Fuel Prices

Toby Perkins Excerpts

Tuesday 15th November 2011 Commons Chamber

[Albert Owen]

Sure—and I was not making a rural versus urban argument, I was talking about peripheral areas, particularly those far from refineries. Indeed, I want to talk about British refineries. Quite often, crude oil from the North sea is actually refined in faraway countries and brought back here, which adds cost. We therefore need to improve our refinery capacity in this country, to keep prices down.

I welcome the fact that the escalator has been done away with. It was introduced in 1993, perhaps for good reasons: it was felt that people could move from private to public transport. However, in semi-rural areas that is just not possible. That is why motorists have been enraged by the rise in the escalator. It went up, I think, by 5% under the Conservatives and 6% under Labour.

The Government could deal with VAT now. We can talk about the effect that a semi-stabiliser would have on North sea oil and the prices at the pump, but the Government can take measures now to reduce VAT to help motorists today. When the previous Government lowered VAT from 17.5% to 15%, fuel prices came down, helping to stimulate the economy. [Interruption.] They did. The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) is laughing, but he needs to compare the prices. Prices came down and businesses were able to trade more. Individuals could also use their cars more, and not just for work but for leisure. [Interruption.] The hon. Gentleman says from a sedentary position that fuel duty went up, but the calculation shows an overall saving to the motorist at the pump, and that is what we are talking about. We can argue the complicated and technical aspects, but at the end of the day people want lower prices at the pump.

[Toby Perkins (Chesterfield) (Lab)]

Government Members may well be laughing too, but people in Chesterfield are not laughing, because they are paying through the nose. It is not just the general public who are affected by the current level of VAT. Small businesses up and down the country that are not VAT-registered and do not qualify to get their VAT back are paying huge amounts. We should not be laughing about this; we should be taking the point seriously.

[Albert Owen]

I am grateful to my hon. Friend. The Government need to look again at changing the rate, because it worked. If we in this House are serious about stimulating the economy, we need to look at such mechanisms—which can be used now—because the economy is flatlining.

Areas such as mine are paying extra for energy and fuel, and we need to do something about it. We had a debate the other week about energy prices, and we agreed that we needed to investigate what is called the “rocket and feathers” effect—that means that when prices go up they shoot up quickly, but when they come down they come down slowly—for domestic energy users and retailers. As the hon. Member for Harlow said, we also need to look at that effect in relation to crude oil prices, which also escalate quickly but come down slowly. We need some sort of commission to examine that mechanism.

The three points that I wanted to make today are as follows. We need to look at the differentials between areas close to refineries and those on the periphery. I understand that a rebate is being considered for remote islands, but, as has already been said, that does not help the many motorists around the coastal areas of the United Kingdom who are paying considerably more. I heard one of my colleagues from Northern Ireland say that Northern Ireland has higher prices, but according to the website that compares prices, Bangor in north Wales pays 3p or 4p a litre more than Bangor in Northern Ireland. I say good luck to the people who live in Bangor in Northern Ireland, but my constituents are paying 7p a litre more, week in week out, to trade, to do business, to move people and goods across the area and to take young children to amenities and leisure facilities of a night.

It is time the Government did something. I will back them when they do the right thing. They can consider whether more could be done on refineries. We need to look at transport costs and VAT, and we need to help the people today.

--- Later in debate ---

[Graeme Morrice (Livingston) (Lab)]

I welcome the opportunity to speak in this debate, and I join other Members in paying tribute to the FairFuelUK campaign and the thousands of businesses and individuals who have backed it. I also pay tribute to the hon. Member for Harlow (Robert Halfon) for securing a debate on this important matter.

There can be no doubt that for many months now high fuel prices have been hitting families and businesses hard. Indeed, the October AA monthly fuel price report highlighted that summer prices—those from April to mid-October—compared with those in 2010 were on average 17.5p per litre higher for petrol and 19.7p higher for diesel. These high price increases are an important element of the wider financial squeeze that so many middle and low-income families are currently experiencing.

New AA research published yesterday also underlined the fact that less well-off drivers have suffered more since the price of fuel peaked earlier this year. The research shows that those cutting back on car use and/or other spending rose dramatically among those living on lower incomes. That is a very worrying development. The constituents who have contacted me over the last few weeks are absolutely clear about what they want: lower fuel duty and lower fuel prices at the pumps.

On fuel duty, the Conservatives in opposition said that pump prices would be benchmarked and allowed only to move by 5p per litre in either direction, in response to the changing price of oil. The limited fair fuel stabiliser plan announced in the Budget does not equate to what the public might expect from a fuel duty stabiliser. Commenting after the Budget announcement, Edmund King, the president of the AA, said:

“In effect it is a stabiliser on an escalator rather than a stabiliser on prices. It does not reduce prices. All it does is to reduce increases in duty.”

That is not what consumers were expecting and, as the motion states, it is time for the Government to look again at a “price stabilisation mechanism”.

When the Government increased VAT to 20% in January, they contributed to a further increase in fuel prices. It was the wrong tax at the wrong time, and it has kept petrol prices high and hit economic growth. I support the call, along with my Labour colleagues, for a temporary VAT cut to 17.5%, which would immediately bring the cost of fuel down by about 3p a litre.

We must also be grateful to my hon. Friend the Member for Bassetlaw (John Mann) for the excellent research that he published earlier this year on the political responsibility for increases in fuel duty. His revealing figures show that Conservative Governments have presided over increases in duty and VAT that have actually cost motorists twice as much as increases made by Labour Administrations. His figures demonstrate clearly that Labour Members have always been on the side of the ordinary motorist and the business person, whereas the Conservatives have been content to use fuel duties as a punitive means of raising revenue.

[Toby Perkins]

My hon. Friend has not only laid out the case with tremendous vision, but he has used some research, which is very welcome. Does he not think that the many people from Chesterfield who wrote to me supporting the fair fuel debate will be surprised to see how meek the motion is? They were expecting a hell of a lot more from this debate than what is to be voted on.

[Graeme Morrice]

I certainly agree with my hon. Friend that the public are expecting more, and we are not going to see any action unless the Government do something about this imminently.

--- Later in debate ---

[Toby Perkins (Chesterfield) (Lab)]

I congratulate the hon. Member for Harlow (Robert Halfon) on securing the debate, but I would like to express my disappointment, and the disappointment of the many dozens of people in Chesterfield who have written to me about this matter, that the motion demands so very little of the Government. It calls on them to “consider the effect” of fuel duty increases, to “examine ways of working” with industry, to “take account” of market competitiveness and to “consider the feasibility” of a price stabilisation mechanism. That is hardly a manifesto for change. Is that what 110,000 people wrote to Members of Parliament about? We are asking so very little of the Government today. Jesus said:

“Blessed are the meek: for they shall inherit the earth”,

and the hon. Gentleman must be very blessed indeed. His request to the Government will greatly disappoint the many people who have written to me.

I recognise entirely that the cost of fuel is just one of many costs that are going through the roof, resulting in many people in our constituencies really struggling at the moment. The cost of energy is a significant one, and the cost of food is going through the roof. Inflation is going up, wages are stagnant and the people in our constituencies are struggling desperately. I welcome the fact that Conservative Back Benchers are finally showing an understanding of the principle of the Government forgoing revenue in order to deliver economic growth, reducing the deficit through the higher tax revenues that result from people having more money in their pockets. It was exactly that principle that persuaded me to vote in favour of shelving the increase, when Conservative Members were not doing so. Having arrived at that point, however, it is bizarre that Conservative Members should think that the issue is purely about fuel, and that all the other reasons why people have no money in their pockets and why consumer confidence is so low are not significant. They focus solely on fuel.

This issue is having a massive impact on businesses. The hon. Member for Harlow started by saying that some businesses do not pay VAT, so they are okay. However, small businesses pay VAT, as do public services, charities and ordinary people out there who are paying it the whole time. The significance of this should not be underestimated. Over the past 15 years or so we have seen a reduction in the amount of tax on fuel as a percentage of its cost. The peak period of the highest tax on fuel was back in the mid-90s. Since then, we have seen a reduction. Over the course of the last few years, we have seen a massive increase in the cost of petrol. The tax has been significant, but the big increases recently stem from the profiteering of the fuel companies—[Interruption.] Is that an attempt to intervene? I was not inviting one, but I am happy to oblige.

[Andrew Percy]

The point I have been trying to make is what the hon. Gentleman might think of his Government’s decision to escalate the escalator and push through 12 rises. It is a bit difficult being patronised by a party that did all that to fuel prices.

[Toby Perkins]

The escalator was the invention of the previous Conservative Government. The reality is that when the major fuel protests broke out in 2000-01, the amount of their income that people were spending on fuel was far less than it is today. All the revenue is coming in now, and Conservative Members say that the Government were generating too little money in years gone by. They stand before us today with all the benefit of the money that has gone in over the years, yet for all the talk we hear from people such as the hon. Member for Brigg and Goole (Andrew Percy), we have a motion before us that asks the Government to consider whether they can do something. If the massive increase in fuel duty over the years is so awful—I think it has gone up a lot—why do we not have a proposal that is a bit stronger? Why is the motion so feeble? [Interruption.]

We have also heard from Conservative Members—[Interruption.] If they want to intervene, they can do so, but I will not just be barracked. According to Conservative Members, there is a huge amount of support for the 1p reduction, which will save motorists £274 over the Parliament. At the same time, people are spending £300 or £400 extra in VAT, so this does not add up. We need a stronger motion, so that we can really help to put some money back into people’s pockets.

Jobs and Growth

Toby Perkins Excerpts

Wednesday 12th October 2011 Commons Chamber

[Toby Perkins (Chesterfield) (Lab)]

The Chancellor has been very generous in giving way, although not so generous in actually answering the questions that he has been asked. He has just laid out all the things that he is doing to put things right, yet the economy is flatlining, with record youth unemployment and no growth back in the economy. What is he going to do to improve the situation? Does he not recognise that we cannot just cut the deficit if we do not have growth?

[Mr Osborne]

We would not have growth if there was a big increase in interest rates. Let us look at other countries in the world that do not have a credible plan to deal with their deficits. Of course this is a difficult time, when many western economies have this problem, but we are taking the tough steps necessary to get the economy going and make it easier for businesses to hire people, which brings me on—

Finance Bill

Toby Perkins Excerpts

Tuesday 28th June 2011 Commons Chamber

[Ian Swales]

Yes, absolutely. This Government have made no changes on any of those items, nor will the new clause lower the cost of those items. Of course, that list covers the vast bulk of the weekly bills of lower-income families and pensioners. In fact, I am sure that many pensioners do not pay any standard VAT in many a typical week.

[Toby Perkins (Chesterfield) (Lab)]

It is hard to know where to start, given the number of areas on which the hon. Gentleman is wrong, but let me just point out one. The increase in VAT affects the cost of absolutely everything. As it is on fuel, it adds to the cost of getting food to our properties. VAT impacts on the cost of every single thing. It is an indiscriminate tax that hits the pensioner, the unemployed, and the single mother just the same is it does the millionaire in his castle.

[Ian Swales]

I thank the hon. Gentleman for his intervention. I just read out a long list of items that are VAT-free; that was the point of what I was saying.

--- Later in debate ---

[Mr Hanson]

I remind the hon. Member for Birmingham, Yardley (John Hemming) that new clause 10 calls for a review of the impact of value added tax on businesses and families over the next three months. Labour Members voted last week for a temporary reduction in VAT. Labour policy is to have a temporary reduction to tackle the real issues that we all face in our constituencies in relation to jobs, living standards and the future of our businesses.

[Toby Perkins]

I am listening to the debate with tremendous interest. There is a determined gaggle of Liberal Democrats here, arguing in the strongest possible terms that the manifesto that they have just fought an election on was totally wrong. Has my right hon. Friend ever known such a passionate rejection of a policy by Members who told us only a year earlier that we should be voting for it?

[Mr Hanson]

The most passionate rejection that I have seen in recent years was in Chesterfield, of my hon. Friend’s predecessor. He stood just next to where I am now before the election, when I was Police Minister, calling for more police and more expenditure. Yet now, the Liberal Democrats are saying that we should have had less expenditure.

I accept that I am going slightly wide of the issue of VAT, Mr Deputy Speaker, so I will return to it. VAT hits not just families or businesses but public services. The national health service in England will be hit by an extra £250 million a year because of the rise in VAT. A CT body scanner that cost £700,000 before the rise in VAT will now cost £17,500 more. A fully equipped ambulance that would have cost £225,000 will cost an extra £5,500. There is about £3 million a year of expenditure by each NHS trust on locum doctors, which will increase by £75,000. A Government who want to cut public spending are levying additional costs on the health service in England.

In my own region, in Wales, the actual cost of the increase in VAT to NHS budgets since 1 January is estimated at £13.2 million. For colleagues in Scotland, I add that Scottish health boards have been saddled with an extra £71 million of costs because of the VAT increase. At a time of decreasing public spending and squeezed budgets, we need to review the matter over the next few months and consider whether the VAT increase is causing even more difficulty.

--- Later in debate ---

[Roberta Blackman-Woods]

I had better make progress as others want to speak. I have been quite generous in giving way.

In conclusion, I shall deal with the issue of growth and why it is so necessary for us to monitor the impact of the rise in VAT on the economy, on families and on the whole country. I make a plea for the Government to look particularly at how that is impacting on growth in the north. It was reckless of the Government to get rid of a regional development agency in the north-east that had a very good plan in place for promoting growth and identifying sectors of the economy that would benefit from public sector investment that would lever in private sector investment. We have no growth strategy in place from the Government, and that is having a huge impact. I would like that to be examined alongside the impact of the VAT increase.

[Toby Perkins]

This is not the first time that I have been involved in passionate debate at 12.50 am, but under normal circumstances it has taken place in a rather less rarefied environment than we are currently enjoying. I shall speak to new clause 10 and the need to assess the impact of VAT on a range of things. We should remember that the Bill follows the Budget for growth, as it was described at the time. One has to ask whether that has been investigated by the Advertising Standards Authority, because since the Budget for growth we have seen growth continuing to flatline.

We saw three months of negative growth at the back end of 2010, which was blamed on the wrong kind of snow. In early 2011, we were expecting a huge boom, with all the people who had been unable to get out to the shops in December rushing out in January and getting the economy moving, but of course it did not happen. The Chancellor’s Budget for growth was a damp squib.

At every level the Chancellor has demonstrated that he just does not get it. He does not get the challenges facing working people or the challenges facing business. He does not understand the cause of the banking crisis and the collapse of the banking model. He does not understand the need for growth and how the Government can stimulate it. Most importantly, he does not understand that the public and the private sector need to co-exist and depend on each other in a constructive economy.

There is no taxation that does not have knock-on effects. The knock-on effects of VAT are phenomenal. The Institute of Economic Affairs described the VAT increase as “bad economics”. If people do not choose to listen to the Institute of Economic Affairs, perhaps they want to listen instead to the economic genius who was advising Norman Lamont when we were led into black Monday. In January this year, the Prime Minister said about VAT:

“If you look at the effect as compared with people’s income then, yes, it is regressive.”

That was at least consistent—it was exactly what he had said in opposition. But what about the Deputy Prime Minister? We all remember him. Back in the old days, when he was still pretending to be a progressive, we remember him with his giant Tory tax bombshell. We have been told tonight that those signs did not mean that he was against a VAT rise, or that the Liberal Democrats would not introduce such a tax bombshell; he was simply warning us that it was coming and that we should beware. A lot of Liberal Democrat leaflets were delivered in Chesterfield, and I thought at the time that they were describing the impact of the VAT increase as a bad thing, but today those of us who have never visited Planet Clegg have been put straight. The impact of VAT on the cost of living is significant, and increasing the cost of living has a dramatic impact on people’s capacity to spend money and support the economic growth that we need.

[Jon Ashworth (Leicester South) (Lab)]

One of the effects of the VAT increase is its contribution to inflation, which is currently running at twice the rate of earnings growth. The Bank of England has suggested that inflation will hit 5% later this year because of increases in utility prices, which are a result of the VAT increase. Many of my constituents are feeling particularly hit by that. Is that also the case in Chesterfield?

[Toby Perkins]

Absolutely. My hon. Friend makes an important point. The impact is being felt on the cost of everything, even items on which VAT is not charged, because businesses and members of the public are having to spend more on others items. There is the impact on fuel and heating costs and the downward pressure on wages, as we see the failure to achieve economic growth and the public sector being told that it will have no wage increases for two years and that pension contributions will increase. All those impacts are contributing to people spending more on VAT and having less money.

[Andrew Gwynne]

New clause 10 proposes an assessment of the impact of VAT on the economy, and of course we can now make a direct comparison with a fairly recent period when the previous Labour Government introduced a temporary cut in VAT and got the economy growing again. Is it not the case that we need to make that assessment so that we can see where this Government are getting it so badly wrong?

[Toby Perkins]

Absolutely. The new clause could not be more reasonable. It is impossible to imagine even having a vote on it, because I cannot see how anyone could argue against the need for an assessment when there is so little growth in our economy.

[Ian Paisley]

Does the hon. Gentleman agree that we need a much more strategic approach to this? We have the ludicrous situation that our taxation policies affect even our international relations. For example, we have lent £7 billion to our nearest and dearest—by which I mean expensive—neighbour, the Irish Republic, which allows it to reduce its internal taxation and reduce to a matter of pennies its aviation tax, yet our taxation continues to increase, which ruins business opportunities in our country. We need a more strategic approach so that if we lend money overseas we can ensure that it does not undermine taxation policy in this country.

[Toby Perkins]

That is an interesting point. We had the ludicrous situation of the Chancellor claiming that our country was on the verge of bankruptcy, but at the same time giving money to a country that was genuinely in a very difficult position. His credibility is really damaged when, for political gain, he says things that he knows are not true, and that every serious economist knows are not true. No one seriously believes that he would have lent money to the Irish if he thought that this country was on the verge of bankruptcy. What we saw in Ireland was what would have happened if we had followed the dangerous policies that the Conservative party proposed in 2008, which were to start cutting when the recession was at its worst. It is precisely for that reason that there is now so little economic confidence.

[Susan Elan Jones (Clwyd South) (Lab)]

Having tried on three occasions to intervene on speeches by Conservative Members, and on each occasion been told no, I am grateful to my hon. Friend for accepting this intervention.

On VAT, Conservative Members bleat that it is not possible to secure any rebate on VAT because the Europeans will not let us, but does my hon. Friend recall that the French managed to do so for their own restaurateurs? What is it about Conservative Members’ being so gutless and spineless that they will not argue our case in Europe in order to do something that would actually improve life for people in this country—especially as they brought in the VAT increase in the first place?

[Toby Perkins]

If I had had any idea that my hon. Friend so desperately wanted to intervene I would have given way earlier, but I am pleased to have been able to make her dream come true. The strong point that she makes, and on which Members should reflect, is precisely why my right hon. Friend the Member for Delyn (Mr Hanson) suggests that we assess the impact of the VAT increase.

I am not trying to get into a class war thing, but one reason why the Chancellor has got things so wrong and why so many of his policies seem so out of kilter is that he has no concept of what people can actually buy with a half-decent salary. That is one reason why, at the drop of a hat, he introduced the changes to child benefit. As someone who was loaded the day he was born, he has no idea of the difference between a salary of £50,000 a year, £20,000 a year or £12,000 a year; he just knows that they are a lot less than he has, and that people on £50,000 seem to earn more than the average so they are probably okay.

[Mr Kevan Jones]

Has my hon. Friend noticed that the same applies to the majority of the Cabinet? I understand that among both its Conservative and Liberal Democrat members there are some 20 millionaires, so they say that we are all in it together, but they are clearly not.

[Toby Perkins]

My hon. Friend makes a valuable point. No one is suggesting that because someone is wealthy they do not have a right to go into politics, just as we would never keep someone out of politics because they were poor—[Interruption.] Well, we would never do so! The central point, however, is that when the policies that the Government pursue seem so directly to hit the most deprived people, to attack pensioners and, particularly, to attack women as they have on so many different occasions, people will understandably look at the background of the people making those decisions. When people hear them in opposition say that they recognise that VAT is a regressive tax, but see them go into government and try to claim something different, they will understandably question their credibility.

VAT hits the poor, the workless and pensioners. Are those really the people the Chancellor wants in his sights?

[Chris Ruane]

Yes.

[Toby Perkins]

Absolutely. The VAT cut, like so many other Government policies, is hitting women hardest.

I do not know, Mr Speaker, whether you ever have the opportunity to visit the Conservativehome website, but if anyone does so today they will see an article entitled “The Conservatives are losing female supporters. Why?” We have had many debates that could have given them the answer, but basically every single economic policy that they have introduced has had an adverse effect on women. Women are more likely to be public sector workers; women have been badly hit by the pension changes; women are more likely to be impacted by the VAT increase; and women often manage the family budget and have noticed acutely the increase in and squeeze on the amount that they have to spend. The Conservatives are trying to analyse why women are deserting them, and we can lead them to the answer without the need for them to do much research at all.

The challenges that business face are significant. Before coming to this place, I was running my own business. Confidence is low. When customers are worried about whether they will be able to afford to pay their mortgage, they will not be spending money on anything that they do not need. The banks are not lending, public sector organisations are not buying from the private sector because they have less money, and IT suppliers are finding that they are not getting the business they relied on from the public sector. At the same time, public sector employees are not contributing to the private sector by buying all the things they would be buying if they had confidence in the security of their jobs. The cuts to the public sector are having a dramatic effect on the private sector.

We have had a Budget for growth that has led to no growth. We now need an assessment of the impact of the VAT increase so that we can understand fully the reasons we are not getting growth in the economy. We need to make decisions based on getting people back to work, getting money in people’s pockets, and seeing the economy grow back in the way that every single one of us wants it to.

[Kate Green]

It is a pleasure to follow my hon. Friend the Member for Chesterfield (Toby Perkins) and to echo many of his remarks.

I appreciate that it is late, and I will keep my remarks brief, but it would be remiss of me not to speak up on behalf of my constituents to express the genuine concerns about the impact on businesses and families of the Government’s fiscal policies, including, in particular, their policy on VAT.

The impact on families, especially the poorest families, of the Government’s fiscal measures is a cause of considerable concern. The other day, the Institute for Fiscal Studies told us that inflation is having a 60% greater impact on poorer families than on better-off households. The poorest fifth of families now face an inflation rate of 4.3%, compared with the richest fifth, for whom it is only 2.7%, and the higher rate is hitting pensioners especially harshly. I suspect that we all know this from standing on the doorsteps in our constituencies and listening to families talk about the pressures they are facing in managing the rising cost of living and the difficulties they are experiencing in making ends meet. Families across the piece are beginning to feel the squeeze that is resulting from the Government’s policies, and there is no doubt that the VAT increase is a significant element in that.

I am sorry that the hon. Member for Redcar (Ian Swales) is not in the Chamber, because there are one or two important points about VAT that we need to ensure that Conservative Members understand. First, VAT is a regressive tax because it hits the lowest income deciles disproportionately harshly. That is because it is a flat-rate tax that it is taken away from the poorest families at the same rate as from the better-off. All the sleight of hand that looks at expenditure deciles misses the point that families with lower disposable incomes are seeing more of their income eaten up on non-discretionary spend, where costs are rising.

My hon. Friend the Member for Llanelli (Nia Griffith) rightly pointed out that we are talking about spend not on luxuries but on household basics. We recognise that food and children’s clothes are exempt from VAT, but let us remember all the other household basics that families will still have to go out and buy: soap powder, washing-up liquid, shampoo, shoe repairs. These are not items of frivolous luxury but everyday expenditures that families have to meet. In addition, as families rightly seek to enter or stay in the labour market, there are the costs for adults of buying clothes and equipment for work. VAT is a regressive tax that harshly hits ordinary families on tight budgets, and that is an important first consideration for Conservative Members to bear in mind.

Secondly, as many of my hon. Friends have said, we need to think about the impact that the VAT rise is having on the economy as a whole. That is the thrust of new clause 10. Here again, there is a basic lesson in economics that my hon. Friends have been trying to get across. Some Government Members have said that businesses can reclaim VAT. That neglects the fact that VAT, wherever it is applied in the product chain, ends up being charged somewhere. It ends up being charged when the consumer goes out and buys the goods. It does not somehow disappear in the course of VAT recovery, but is charged ultimately to the customer, who is now faced with spending more on essential items and having less to spend on additional items. That is having a damaging effect on business, manufacturing, retail and jobs. That is the point that I and my hon. Friends have been trying to get across.

It is a pity that the hon. Member for Redcar has only just arrived as I finish this helpful, if rather basic lesson in elementary economics. You will not want me to repeat it all at this time of night, Mr Speaker, so perhaps the hon. Gentleman can read the Official Report tomorrow to gain the benefit of what I and my hon. Friends have been trying to get across.

As I said, I want to make a few remarks about the impact that this policy is having in my constituency. I have talked about the impact that it is having on families in my constituency. Hon. Members have alluded to the impact that it has had on HomeForm, which is a substantial business based in Old Trafford in my constituency. It has been forced into financial difficulties, and I am very concerned about that. I am also concerned about an exceptionally important and large retail centre in my constituency, the Trafford centre, with which hon. Members may be familiar. I am concerned about jobs at the Trafford centre, particularly because of the nature of those jobs. They are exactly the kind of jobs that low-income families and those who can manage only a few hours of work are reliant on: part-time jobs, shift jobs and low-skilled jobs. Those are the jobs that are being put at risk and those are the jobs that do something—not very much, but something—to keep families on modest incomes afloat.

I am concerned that there is an impact on families, an impact on industry, an impact on retail and an impact on jobs. As my colleagues have said, that translates into a fall in consumer confidence and a fall in retail growth. We are concerned therefore about the damaging effect on the economy overall.

As the House is aware, we are asking simply for an assessment of the economic impact of the Government’s VAT rise. I think that that is a reasonable thing to ask for, particularly given the Chancellor’s apparent greater open-mindedness towards the economic impact of the 50% income tax rate introduced by the last Labour Government for those with incomes of more than £150,000. It was interesting to hear him say explicitly in his Budget statement in March this year that he regards that as “a temporary measure” and that he is concerned about what its broader impact may be. We are asking simply that VAT—a tax that affects all families, all households, all businesses and our economy as a whole—be subject to the same degree of scrutiny and review. I am at a loss to understand why a responsible Government would not want to take on board new clause 10 and support us in the Lobby this evening.

The Economy

Toby Perkins Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Ed Balls]

I am not giving way to the hon. Gentleman again now; I might do later.

The reason why the VAT cut is needed now is that things are getting worse, not better. In recent weeks, we have seen manufacturing output and job vacancies falling and the biggest fall in retail sales for more than a year. The Chancellor likes to boast that a net 370,00 jobs have been created in the last 12 months; what he does not like saying is that 70% of those extra jobs were created in the six months before the spending review and only 29% in the six months after it. That is why his Budget forecasts of a year ago have gone so badly awry.

The Office for Budget Responsibility forecasts for growth have been downgraded three times. Unemployment is now forecast to be 200,000 higher, while inflation is forecasted to be well above target this year and next year. The result of this stalled recovery, higher unemployment and higher inflation is that the Government are now forecast to borrow a further £46 billion more than was forecast in last year’s spending review. Public borrowing in the first two months of this year is higher than it was in the first two months of last year.

[Toby Perkins (Chesterfield) (Lab)]

The Chancellor said yesterday that he does not want to comment regularly on the OBR’s updates. Given that it is downgrading its forecasts every time he opens his mouth, it is hardly surprising.

[Ed Balls]

Whether or not the Chancellor comments, the fact remains that since the last OBR forecast, Britain’s growth forecasts have been downgraded by the International Monetary Fund, the OECD, the CBI, the British Chambers of Commerce and the National Institute of Economic and Social Research. Everybody else is downgrading growth forecasts; we will have to wait for the OBR finally to catch up.

--- Later in debate ---

[Mr Osborne]

My hon. Friend makes two good points. First, there was a very welcome recent reduction in unemployment—the biggest fall for a decade. Secondly, he draws attention to one of the most staggering facts about the past decade: private sector employment in the west midlands fell in the decade leading up to the financial crisis. That shows how unbalanced the British economy became under the last Labour Government.

[Toby Perkins]

rose—

[Mr Osborne]

I will give way, and then I will come on to the shadow Chancellor.

[Toby Perkins]

If the Chancellor feels that the economy was so unbalanced, can he explain why he was still saying in 2008 that he would follow Labour’s spending plans?

[Mr Osborne]

We fought the 2005 election and, sadly, lost it, saying that Labour’s plans were unaffordable. In 2008, we made it clear that we were coming off Labour’s spending plans. [Hon. Members: “You didn’t.”] We did. I happened to be there—I am not sure that the hon. Gentleman was. We came off Labour’s spending plans in 2008, and thank God we did, because we earned a mandate to make the necessary changes to put the economy back on track.

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[Kwasi Kwarteng]

This is the third time that the hon. Gentleman has tried to intervene, and I am afraid that I must press on. I am willing to take interventions from other colleagues, but he has had his say and I would like to have mine.

We have had a difficult time over the last year, during which time my right hon. Friend the Member for Tatton (Mr Osborne) has been Chancellor of the Exchequer. No one will dispute that: the situation has been tough. However, it would have been far worse if we had followed the policies of the right hon. Member for Morley and Outwood (Ed Balls) and not tackled the deficit in the rather aggressive but timely way in which we decided to. Hon. Members referred earlier to Greece, which has indeed been a Greek tragedy. People are on the streets, the Government are practically insolvent and there is a real risk of some kind of political revolution—I am choosing my words carefully, but the situation is very unstable. The situation facing this country was, I confess, not as bad. However, if we had not been serious about tackling the deficit, there was every likelihood that the international markets would have forced our interest rates up, that our cost of borrowing would have increased and that markets would not have bought gilts in the way that, over the past year, they have. The consequent rise in interest rates would have affected every family in this country, who would have had to pay high interest rates simply because the Government did not have the courage or the conviction to deal with the deficit.

[Toby Perkins]

As for the comparison with Greece, does the hon. Gentleman recognise that if we had followed the advice of the Chancellor when the recession struck back in 2008, although events here might not have followed what happened in Greece, they would quite probably have followed what happened in Ireland, which saw huge public spending cuts? Ireland went into a cycle of more and more cuts, and more and more people being put out of work. The result of those cuts was not that Ireland’s deficit shrank, but that public services and poverty got worse.

[Kwasi Kwarteng]

I accept the hon. Gentleman’s point about Ireland, but let us look at what happened last year and the situation that we faced going into the general election in May. The shadow Chancellor quite rightly observed that the market price of gilts was rising and that interest rates on them were coming down in the period before the election. It is true that in the six weeks before the election, interest rates on gilts came down, but that was only because the market realised that there would be an end to the Labour Government. The market anticipated the result of the general election, after it became clear that, as a consequence of Labour’s total irresponsibility, the end of a Labour Government would mean a new Government who were serious about dealing with our financial position. It is true—I remember this—that the rates came down from mid-March, but that was only as a consequence of people in the markets literally rejoicing because Labour was going to leave. The shadow Chancellor was quite right to make that point; I just felt that we needed a bit more context.

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[Toby Perkins (Chesterfield) (Lab)]

I think the hon. Member for Elmet and Rothwell (Alec Shelbrooke) forgets that the reason he sits on the Government Benches is that the Liberal Democrats changed their policies and decided to let him sit over there.

[John Hemming]

rose—

[Toby Perkins]

It is so good to see a Liberal Democrat turn up that I have to let him in. It will encourage him to come again.

[John Hemming]

I simply point out to the hon. Gentleman that we have not changed our policies. He is asking for more money to be borrowed. Where would it be borrowed from, and what would the interest rate be?

[Toby Perkins]

It is interesting that the hon. Gentleman assumes what I am going to say already. I am only three seconds into my speech. I will come to that point.

The hon. Member for Elmet and Rothwell said that he was proud of the Government’s record so far. I would not like to be here when he is ashamed. Government Members would like this debate to be about whether we need to reduce the deficit, but that is not what it is about at all. Everyone recognises that we need to do that, and that in 2008, prior to the onset of the biggest global economic crisis in history, we had a lower deficit as a ratio of GDP than in 1997 when we came into power. It was only the scale of the economic crisis that forced the Labour Government to spend money to stop the awful situation that ordinary people were finding themselves in, with jobs being lost and the danger of houses being repossessed. We are proud of the decisions that we made at the time, which were supported by the IMF. It said strongly that this country, under the Labour Government, showed leadership when the rest of the world did not know what to do in the face of a terrible global economic crisis.

[Kwasi Kwarteng]

rose—

[Toby Perkins]

Because the hon. Gentleman was so generous to me, I will allow him to intervene.

[Kwasi Kwarteng]

I believe in debate—it is good that interventions are taken. If the problem was global, why was our deficit to GDP ratio four times higher than that of the Federal Republic of Germany?

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[Toby Perkins]

Each country was in a different situation. Our ratio was much lower than Japan’s. There are a number of reasons why the German economy was different from ours. We over-relied on financial services and our manufacturing sector was reduced. We had high increases in housing prices. I do not remember any point in the past 13 years when Conservatives jumped up and down saying that they wanted the Government to engineer a house price crash.

[Claire Perry]

Will the hon. Gentleman give way?

[Toby Perkins]

I think I have given way enough. I am grateful for the fact that the hon. Lady has turned up for the debate, but I shall carry on.

As someone who for the five years prior to coming to this place ran a business that relied on people having money in their pockets to buy non-essential items, I know very well how important it is that decisions on our economy are balanced between the need to support growth and the need to reduce the nation’s borrowing. However, we are debating the economy today because since the Chancellor’s Budget a year ago, the OBR’s initial predictions get worse at every stage. The OBR now predicts £46 billion more borrowing than it predicted a year ago. The Government have discovered that the policies that they are pursuing are not working, so why do they not listen to the advice, change course and ensure that we protect not only the growth that we need in our economy to reduce the budget deficit, but the people on the ground in our constituencies—that includes the constituencies of Conservative Members—who are struggling to get by, whose houses are being repossessed? Repossessions are increasing.

[John Hemming]

Will the hon. Gentleman give way?

[Toby Perkins]

I have given way to the hon. Gentleman once. I am grateful for the fact that he has turned up, but I do not want to give him any further encouragement.

The scale of the deterioration in the OBR’s forecasts is stark. The OBR, which was set up to provide an independent view of the state of Government finances, has downgraded its forecasts three times. The Chancellor told us of all the steps he is taking to stimulate growth, but even taking those into account, the forecast is that public sector net borrowing will increase by £46 billion over the next five years, which demonstrates the failure of those policies.

The Chancellor might be failing to get our economy growing, but the same cannot be said of unemployment. Government Members are celebrating, as we all do, the fact that unemployment is down in the last month, but unemployment over the course of the Conservative-Lib Dem Government will go up. Youth unemployment is up. The OBR forecast is that unemployment will rise––[Interruption.] Going forward, the OBR is now predicting that in every year over the next five years unemployment will be higher than in its prediction of a year ago.

[Ben Gummer]

The hon. Gentleman is factually wrong. The OBR says that unemployment will peak at the end of this year and the beginning of next year, and that it will fall in every successive year.

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[Toby Perkins]

The hon. Gentleman did not hear what I said. The OBR suggests that unemployment will be higher in every one of the next five years than it suggested in its predictions a year ago. That is what I said.

Alongside the increase in unemployment, we are seeing increases in inflation and interest rates. We have been here before: growth stagnating; unemployment rising; businesses failing; and inflation, interest rates and house repossessions increasing. Who was the economic genius who advised the Chancellor the last time a Tory Government led Britain down that road? The current Prime Minister. Should we be surprised?

The Prime Minister has a pedigree as an economic failure, but what about the Chancellor? The Chancellor is the master of hindsight. This was the man who told us that bank regulations were too stringent when Labour was in power. This was the man who, up until 2008, told us that the Conservative party supported Labour’s spending plans, but who now claims that Labour overspent for 10 years. We told him that he was cutting too far and too fast, but he then delivered a damp-squib Budget for growth because we had been right in the first place. He is the man who will soon gain huge dividends because of Labour’s sensible decision to nationalise Northern Rock at a time when he was still a rabbit staring into the headlights of an economic crisis that shook all his assumptions about the sanctity of the markets.

When the IMF was still praising Britain following Labour’s response to the international crisis, the now Chancellor was encouraging us to follow Ireland’s example of massive cuts at the heart of a recession. He is fond of his international comparators, so let me give him some. When he was supporting our economic plans, Britain’s net public spending as a proportion of GDP was 6% lower than when Labour came to power. We have seen an unprecedented clean-up of the disgraceful state in which the previous Conservative Government left our public services. At that time, our debt, as a proportion of GDP, was the second lowest in the G7. Now the growth that he promised to return Britain to lags behind every single country in Europe except for the absolute backmarkers.

People in business, whether in plumbing or double-glazing or the sports goods industry, as I was, need their customers to have money and confidence, but under this Government the amount of money in people’s pockets has shrunk, the cost of goods has risen because of the VAT increase, and people have no confidence that the economy is going to grow and so are not spending money. That is why we are not seeing growth in our economy. We all want the deficit shrunk, but that will happen only if we get growth back into the economy now.

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[Charlie Elphicke]

Employment has gone up in my constituency, and unemployment has been falling, which is welcome. We are going in the right direction: across the nation, there are 520,000 new private sector jobs, while public sector employment has fallen by 143,000, so we see a net rise. The most recently announced figures show unemployment falling sharply by 88,000.

[Toby Perkins]

Will the hon. Gentleman give way?

[Charlie Elphicke]

No. Time is pressing, and I need to allow time for the wind-ups.

Youth unemployment has also started to move strongly— although perhaps not as strongly as wider unemployment —in the right direction. Surely the House must welcome that. Manufacturing output is also moving more in the right direction, after being halved in the Labour years, and now being about 11% of our economy. I hope that the economy will rebalance under this Government so that we are less dependent on banks and fat cats—for party donations, frankly—on handing out knighthoods and on bonuses, and more dependent on much more productive service and manufacturing industries. We need less of financial services and housing, and more of making things, producing things, servicing things, and—yes—education.

The narrative of what this Government are doing is to ensure that our economy is stronger, that our work force are more incentivised to work by making work pay through universal credit, and that they are not only incentivised to work but given the skills to work under the Government’s skills and education agenda. We can have a country that is more productive, where more people want to be in employment, where we do not suck in people from overseas to do the jobs, and where we ensure that our countrymen are encouraged to get into work, do their part, fulfil their potential and have more of a sense of dignity, happiness and well-being. That will allow us to build a Britain that is fit for this decade, and it will ensure that we steam ahead, further ahead, of our European colleagues, and do well. The Government are working on that, and deficit reduction is part of it, but the growth, rebalancing, welfare reform and skills and education agendas are parts of the narrative that add up to a much stronger, much more vibrant economy—a much more exciting Britain-to-be where people will be able to benefit from much more success, much more money and much more good fortune, built on a solid foundation for the long term.

Regulatory and Banking Reform

Toby Perkins Excerpts

Thursday 16th June 2011 Commons Chamber

[Mr Hoban]

My hon. Friend is absolutely right to highlight the numbers of people employed in financial services not just here in London, or in Edinburgh and Glasgow, which are well-known financial services centres, but throughout the country. We need to ensure that the industry continues to be a strong contributor to employment, to economic growth and to tax revenues, and to ensure a balance so that it does not pose an excessive risk to the strength of the UK economy. The measures that we have put forward today strike the right balance between encouraging the industry to continue to be a wealth and employment creator and ensuring that the right protections are in place for consumers, so that they buy the products that those companies sell. Those companies will not thrive unless there is consumer appetite for buying pensions, for investing in their futures, for taking out deposit accounts and for buying life insurance policies. We need to get that balance right between consumer interest and business interest, but businesses will be best served if consumers feel happy about buying products from them.

[Toby Perkins (Chesterfield) (Lab)]

The Minister rightly says that a key part of the recovery of the banking sector’s reputation is an increase in the public’s confidence in the system, and he is putting a lot of power and confidence in the role of the Bank of England. What specific new powers will the Bank have to enable more public confidence in a safer banking system in future?

[Mr Hoban]

The Bank of England and the FSA published a couple of weeks ago a document setting out the new regulatory approach that the PRA will set. They were clear that, rather than waiting for a bubble to burst and for problems to emerge, they will intervene earlier to force firms to take action to correct problems, and that shift in style—from waiting for a problem to happen to trying to pre-empt its creation—is absolutely vital. We are reliant on the judgment and the discretion of the regulators in following through that new regulatory approach, but rather than waiting until it is all too late, as happened in so many different examples over the past 10 years, giving the regulator the power to intervene early will have a significant benefit on outcomes for our constituents.

Amendment of the Law

Toby Perkins Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Sir Stuart Bell]

I am grateful to the hon. Gentleman for his point, because we have argued consistently—and so has the international community—that we had a financial crisis from 2008 and 2009 and that out of that financial crisis, without referring to tsunamis or earthquakes, there have been many aftershocks and it will take much time to get over that. I agree with that point but it was not us who said that we would raise growth last year—it was the Conservative Government. The hon. Member for Chichester made an excellent point when he said, quite rightly, that under a Labour Government we had 40% debt in relation to gross domestic product. My recollection is that for some years it was 37% and it was the financial crisis that pushed it up to where it was.

[Toby Perkins (Chesterfield) (Lab)]

Would my hon. Friend also say that what is particularly startling today is that, after all the measures we have heard from the Chancellor about in the Budget, the growth forecast has taken place as an after-effect? How bad would the growth forecast have been without those measures? It is still drastically down from what the Chancellor suggested that it would be when he delivered his previous Budget nine or 10 months ago.

[Sir Stuart Bell]

That is the point that the Leader of the Opposition made. I was reminded by those on the Front Bench—I had not got so far in my speech—that if growth is down, inflation is up. The Chancellor made a point about commodity prices going up. They are going up in France, where inflation is 2%. We have higher inflation because of the Government’s policy. We have depreciated the value of our currency over a period of time by 25%. We have increased our exports but we have also increased our imports. Our imports are still greater than our exports. We are now importing inflation. The difference between French inflation at 2% and our inflation, which will run between 3.5% and 5%, is that we are importing it, because of Government policy.

Unemployment is going up; it is at a 17-year high. The Chancellor made a great thing about 3,000 jobs in the manufacturing sector, but he did not refer to all the jobs that have been lost. How many more jobs will be lost when we move into the cuts to local councils that will start on 1 April? How will Middlesbrough council cope with a 28% deficit reduction? How will the national health service cope? We know that we will lose at least 1,000 jobs in Middlesbrough and unemployment in my constituency is disgracefully high. We have the fourth highest unemployment rate in the country and that is wrong. It happened under a Labour Government and under a Tory Government. The cuts that are being announced and those that have been made through the massive deficit reduction programme announced by the Chancellor in his previous Budget will push us further down.

No reference was made, as I have said, to the welfare state. What happened to the welfare state? What happened to the balance between the public and private sectors? What happened to those who are unable to look after themselves? Where was all that in today’s Budget?

Bank Bonuses

Toby Perkins Excerpts

Tuesday 11th January 2011 Commons Chamber

[Mr Osborne]

The discussions are taking place now. In the next couple of weeks, I expect to be able to come back to the House with the conclusions of those discussions. The pay packages and bonuses for UK banks will be announced either right at the end of January or in early February; those for American banks will be slightly earlier.

[Toby Perkins (Chesterfield) (Lab)]

A lot of people will be particularly disappointed, because how the Chancellor is speaking today is so very different from how he spoke in opposition. As someone who has recently been going downhill fast, does he understand how depressed people will be about what they are hearing from him today compared with what he said as shadow Chancellor?

[Mr Osborne]

I hope that what people are hearing from us today are serious proposals: to increase lending in our economy, which is very important; to reduce the bonus pool, so that it is not as large as it was under the Labour Government; and to increase the contribution to communities in the way that we all want to see. That is what we are seeking to agree with the banks. As I say, there is absolutely no proposal to the contrary from the Labour party, which actually created this mess, and feathered the nests of the banks, while it was in office.

Financial Assistance (Ireland)

Toby Perkins Excerpts

Monday 22nd November 2010 Commons Chamber

[Mr Osborne]

The sovereign debt concerns are very heightened at the moment—that is a statement of the obvious—and a Chancellor of the Exchequer who represents the country with the largest budget deficit in the G20, and the largest budget deficit in the EU until Ireland started to overtake us, must make moving Britain out of the financial danger zone their immediate priority, which is what this Government have done.

[Toby Perkins (Chesterfield) (Lab)]

Does the Chancellor agree that the real lesson that comes out of Ireland—he rightly identified similarities with our economy—is that the impact of the global banking crisis added to a drastic programme of public sector cuts does not mean growth? That is dangerous to the economy.

[Mr Osborne]

Quite frankly, that assessment is not shared by the International Monetary Fund or other EU member states. It is not the assessment of anyone who looks at the Irish situation except for the hon. Gentleman.

Oral Answers to Questions

Toby Perkins Excerpts

Tuesday 16th November 2010 Commons Chamber

[Mr Osborne]

We have created the independent Office for Budget Responsibility so that the fiscal forecasts for the United Kingdom are no longer produced by the Chancellor of the Exchequer and sometimes influenced by the political judgments of the Chancellor of the Exchequer, but instead are done independently.

[Toby Perkins (Chesterfield) (Lab)]

On child benefit, can the Chief Secretary explain why he believes that families earning £45,000 have broader shoulders than those earning £80,000?

Comprehensive Spending Review

Toby Perkins Excerpts

Thursday 28th October 2010 Commons Chamber

[Danny Alexander]

I do not accept that analysis, and I will come to that point later. The hon. Lady should be aware that her party’s plans were for £44 billion-worth of cuts, which would have had an impact on people too. Many of the things that we have done, such as uprating the state pension in line with earnings and protecting the national health service, which her party would not have done, support women.

[Toby Perkins (Chesterfield) (Lab)]

The right hon. Gentleman is perpetuating the myth that there is no alternative, but he just said that the previous Government had a strategy in place for paying off the deficit, so there is an alternative. An alternative was also put forward in 1945. He can take whichever direction he likes, but he cannot keep claiming that the decisions he is making are the only alternative, because others have been put forward.

[Danny Alexander]

No alternatives have been put forward by the hon. Gentleman’s Front Benchers; perhaps he wants to talk to them about that.

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[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

I am very pleased to have an opportunity to contribute to this debate, as I believe that these economic issues will be the most important issues facing this Parliament. I want to talk in particular about the effects of the spending review on London and inner-city communities—the type of community that I have lived in all my life and sought to represent over the past two decades. I also want to talk specifically about the effects of the spending review on the private sector, as they are not sufficiently debated or understood, and on the public sector, and about the particular effects on housing and housing need in London, because I think the spending review and the mix of proposals on housing benefit and cutting expenditure on public sector housing will hit London harder than any other part of the country, with consequences that I do not think the Government have calculated.

It is not sufficiently understood that more than 1 million jobs in the private sector are directly dependent on public sector contracts with private sector organisations. That is the case in construction, for example, but there are also many jobs in social care and looking after young children that are basically delivered by private sector organisations. Also, when we make these cuts and people lose their jobs, demand will be taken out of the economy, so many retail and service companies in London will suffer. These cuts will have a ripple effect in the private sector in London. The Government and their supporters in the Lib Dem party may be laughing now, but they will be laughing on the other side of their faces when the effects on the private sector become clear.

The coalition Government talk about the public sector as if it is all about men in bowler hats who can easily be switched into meaningful jobs in sectors such as banking. In Hackney and the inner city generally the majority of public sector jobs are women’s jobs, however, and the majority of those women are heads of households, and far from doing peripheral or frippery jobs, they work in the heart of communities as teaching assistants or care assistants or in the voluntary sector, which will suffer because of the cuts in local government spending. These jobs are at the heart of communities. How hypocritical it is of the coalition Government to talk about the big society and then attack ordinary women working in the heart of their communities across a range of important occupations.

I have listened to what coalition Ministers have had to say, but having lived in and represented Hackney for more than 20 years, I can tell them that there are no private sector jobs for women in Hackney who will be made unemployed to step into. That is because of the structure of employment in Hackney and the inner city. Yes, we can count up the number of vacancies and the number of people who might be made unemployed, but there is a mismatch between the types of people that this coalition are going to fling into unemployment and the actual opportunities available to them, such as they are, in the City and the private sector in London generally.

We have to judge these matters on the basis not of political banter, to and fro and Punch and Judy, but of the effect on real people’s—real women’s—lives. The consequences for communities such as Hackney in the next financial year will be very serious indeed. The people in those communities will not have been impressed to see Ministers on the Treasury Bench laughing and congratulating themselves when the statement was read out. What were they congratulating themselves on—thousands of people losing their jobs and thousands more losing their homes?

That brings me on to housing. Members will be aware that since the 19th century one of the core activities of local government in London has been building housing—affordable, quality housing for rent. If hon. Members are not aware of that, I can take them to estates built in Hackney more than a century ago. Of course politicians then, even Tory politicians, recognised that decent housing was at the core of social stability and public health concerns. But what are we getting from this coalition? We are getting cuts in public sector housing expenditure, which, as I said, affect the traditional role of local government; cuts in people’s housing benefit after a year; and, above all, a cap in housing benefit.

I put it to the Government that the majority of people claiming housing benefit are not shiftless people, but working people and those looking after disabled people. These are not people who are simply unemployed. It has been argued that we have to cut housing benefit because, horror of horror, poor people are living alongside rich people in desirable areas of the city.

[Toby Perkins]

My hon. Friend is reflecting on the inequities of the changes to housing benefit. Does she agree that the Government’s focus on the cap is a red herring, because it is relevant to very few housing benefit recipients, and that the really important thing is the 10% cut that will hit housing benefit recipients in the second year?

[Ms Abbott]

I quite agree, and I am grateful to my hon. Friend for raising that issue. I have a sentence or so more to say about the cap. We have been told by the Prime Minister of the horror of poor people living alongside rich people in boroughs such as Islington and Westminster. Let me tell the Government that I can take them to the heart of the Prime Minister’s Notting Hill and show them poor but entirely respectable West Indian couples living alongside merchant bankers who have bought their houses for millions of pounds. London has always been a city where rich and poor live side by side; it has never had the perfumed stockades of the upper east side of New York or the kind of social segregation seen in American cities. This type of cleansing of poor people from what are deemed to be areas that are too good for them to live in is quite unconscionable. As my hon. Friends have said, this is not just about the cap on housing benefit, although that will also have a serious effect on ordinary people in London and may well see the end of some Lib Dem MPs now sitting on the Benches opposite us; it is also about the cuts in housing benefit after a year.

What I say to the House is that we can sit here this afternoon scoring points and doing the Punch and Judy stuff, but real people in our constituencies, whose circumstances are not understood by those on the Treasury Bench, will suffer as a result of this ill-thought-out, ill-paced and wholly ideological spending review. The credit crunch and the deficit have been the occasion of this spending review, not the reason for it.