2006, when he was the City Minister, a big debate opened in the Labour party when Bob Diamond was having one of his early years of extremely generous bonuses. The deputy leader of the Labour party declared “war” on “fat City bonuses”. She was promptly slapped down by the then City Minister, who reminded us that such pay-outs were good for tax revenues and for job creation. In that particular Labour party debate, I was very much on the side of the deputy leader.

If the previous Government are serious about taxing banks, why did they allow a situation to arise in which only two of the 15 major banks had in place an agreement to stop large-scale tax avoidance? We have now stopped it. Every single bank is now covered by the HMRC code on tax avoidance. Additionally, we have put in place the levy on banks’ balance sheets, raising £10 billion, which is four times as much as the one-off bonus tax would have raised.

Autumn Forecast

Lord Watts Excerpts

Monday 29th November 2010 Commons Chamber

[Mr Osborne]

My hon. Friend makes an extremely good point. What is happening here is a rebalancing of the economy. I hear the shadow Chancellor muttering away about what he calls slow growth, but according to the European Commission forecasts today our growth is more rapid than that of Germany, France, the United States of America or Japan, as well as than the EU average and the eurozone average. I am not sure what his proposals are to increase that growth rate but if he has some, now is the time to produce them.

[Mr Dave Watts (St Helens North) (Lab)]

Is it not the case that most of the public sector cuts will take place in the north and that any jobs that are created—there are not likely to be many—will be in the south? Is not the policy unbalanced?

[Mr Osborne]

In the last decade, under the Government of which the hon. Gentleman was a member, for every 10 jobs created in the south-east only one was created in the midlands and the north. That is the situation that we have inherited and the economic model that we have to change. It is precisely because we want to see exports and investment increase that we are aiming for a more geographically balanced model of economic growth. Announcements such as the one we have made today on the investments by Glaxo will help that, as will the first-time-ever tax cut for new employees that is specifically directed at regions outside the south-east.