Savings Accounts and Health in Pregnancy Grant Bill
Toby Perkins Excerpts(15 years, 3 months ago)
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Mr Hoban
I am turning to child trust funds, and I take on board the right hon. Gentleman’s point. As one of the consequences of our decision to scrap the child trust fund, we are using some of the money that we have saved to provide respite care for disabled children. We have thought carefully about the issues, and, frankly, the decisions are not easy to take. Our decision to scrap the child trust fund is important. It will enable us to deliver the pupil premium and the £2.5 billion package, which was recently announced, to support children from disadvantaged backgrounds. The right hon. Gentleman should look at the issue in the round rather than cherry-picking particular policy areas.
Mr Hoban
No; I will continue. I have given way quite a lot, and I want to make some progress. This is an important Bill, which is why I want to ensure that I have given Opposition Members the opportunity to intervene, but I want to continue setting out the case for why we need to take these measures to tackle the problem that the previous Government left behind.
We announced in May that Government payments to child trust funds would be cut in two stages—they will be reduced first and then stopped altogether. In July, we made regulations to take the first step. For those born from August this year, payments at birth were reduced from £250 to £50, or from £500 to £100 for children in lower-income families or children in care. Government payments at the age of seven also stopped completely from August. The regulations will end the additional payments made to disabled children from 2011-12 onwards, although, as I have said, we will recycle the money that we have saved on those payments to provide additional respite breaks.
Those regulations could not end eligibility for child trust funds altogether, because that process requires primary legislation. This Bill completes the process by ending eligibility for child trust funds for all children born from January 2011 onwards, which means that the remaining Government payments will stop altogether.
Mr Hoban
As I have set out, the previous Government left us with no choice but to axe those schemes, because we had to save £80 billion in public spending to get spending back on track and keep the deficit under control and interest rates as low as possible for as long as possible. That was the Government’s priority.
Mr Hoban
I will not, because I want to continue making progress.
We want to provide people with a clear and simple way of saving for their children, while saving the £500 million a year that we currently spend on child trust funds.
The savings from the child trust fund, the saving gateway and the health in pregnancy grant will allow us to prioritise the limited resources that we have. As the Chancellor set out last week, we have chosen our priorities as we tackle the deficit that we inherited. We are delivering on our commitment that health spending will increase in real terms in each year of this Parliament. We are prioritising long-term growth, creating the conditions for a private sector-led recovery. We are also radically reforming public services to build the big society where everyone plays their part.
Toby Perkins
My right hon. Friend is touching on the choices that the Government have made. The number of attacks that they have made on children, families and women is revealing. They seem willing to give money to married couples who do not have children but they are taking money from families with children. Anyone who has been married and had kids knows that it is not getting married that costs money but having kids. When my son was four months old I thought that he was robbing my wallet because I had no money left. Does not the Government’s approach show how out of touch they are with the real lives of families and children?
Mr Hanson
I agree. The Government are not in touch with the difficulties of raising a child or of meeting the costs when children reach the age of 18.
The child trust fund is worth £500 to each child over their lifetime, but it is worth £1,000 to the poorest children. The Minister will know that the previous Labour Government also introduced a disability living allowance payment on top of £100 or £200 for those entitled to DLA. That measure was introduced to take into account the significant extra challenges that disabled people face at that important time in their lives. When that measure passed through Parliament earlier this year, under the previous Labour Government, the Conservative party did not oppose that addition. Indeed, the present Financial Secretary said that
“we recognise that additional support is required for children with disabilities, and we have no objections to this statutory instrument.”—[Official Report, Eighth Delegated Legislation Committee, 10 February 2010; c. 4.]
The Liberal Democrats’ spokesperson at the time said they were happy to support the regulations. Quite simply, the Government say one thing in opposition and another in government.
As young people reach 18, the financial challenges—not least those imposed on them by the current Government—will be more difficult. If individuals do not come from a wealthy background, the prospect of stumping up extra money for tuition fees is an eye-watering one. Not everyone will have a trust fund of their own to manage those resources. The children’s trust fund would have provided young people with an extremely welcome lump sum, would have helped people with education and training from the age of 18, and would have helped people to save who had never saved before to supplement their future income.
Toby Perkins
Teenage pregnancy levels are high in some of our most deprived communities, and the child trust fund at least offered 18-year-olds who were about to have children the chance to take a different track or to receive some support. Does my right hon. Friend agree that the Bill will take away a key tool in the battle against child poverty?
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
Over the past few days, weeks and months, there has been a lot of talk about “fairness”, which is an easy word to use. Who is the judge of what is fair? Whose standards of fairness are being applied? Many believe that the measure of a civilised society is how it treats its weakest members. If so, the Bill clearly fails the fairness test, because it lets down families and leaves our children to take the strain.
When the Prime Minister spoke about “mending our broken society”, he did not say that he would go around breaking it first.
“I want the next Government to be the most family friendly Government we’ve ever had in this country”.
It was a broken promise, one of many, with more to come. Then we have the Chancellor’s hollow promise of fairness:
“A fair Government make sure that those with the broadest shoulders bear the greatest burden.”—[Official Report, 20 October 2010; Vol. 516, c. 955.]
Today we see the Liberal Democrat and Conservative idea of fairness.
Anyone who has young children running around knows how expensive bringing up a family can be. As we are discussing the removal of a grant of £190 to encourage health in pregnancy, I want to talk about how expensive simply being pregnant can be. There seems to have been a lot of debate and misunderstanding about the value of the grant. My hon. Friend the Member for Walsall South (Valerie Vaz) made good points about the physical nourishment required by a pregnant woman, especially in the later stages of pregnancy. On a physical level, however, a pregnant woman needs clothes to go to work, shoes for her swollen feet, vitamin supplements—I craved fresh fruit salad. I know mothers who have suffered from chronic back pain and chronic pelvic pain. They have struggled to sleep because the later stages of pregnancy are so uncomfortable. All those conditions can be helped by customised cushions, back supports and other aids, none of which is available on the national health service, all of which must be purchased, and all of which I was fortunate enough to be able to purchase, although many on lower incomes would not be able to. The health in pregnancy grant was designed to ease the final stages of pregnancy, and to ensure that a child is not born to a broken mother.
All that arises before we consider the huge impact of the link between the health visitor, the midwife and the pregnant woman that is currently required for the grant to be obtained. The financial pressures during pregnancy are difficult for all women, but teenage mothers suffer a particular burden. The Institute of Education has found that they suffer a lifelong financial disadvantage, with a lifetime family income £12,000 lower—or an annual income 2% lower—than the family incomes of those who become pregnant in their mid-20s.
Toby Perkins
My hon. Friend is making a compelling case. Does she agree that, whatever we may have thought about the upper-class buffoons whom we may have considered to constitute the Conservative party, they always seemed to have a sense of gallantry? When they said “Women and children first”, it was supposed to be a good thing. Nowadays, however, when they say “Women and children first”, they mean that women and children should be in the front line, facing a battering from the cuts. It is women and children first who are losing the benefits, it is women and children first who are losing the payments, and, most of all, it is women and children first who are paying the costs for these upper-class buffoons.
Catherine McKinnell
My hon. Friend ably makes a point that I was about to make myself. Families are being asked to bear the brunt of the mistakes made by bankers. The Government plan to take £190 away from the pregnant mothers who need it most. I believe that that constitutes a shameful attack on the most vulnerable and needy in our society. The Government tell us that the banking levy would bring in £2.4 billion, but my hon. Friend the Member for Walsall South set out the economic case—the “you do the maths” case—very clearly.
The Economic Secretary to the Treasury (Justine Greening)
As we have heard, this has been a vigorous debate and I am very grateful to all the Members who have contributed. The discussion has been wide-ranging and I want to start by addressing some of the wider arguments that have been made before moving on to some of the more detailed points about measures in the Bill. I shall try to cover all the speeches, although they were numerous.
My hon. Friend the Financial Secretary set out at the start of the debate the rationale behind the Bill and the role that it will play in our plan—a clear and credible plan—to reduce our budget deficit. Some Members have argued today that our plans move too fast, but our deficit is unprecedented and unsustainable so we must take action to tackle it. That action is supported across the world. Only today, Standard and Poor’s, the credit rating agency, stated that the coalition parties
“have shown a high degree of cohesion in putting the U.K.’s public finances onto what we view to be a more sustainable footing”.
It is simply untenable for Labour Members to spend yet another debate, yet another afternoon and yet more hours in refusenik mode arguing about what they do not like, while setting out no plans for what they would do instead.
We are spending £43 billion this year—£120 million a day—on the debt that the Government have inherited. The Labour party wants to airbrush that amount out of our financial worries, but that is simply not possible. Failing to act now would risk higher interest rates, higher mortgage rates, higher rates of business failure and higher unemployment. The Labour party knows all about higher unemployment, having again left unemployment higher when it left office than when it came in.
Toby Perkins
The Minister just said that higher employment is something that the Labour party knows all about. I do not know whether she is aware that unemployment was up near the 4 million mark under a Conservative Government. What does she consider to be a successful level of unemployment this time?
Justine Greening
The hon. Member for Edinburgh East (Sheila Gilmore) talked about judging Governments based on what they do. The previous Labour Government left unemployment around 400,000 higher when they left office than when they came in. I do not know what the hon. Member for Chesterfield (Toby Perkins) has to say to those people who were unemployed when the previous Government left office, but those people must be very pleased that the Labour Government are no longer in office taking bad decisions.
Today Labour Members have discussed fairness, but there is nothing fair about failing to tackle the deficit. They have discussed it being unfair to end eligibility for the child trust fund, but there is nothing fair about asking future generations to pay our debts, which is simply unacceptable. It was the ultimate irony to spend the afternoon listening to Labour Members discussing the value of saving, when the Labour Government left office with our savings ratio at an all-time low, as we have heard. A savings culture was nowhere to be seen in the Labour Government. If they had demonstrated a little bit more of that culture themselves, the rest of the country might have followed suit.
Oral Answers to Questions
Toby Perkins Excerpts(15 years, 4 months ago)
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The Economic Secretary to the Treasury (Justine Greening)
I will be very happy to meet my hon. Friend. The coalition agreement mentions the desire to reform air passenger duty and move towards a per plane duty. In the intervening period, I have had a range of meetings, including with airport owners, and I would be happy to add him to my list of people with whom I have discussed that policy.
Toby Perkins (Chesterfield) (Lab)
T8. The Chancellor was a millionaire the day he was born, so he has not got a clue what it is like to try to raise a family on £40,000 a year—[Interruption.] Do you mind? He cannot hear me. People who earn that much are not the super-rich; they are hard-working people who are getting by and getting on. The cuts to child benefit will take about 10% of the income of some of them. By what definition of fairness does he think robbing 10% from hard-working people is a fair deal for such families?
Mr Osborne
I will make one observation if the hon. Gentleman wants to lay into my background: I went to the same school as the deputy leader of the Labour party.
On child benefit, we have had to take some difficult decisions. It is quite extraordinary that the Labour party finds itself opposing our decision. Yes, it was a tough decision, but it was fair in the context of the decisions that we must take. The fact that Alan Milburn today warned Labour Members not to oppose the measure—[Interruption.] Of course, the sensible part of the Labour party is no longer on the Front Bench. The fact that Alan Milburn, whom Labour appointed as its social mobility tsar, is warning them is something to which Labour Members should pay attention.
Equitable Life (Payments) Bill
Toby Perkins Excerpts(15 years, 5 months ago)
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Mr Hoban
I discussed that idea, but I received a strong representation from Equitable Life advising against it, because of the complexity that might be attached to staged payments. Some have suggested that we make payments into people’s pension funds, but some of the key criteria for judging the payments scheme will be simplicity, speed and transparency. People will be concerned that a series of small payments over a long period will not necessarily meet the simplicity, speed and transparency criteria against which a payments scheme ought to be judged.
Toby Perkins (Chesterfield) (Lab)
Will the Minister acknowledge that the broad range of issues that he now says he will take into consideration were entirely absent from his discussions in the run-up to the election or in the coalition agreement, which states that the coalition Government will implement the Parliamentary and Health Service Ombudsman’s recommendation? People in the Equitable Members Action Group will be extremely disappointed with the Minister’s tone when they compare it with the tone he took in the run-up to the election.
Mr Hoban
It is a bit rich for Labour Back Benchers to complain, when the Labour Government had a chance to resolve the matter but failed to do so. The hon. Gentleman should explain to Equitable Life policyholders in his constituency why his colleagues failed to take the action necessary to resolve the problem when they were in government.
Stephen Timms
I am not sure which investors the hon. Gentleman is thinking of, but I think it essential for us now to move quickly to a scheme. We need a timetable, and we need the details of a scheme, so that this long-standing matter can be resolved.
Toby Perkins
Many former Equitable Life policyholders who have spoken to me unquestionably felt that both previous Governments had been too slow to act. They will be very surprised by the extent to which Members who signed that pledge now apparently welcome proposals that are so far removed from what the Conservative and Liberal Democrat parties promised in the run-up to the election.
Stephen Timms
My hon. Friend is absolutely right. There is what I would describe as incandescence on the part of those who have been affected, because promises so clearly made to them before the election are not being fulfilled now.
Finance Bill
Toby Perkins Excerpts(15 years, 6 months ago)
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Mr Gauke
That is our intention. The Chancellor has made it clear that we have no intention of reconsidering the zero ratings for food or children’s clothes. There are occasional border disputes regarding goods that are zero-rated and those that are fully rated, but on the fundamental question of zero-rating we have made it absolutely clear that we do not intend to revisit those areas. We are also increasing the personal allowance on income tax.
Toby Perkins (Chesterfield) (Lab)
May I drag the Minister back to his point about the VAT rise being part of a package of measures and about the poorest being protected by the Budget when it is taken in the whole rather than just looking at the VAT rise? Will he remind the House what safeguards there are for pensioners or unemployed people who do not have children? What benefits will they gain that will pay for the extra VAT that they are going to pay?
Mr Gauke
Again, I refer the hon. Gentleman to the distributional charts, particularly those that examine these matters on the basis of the expenditure decile, which academics increasingly believe provides a better examination of those who are suffering from material deprivation. That approach demonstrates that the measures are progressive, when taken as a whole, and that the wealthier sectors of society are paying more. The distributional analyses show that the single tax measure that had a regressive effect was the dumping of the 10p rate of income tax that was announced in 2007, which hurt the bottom five deciles and benefited the top five. That does not seem fair, and I am glad that we were not part of the Government who did that.
Toby Perkins
I should like to bring my right hon. Friend back to what he was talking about—unemployment, housing, the impact on people and how the last Labour Government protected people on the ground. Is it not strange that there seems to be no acknowledgment from those on the Government Benches about how many extra people are in work and still have the homes for which they have worked so hard all their lives? There seems to be no acknowledgment from the Conservative party that that issue is worth worrying about. Perhaps that is because they were not the people who lost their jobs or were in danger of losing their homes.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I press hon. Members to make shorter interventions. The shadow Chief Secretary is being generous; may that continue.
Andrew George
Perhaps the hon. Lady was not listening to my opening remarks when I said that on balance, because there are many measures that I approve of, even though I am disappointed by this particular measure, I will be supporting the Government. This is, of course, a Finance Bill and not the Budget as a whole.
I was reassured, but I seek further reassurance from Treasury Ministers, regarding the promise that the Government will not revisit the current list of zero-rated and 5%-limited VATable products and services and that they certainly have no intention of reducing those lists or in any way cutting the number of VAT-exempt, zero-rated or VAT-limited products and services such as those that we have been debating.
Andrew George
I am just bringing my remarks to a close and I know that a lot of people wish to engage in the Backbench Business Committee debate later, so I hope that the hon. Gentleman will bear with me.
It has been a pleasure to take part in the debates throughout the proceedings of the Finance Bill. I put on record my disappointment regarding the VAT measure in particular and I hope that Treasury Ministers will reflect on the debate and come forward with an evaluation in the months and years ahead.
Toby Perkins (Chesterfield) (Lab)
The hon. Member for Daventry (Chris Heaton-Harris) was true to his word. His speech was fairly brief, but it could have been a good deal briefer, because he completely failed to understand that the Bill is simply a return to the ideological and illogical Tory mistakes of the past. It reflects a Budget that spoke throughout of the Tory obsession with public sector cuts and the mistaken belief that public sector shrinkage automatically leads to private sector growth. In fact, the Tory belief seems to be that our economy is balanced on a see-saw—that as soon as the public sector goes down the private sector goes up, and vice versa. I speak as someone who for the past five years has run a small business, and who for seven years before that worked in the private sector for one of the fastest-growing companies in the UK.
As an internet-based sports retailer from 2004 to the general election, I relied on customers from all four corners of the country and every aspect of our diverse economy. I sold to businesses and to business people, for sure, but I sold also to schools, school teachers, universities, armed forces teams and individuals, such as doctors, council workers and police officers. The VAT rise in the Bill would have taken 2.5% straight off the bottom line of my business and would inevitably have led to higher prices; it would absolutely have had to. It means not just higher prices for pensioners, the disabled and people on benefits, those who are already likely to be struggling because of cuts to their housing benefits, but a double whammy—less money and higher prices.
So far we have heard a great deal from the Con-Dem Government about the private sector’s role in the recovery, but more revealing has been what we have not heard. We have not heard how the private sector will play a role in reducing the large number of people who claim sickness-related benefits when getting back to work; how cutting manufacturing allowances to fund a corporation tax cut that will help businesses only in January 2013 at the earliest is going to help our manufacturing industries and help us to grow our way out of recession; or how the retail sector will contribute to our growth when the Government’s policies will take money out of customers’ pockets.
I know the impact that those measures could have, because if the Government take money out of the pockets of people, particularly the poor and public sector workers, they take it out of the private sector, too. They take it out of the pockets of the shop owner who would have sold a teacher a new television; they take it out of the pocket of the plumber who would have fitted a new bathroom for a social worker who, now, does not have the confidence to make that purchase; and they take it out of the pocket of the double glazing firm that was about to install a new conservatory at a doctor’s house. The idea that the private sector will flourish because of this Bill is ludicrous.
The economy is not out of the woods. The Bill stifles growth, it is bad for business and it is bad for those who rely on the public services. The Government got the answer wrong not only by failing to understand the impact on the private sector of the cuts in public sector spending, but on every level with their decisions on taxation and investment. Tory Members have admitted that this is an ideological Budget, rooted in Thatcher’s economic catastrophes. The Budget means that huge global banks will pay less tax, while the very poorest people in our society—benefit recipients and pensioners—will be worse off. The Exchequer Secretary to the Treasury was unable to provide me with any way in which the Bill will compensate pensioners, the unemployed or those who do not have children for the fact that, under the VAT rise, they will pay hundreds of pounds more a year.
To hear the Conservative party propose such measures is no surprise. Conservatives have always set out to protect privilege and wealth, as anyone who has ever studied history will know. It is what they have always done, and that is why the hon. Member for Bermondsey and Old Southwark (Simon Hughes) said:
“I have always been concerned that Conservatives first look after their own and have presided over widening inequalities and not a more just society.”
That is what he has always said. Once I held out hope for the Liberal Democrats, but hearing them suddenly claim that VAT is a progressive tax, that we need dramatic cuts now and that we should not be too harsh on the bankers, it is as if the recent general election was so painful for them that they cannot bear to remember what they spent a month arguing.
The Tory cuts philosophy was the wrong decision at the wrong time, but even if we accepted that their cuts programme had to go faster and further than they had ever let on during the election, and even if we believed that Labour’s responsible deficit reduction programme for halving the deficit in four years was not enough, we would find that the decisions in the Bill still do not make sense.
The Exchequer Secretary argued that the Government had been left without a choice, but, as my hon. Friend the Member for Streatham (Mr Umunna) revealed, there were alternatives. The capital gains tax rise was less than half that promised in the Liberal Democrat manifesto, and corporation tax was already at its lowest point for a long time and 5% less than it was in 1996-97. If there are tough decisions to be taken, and ordinary people and so many good businesses are struggling so badly, why choose to make life even more prosperous for those businesses that are already flourishing and, in some cases, contributing very little to growth?.
The previous Labour Government were securing growth to protect hard-pressed people against losing their homes, and when we realise that in this recession about 30,000 fewer people lost their homes than did so in past Tory recessions, we see just how easily the Tories would have cut people adrift. When we see that 500,000 fewer people lost their jobs than would have done so if we had followed Tory advice, we know that throughout this country there are people who can walk into work with their heads held high, knowing that when the crisis struck they had a Government who said, “Yes, we care.”
The measures that the Labour Government took are working. The predictions that the current shadow Chancellor made in his last Budget were, if anything, pessimistic. The borrowing requirement is down by £8 billion and there was a Government underspend of £5 billion. That is why even right-wing analysts such as Fraser Nelson of The Spectator have been forced to admit that the Office for Budget Responsibility did not demonstrate that measures in the Budget were inevitable, and, as Tory Members have admitted before, that it is an ideological Bill which reflects the warped view of life held by so many Government Members who have never had to struggle for anything in their lives—many of them millionaires the day they were born. Their first reaction to a crisis made in the City is to put social workers, school teachers, special needs assistants and carers on the dole; to tell people to put on a thicker jumper and holiday in this country; to cut the value of the money in people’s pockets and introduce an arbitrary tax that will hit the poorest hardest; and to do nothing—absolutely nothing—to create the jobs that might help the poor to work their way out of poverty.
Margot James
I thank my hon. Friend for giving me the benefit of some of the history of the House before I was a Member. Many of the opinions of the Secretary of State were indeed prescient. What my hon. Friend has added to the debate is truly shocking.
The public sector is clearly unaffordable. The restructuring has been inevitable; there has been no choice on our side as far as that is concerned. Yes, we will try to make a virtue of a necessity and seek to rebalance the public and private sectors, which this country has long needed irrespective of the conditions in which we now find ourselves.
Toby Perkins
The hon. Lady mentioned the prescience of the right hon. Member for Twickenham (Vince Cable) and has commented on the size of the debt and how we got into this position. Will she also acknowledge that right up until 2008, before she came to the House, her party was arguing not for less but for more public spending in a raft of areas?
Margot James
I am glad that the hon. Gentleman intervened because I cannot understand why that point keeps being made by Labour Members. I fought the 2005 general election and our party’s policy was clear: we would share the proceeds of growth. We were not advocating spending at the same rate as the Labour party did when in government; yes, we were arguing for increases, but at a significantly lower rate than was happening under the Labour party. I should like to put that on the record.
I return to my theme that this Budget does a great public service in restoring the private sector as the driver of the growth that will get the country out of the mess that has been left to us to sort out. I want to commend a few of the key features of the Bill. The reduction in corporation tax to 20% for small and medium-sized businesses and the longer-term reduction for larger businesses are key. There is also the Work programme, which is about making work pay. We need to make sure that those who can work have the opportunity to do so—indeed, they must.
There are 50,000 more apprenticeship places and the national insurance holiday for new companies, which do not have to pay any national insurance whatever for the first 10 employees. Furthermore, the Government have abandoned the Labour party’s dangerous plan to levy an additional rate of employers’ national insurance and there has been a £250 million increase in the enterprise growth fund, meaning that medium-sized companies in this country have access to more credit. Those measures will restore the private sector. Painful measures that we are obliged to place on the public sector—with the full support, I believe, of the public—will be more than made up for by the recovery of the private sector, because, according to the Office for Budget Responsibility’s projections, employment will rise year on year. I know that Labour Members are sceptical about that, but I believe in British industry and think that our private sector, including all the small companies in my constituency, is ready for the challenge. We have at last liberated it so that it can take up the challenge. I have every confidence that through the recovery of the private sector, the country will prosper once again.
Office of Tax Simplification
Toby Perkins Excerpts(15 years, 6 months ago)
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Mr Gauke
My hon. Friend, too, makes a good point. On the day of the Budget we published our document “Tax policy making: a new approach”, which set out a more consultative and deliberative approach to tax law, ensuring that draft legislation is properly examined. We think that that is to the advantage of all people; greater clarity in tax law is clearly helpful.
Toby Perkins (Chesterfield) (Lab)
Will the Minister confirm that the two appointees will not get any expenses or salary? Will he refer the appointments to the Committee on Standards in Public Life?
Mr Gauke
The appointees will not be paid. If they incur proper expenses, they will be reimbursed, as is only reasonable—[Interruption.] I would have thought all Members of the House would appreciate that. Ultimately, the appointments will be in accordance with the relevant provisions, but we believed it important to set the OTS up quickly. We have done that, and with two excellent individuals.
Oral Answers to Questions
Toby Perkins Excerpts(15 years, 7 months ago)
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Mr Hoban
My hon. Friend is right to point out the barriers to investment that red tape can create. That is why we have set out a series of specific measures in the Budget to reduce the burden of red tape. We believe that that will help up to 500,000 businesses in the south-west.
Toby Perkins (Chesterfield) (Lab)
12. What assessment he has made of the effect on levels of employment of the implementation of the measures proposed in the June 2010 Budget.
The Financial Secretary to the Treasury (Mr Mark Hoban)
The OBR has published its assessment of economic prospects, taking into account the measures in the Budget. It forecasts that employment will rise, reaching 30.1 million in 2015. Reducing the deficit will mitigate the risks to the recovery, create the conditions needed for growth and enable mortgage rates to be kept lower for longer. The Government are committed to supporting private sector job creation, cutting corporation tax and raising the employers’ national insurance threshold to support the economy.
Toby Perkins
I thank the Minister for his response, but as the local futures group says, Chesterfield will lose 1,374 public sector jobs—almost 3% of our entire employment base—by 2016. Given that manufacturing allowances are to be cut, which will make it more difficult for us to grow our way out of the economic difficulties, and given the VAT rise, which will make it difficult for the retail sector, is not the reality that, far from this Tory Budget being courageous, the ideology behind it is going to hit people with their jobs?
Mr Hoban
The hon. Gentleman forgets the measures in the Budget that will increase employment opportunities —the cut in national insurance contributions, the tax break for new businesses, which will benefit businesses in his constituency, and the reduction in red tape. All those measures are geared towards improving the prospects of private sector growth in our economy. We need the economy to be led by the private sector.
Finance Bill
Toby Perkins Excerpts(15 years, 7 months ago)
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Mr Byrne
I look forward to the hon. Gentleman telling us later how the increase in VAT is going to support the argument that he is trying to prosecute. I hope that he will also reflect on the cost of this Budget to jobs. The official figures for job cuts as a result of this Budget are bad enough, but the real figures are even worse. We have already watched the extraordinary spectacle of the Office for Budget Responsibility tell the Chancellor that employment will be 100,000 lower as a result of Budget measures, but then the real figures were published in The Guardian—not in this House, but in The Guardian—from which we learned that secret Treasury papers say that the Budget will cost 1.3 million jobs over the next five years. When the Chancellor stood at that Dispatch Box a couple of weeks ago, he told us that he would not hide things in the “small print” and that he would give it to us “straight”; he was so straight and so open that he kept the Treasury advice out of the Budget altogether. Yet even that picture might not reflect the entirety of the Budget’s impact.
Toby Perkins (Chesterfield) (Lab)
Does my right hon. Friend agree that the Liberal Democrats’ comments would have more credibility if they had not spent the six or eight weeks before the general election arguing very accurately and articulately against the very Budget they have just helped to deliver?
Mr Byrne
My hon. Friend is absolutely right. Some Front-Bench Labour Members believe in redemption, and we have not given up on the hon. Member for Bermondsey and Old Southwark (Simon Hughes). That is why we are looking forward so much to hearing his contribution later this evening. [Interruption.] I hope he is not going to dispel the image I have of his virtue and integrity.
Clive Efford
What we have heard in several debates is so much hand wringing that I have almost started to feel sorry for the Liberal Democrats. They must be in agony from all the crushed fingers they have from wringing their hands so tightly in trying to explain away the impact of the VAT increase.
Toby Perkins
Was my hon. Friend as surprised as I was that during the Budget debate the hon. Member for Bromsgrove (Sajid Javid) said:
“Opposition Members have accused us of being ideological about the matter, but how can we be anything else? They are absolutely right, and there is no shame in it”?—[Official Report, 24 June 2010; Vol. 512, c. 515.]
He was clear that it was a Thatcherite Tory Budget that he was proud of. The Liberal Democrats are being used as a sort of human shield to defend a Budget that in other circumstances would have appalled them.
Rushanara Ali
We all know that income inequality rises in periods of boom. It is not acceptable, and personally I would rather that we had been able to do much more. As under previous Governments, income inequality increased. However, social inequality decreased. Like many Opposition and Government Members I worked passionately to reduce poverty and we did reduce child poverty nationally. I regret that we did not manage to achieve comparable reductions in child poverty in London.
The Government’s cuts will be judged on the measure of progressivism, and it is a great shame that the Bill is not progressive enough. Using VAT to raise £13 billion is a regressive choice. Save the Children estimates that the poorest families in Britain will face VAT bills of about £1,600 a year. The Treasury’s own figures show that the poorest are affected three times as much as others by changes in VAT. Many have argued that that is offset by the exempted expenditure on food and children’s clothing, but it is quite the opposite. The poorest 10% of households already spend a higher proportion of their disposable incomes on VAT—about 14% compared with about 5% for the top 10%.
These changes, combined with announcements in the Budget such as those on housing benefit, disability living allowance and other kinds of fixed income, alongside the removal of some £3 billion of support to families, will devastate many of the vulnerable families in constituencies such as mine and many others. Ministers and Government Members have been quick to say that restoring the link between earnings and the basic state pension is an important achievement, but unfortunately some 10,000 pensioners in my constituency will suffer from the VAT rise alone.
The VAT increase will reduce consumption. It will hit small businesses, including almost 4,500 in my constituency, very hard. I do not accept the argument that it will be good for the economy. About 70% of those businesses in my constituency have fewer than four members of staff working for them, and there is no doubt that a reduction in consumption will affect them negatively.
The Conservatives have been out of power for 13 years, and the first thing they now do is raise VAT. What does that say about their idea of progressivism? Those of us who were brought up in modest income households, like many millions of people in this country, have not forgotten the pain and suffering inflicted on families through VAT hikes in the past, and I simply do not accept that this is the right path now. I appeal to Liberal Democrat friends and to true compassionate Conservatives —I hope there are still a few left—who know in their heart of hearts that this VAT increase is bad for the British economy, does nothing to create fairness and social justice and does nothing to protect the most vulnerable in our country to think again and to vote with us.
People on modest incomes in constituencies such as mine will have to make terrible choices between heating or feeding and clothing their families, or between new pairs of shoes for their children and taking the bus to work. Sadly, those are the kinds of choices that some people will be forced to make because they are already on low incomes, struggling to cope in this difficult economic climate. We know that in periods of recession people turn to loan sharks because they find it difficult to get other loans, and end up heavily indebted and trapped. We also know that despite efforts by the previous Government, many of the poorest people in this country still suffer from being in a poverty trap. Despite those efforts, child poverty still has not been reduced by as much as we would have liked. I believe that this Budget, particularly the VAT increase, will continue to damage vulnerable families. In Tower Hamlets, in constituencies such as mine, the Budget cuts have already amounted to about £9 million, and a further £55 million of cuts are proposed over the next three years.
Although I welcome the bankers levy, where is the justice and fairness in raising just £2 billion, with no provision being made to tax bonuses? We may contrast that with the £6 billion of bankers’ bonuses and with the billions of pounds of public service cuts for ordinary families and workers, and it just does not seem adequate. I am not saying that the public do not want to see the deficit cut, but where is the justice in such a comparatively small levy compared with what the public have to pay?
Toby Perkins
My hon. Friend is making a powerful case. Does she share my view that any Budget that is supposed to have us all in it together but leaves the bankers and the super-rich feeling tremendously relieved and the most deprived people in our communities horrified by what they are facing cannot possibly achieve any measure of fairness?
Rushanara Ali
I agree completely. My constituency is situated between the City and Canary Wharf, and although I and many people in my constituency are grateful for the contribution that responsible bankers make through local community work and so on, the reality is that a small but significant minority have brought the economy almost to a standstill. That is not acceptable, and bankers ought to be asked to make a bigger contribution than ordinary members of the public.
Over the past decade, constituencies such as mine have struggled to get to a position in which people can reach their aspirations, and unemployment was high even during the boom period, particularly among graduates. In the current climate the situation is ever more difficult. I do not believe that punishing ordinary families and people who are struggling to make ends meet is the way forward, or that it will help to create the big society that members of the Conservative party claim to want to create. It does not highlight compassionate conservatism. We heard a lot about that before the election, but I see no sign of it. I hope that some of our friends on the other side of the Chamber will reconsider the matter and think about how they can support families in this difficult climate.
Budget Resolutions and Economic Situation
Toby Perkins Excerpts(15 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Huhne
Let me make a bit of progress with the argument. The deeper answer is the profound change that must take place in our economy over the next 10 years, which will also be a great source of growth, jobs and profit. I am talking about the transition of our economy—the third, or green, revolution—to being powered from low-carbon sources. That is potentially as great a shift as some of the biggest changes in our economic history—from water to coal, from coal to oil and from gas to electricity. With each of those fundamental changes of technology, there was a wave of new investment that powered the recovery of a new and very different economy. We can look at the legacy of the rapid recovery in the 1930s from the point of maximum downturn in 1931. That was one of the fastest periods of British economic growth, with the development of new electrical appliances, other light industries and the suburbs around our major cities.
Let me cite some numbers to give a feel for the scale of the potential transformation that we face as a result of the green revolution. Thanks to the ageing of our energy infrastructure, my Department estimates that we will need £200 billion-worth of new investment in the next 10 years. That scale of investment will have substantial macro-economic consequences for businesses in the supply chain and for all those who work in them. I am pleased that my right hon. Friend the Chancellor announced in the emergency Budget, even though the focus was inevitably on averting a fiscal crisis, two measures that will support that investment. The first was our coalition commitment to remodelling the climate change levy and providing a carbon price floor to encourage low-carbon sources of energy, renewables and others. We will consult on that in the autumn. The second was, of course, the commitment to the green investment bank. We will be looking at the scope of the bank through the autumn and we hope to bring forward proposals on that.
Toby Perkins (Chesterfield) (Lab)
A lot of environmentalists were deeply disappointed that there were not more green taxes. Is that just another example of how little influence Liberal Democrat policy has had on what was a classic Tory Budget?
Edward Miliband
That is an extraordinary statement to make on the Floor of the House. A set of commercial negotiations was carried out with Sheffield Forgemasters. The decision was signed off by the permanent secretaries of DECC and the Department for Business, Innovation and Skills as a value-for-money loan, but now the right hon. Gentleman questions that.
The right hon. Gentleman’s explanation is different from that offered by the Chief Secretary to the Treasury, who said that the loan represented value for money, but the Government did not have the money. The Secretary of State is not only wrong to oppose the loan, but confused about the reason why it is not being offered. I am afraid that the Government are hampering the green revolution that we need.
Toby Perkins
Does my right hon. Friend agree that the fact that a Liberal Democrat Chief Secretary to the Treasury came to the House to tell us the decision about Sheffield Forgemasters, and that a Liberal Democrat Secretary of State is supporting that decision today, is just another sign of how the Conservative Government are using the Liberal Democrats as a fig leaf, which will shame the leader of the Liberal Democrats in his Sheffield constituency?
Edward Miliband
My hon. Friend is completely right. He has experience of booting out Liberal Democrats locally—something that will happen in many constituencies at the next general election. It is blinkered short termism: that is the only way to describe what they have done.
What is the assessment of the Budget from a green point of view? Friends of the Earth says that the
“June Budget does little to suggest”
that the coalition will keep the
“promise to be the greenest Government ever.”
That is not a very good start, but I want to reassure the Secretary of State by telling him that there is praise for the Budget from an unlikely quarter. Roger Helmer, a Conservative MEP and a well known climate change denier, quite likes the Budget and says:
“Green lobbyists are whingeing that ‘this is the least green Budget for years’. Brilliant! Well done George. Maybe we’ve come to our senses”.
I have to tell the Secretary of State that for the first Budget in which he was involved to have congratulations from Roger Helmer and condemnation from Friends of the Earth is not a very good start.
The second test we should apply to the Budget is that of fairness. Is it a fair Budget or not? Let us be clear: as well as going beyond the decisions that the Liberal Democrats advocated for the first year, the Budget goes well beyond the pace of deficit reduction that they recommended. To sustain the Secretary of State’s argument, we are talking about not only cuts now, but a much faster timetable. He shakes his head, but the Institute for Fiscal Studies analysis published at the time of the election shows that the Liberal Democrats had set out exactly the same pace of deficit reduction in 2014-15 as we had, but this Budget goes beyond that, with £30 billion of extra cuts in spending and the rise in value added tax.
The question at the heart of the Budget debate over the past 48 hours is where do the cuts fall? Who bears the burden? That is the question that Lloyd George asked in this House years ago. The truth is becoming clearer: this is a regressive Budget, not a fair one. The Chancellor claimed in his speech that the Budget was fair, and I think it important to quote him exactly. These are not my words, but those of the Chancellor of the Exchequer. He said:
“Overall, everyone will pay something, but the people at the bottom of the income scale will pay proportionally less than the people at the top. It is a progressive Budget.”—[Official Report, 22 June 2010; Vol. 512, c. 180.]
That is simply not the case. That was exposed yesterday by the IFS. When one looks at the Budget measures, one sees that it is regressive, not progressive. According to the IFS, as my hon. Friend the Member for Leeds West (Rachel Reeves) said, as a result of the measures in the Budget the poorest 10% will pay four times more as a proportion of their income than the richest. I repeat: four times more.
Simon Hughes
The hon. Gentleman has a good, honourable and knowledgeable track record on the issue, and, as he would expect, in this Parliament I have already met the Housing Minister, the Secretary of State for Communities and Local Government and my friend the Secretary of State for Business, Innovation and Skills to ensure that those points are made. We are just beginning the debate about where the spending cuts must be made, and a coalition of Members needs to put the case for retaining that expenditure which is necessary to pump-prime, drive and incentivise the housing stock change that we clearly need. The other central point, on which the Government have made a commitment, is to introduce the power of general competence to local councils, so that they have much more flexibility over how they address such issues.
Thirdly, on the green agenda, I note the comments that my right hon. Friend the Secretary of State for Energy and Climate Change made about the carbon price, and we await with interest the publication of the proposals to reform the climate change levy. However, I remind him that we ought to reconsider introducing the emissions performance standard, which both our parties were willing to do. Labour resisted it, but I hope that it gets back on the agenda as a way of ensuring that we make progress not just in our country, but throughout Europe.
Fourthly, and more controversially, there is nuclear power, to which the Budget referred not specifically, but indirectly in relation to Sheffield Forgemasters. I made my position clear about nuclear power before the election, and when the initial announcement was made about the Sheffield Forgemasters loan, and I have always believed that the nuclear industry will not have a viable future unless it receives public subsidy. I have never had a theological opposition to nuclear power. I believed that it was the wrong answer, contributing too little to emissions reduction and to the country’s power needs, but in that context the Sheffield Forgemasters loan was inconsistent with a policy of not subsidising the nuclear power industry.
The announcement is difficult for Sheffield and for south Yorkshire, but we have to have a policy that applies from the beginning to the end, and we have to be tough on that. In reality, other countries such as Germany have now introduced a tax on nuclear power stations to make up for the fact that the industry benefits from a carbon price but does not pay for the clean-up of the legacy nuclear waste. There must be economic realism in the nuclear industry. That has been our position, and it has been accommodated in our parties’ agreement.
There is another matter on which I have lobbied the Government but not yet seen anything emerge, and if it could be dealt with in the ministerial winding-up speech that would be helpful. It is about helping with biodiesel that is made from recycled vegetable oil. I declare two interests: I drive a vehicle that uses it; and there is a firm in my constituency from which I purchase it, and which in turn takes it from firms locally. It is a good and environmental product, but the financial incentives for biofuels do not yet encourage the industry to grow. It is an industry of small businesses, it ought to be incentivised but the Treasury loses out because of the wrong incentives as well as inadequate incentives for the sector. I hope that that issue will be looked at, and that we might introduce an amendment to the Finance Bill in order to pick up on that individual and ring-fenced item.
On the Budget as a whole, the right hon. Member for Doncaster North rightly said that I had always assumed that the more natural coalition, had it been achievable, would have been between the Labour party and ourselves. There is no secret about that, but in the end it proved undeliverable on two counts: first, the numbers did not add up, and this country needed a secure, majority Government; and, secondly, the Labour party was not willing to move on key issues. They included political and electoral reform and a fairer taxation system—in particular, taking people on low incomes out of tax.
The measures that commend the Budget are specifically items that were in the Liberal Democrat manifesto, on which I did fight the election. They include, first, linking pensions with earnings. The link was broken by Mrs Thatcher and never reintroduced by Labour, but its restoration next year was committed to in this Budget. Secondly, there is the measure on taking people who have an income of less than £10,000 out of tax gradually, the first wave of which was introduced in the Budget, and which matters not to the absolutely poorest who have no incomes, but specifically to pensioners and working people who have a small income. Thirdly, there is the measure on increasing capital gains tax, because we believe that it should be set at the same level as income tax. There has been a debate among Government Members on that issue, and there is a difference in view, but there has been a move in that direction, which I applaud and recognise.
Toby Perkins
I congratulate the hon. Gentleman on his appointment as the deputy leader of the Liberal Democrats, but I fear it strangely apposite that at the moment he sits all alone on the Liberal Democrat Benches. If he feels that this is a coalition Budget, will he explain how much worse it would have been for the poorest people without the influence of the Liberal Democrats?
Simon Hughes
I am, and always have been, very clear about that issue. When it was obvious that there was no possibility of a coalition with the Labour party, we had the option either of letting the Conservatives become a minority Government or of being in coalition with them. I am very clear that it was better for the country and for the issues that matter to me that we were part of the Government—that we were influencing matters and ensuring that there was a shared programme, not a Conservative programme. I say that completely honestly, and the hon. Gentleman, with a constituency that is in some ways not dissimilar to mine, would expect as much. I have made it my business to battle for the people whom I represent in order to ensure that we end up with a fairer Budget, and a fairer Britain as the outcome. The election, the Budget and the next exercise, the spending cuts, must all be judged on whether we end up with a fairer Britain.
Let me therefore address the remaining issues that follow from that. There has been some press speculation that, because certain items are expensive, they are unaffordable and should be dropped. They include items for the poor, such as the freedom pass and the winter fuel allowance. There is no issue between me and my friends on the Treasury Bench, but the coalition deal is a deal and what has been agreed must stand. There cannot be any unpicking of items in that deal, otherwise the whole thing risks falling apart. There is no suggestion of that from the Government; there is a suggestion from outside the Chamber of changes. However, the deal must be that we go down the committed road. We signed up and the Conservative party signed up, all compromising where appropriate, and that must stand. If there were any suggestion that it change, there would be trouble. I do not think that it will change, because I have heard nothing from colleagues in government suggesting that they want it to, but let us be clear from the beginning: it is a deal, and if it is stuck to, it will last the five years.
I turn to yesterday’s Institute for Fiscal Studies report. The IFS is a respected organisation. It made clear that the Budget as a whole increases fairness, but that if it excluded the matters that were implemented by the Labour Government in the Budget earlier this year it would not be. However, the Budget does not exclude them; it has endorsed and continued them. The right hon. Member for Doncaster North and I know each other well, but the Government have continued with those elements that the previous Labour Chancellor introduced in the routine Budget earlier this year.
Luciana Berger
I thank the hon. Gentleman for his comments but I do not agree with them. My point was that the Conservatives campaigned during the election on a pledge that they would not cut front-line services. That will not now be the case.
Toby Perkins
Does my hon. Friend share my confusion? Have we not been told for the past six weeks that the Labour Government spent too much money? It appears now that we were cutting all the time. Is she as confused as I am as to the policy of the Government?
Toby Perkins (Chesterfield) (Lab)
It is interesting to follow the hon. Member for Bromsgrove (Sajid Javid). There was one thing in the past 14 minutes that I am glad that he acknowledged; otherwise there was little with which I could agree. However, I agreed with the admission that the Budget is ideological and that the Conservative party has delivered the sort of change that it always wanted to make and scrapped the massive improvements that the Labour party made in the public sector. It is not an economic but an ideological Budget. The hon. Gentleman’s honesty, at least about that, does him great credit.
I want to consider the huge and unnecessary gamble that the Chancellor has taken with our economic recovery, and why a genuine growth strategy would enable us to grow our way out of the economic crisis without threatening thousands of people with the dole, and without threatening those who rely on housing benefit or the economic recovery. I shall also talk about the Budget’s impact on my constituents in Chesterfield and Staveley.
First, I shall deal with the myth that the Chancellor had no choice and that the measures were taken out of economic necessity rather than, as the hon. Member for Bromsgrove admitted, political ideology. That is nonsense. The Chancellor’s Office for Budget Responsibility’s report confirms that the borrowing requirement this year was £8 billion less than that forecast by my right hon. Friend the shadow Chancellor in March. Before the Chancellor’s intervention in the Budget, we were on target for the growth forecast for 2011 of 1.25% that the shadow Chancellor had made. The OBR admitted that the shadow Chancellor’s plans for spending restraint over the next four years would have halved the budget deficit by 2014-15, just as he said they would when he delivered his Budget in March.
Uniquely among the main parties, the Labour party is putting forward policies that we campaigned on in the general election a month ago. This could catch on: we could go into elections telling the public what we wanted them to vote for, and then we could come to this place and deliver those policies.
Toby Perkins
My hon. Friend makes a valid point: it probably is not the new politics, but it is something that political parties should perhaps consider.
Hon. Members should remember that the previous Labour Government were the first Government for many years to start paying off the national debt. The stringent financial rules that the former Prime Minister put in place during his long stint at the Treasury put this country into the position whereby we entered the recession with the second lowest debt to GDP ratio in the G7.
Jacob Rees-Mogg (North East Somerset) (Con)
Is it not the case that the only time when the economy was run properly under the previous Government was when they followed Conservative spending plans in their first three years?
Toby Perkins
It certainly is not the case. The hon. Gentleman should remember that in 1997 we inherited hospitals that were in a disgraceful state and where people died of things that they could have been treated for, if only they had got to the top of the waiting list. We should also remember that we inherited schools where the roofs leaked every time it rained. Our children were educated in quite disgraceful conditions. That was the legacy of 18 years of the Conservatives, which is why when they lost, they lost so massively that they were not even credible as a party for another 13 years.
Mr Tom Harris
May I congratulate my hon. Friend on a terrific election result in Chesterfield? Does he share my bewilderment—and, I have to say, amusement—at the efforts by the Chief Secretary to the Treasury and the Business Secretary to claim not only that they were wrong to oppose an increase in VAT, but that they have miraculously transformed VAT from a regressive tax before 6 May into a progressive tax now?
Toby Perkins
I was certainly bewildered by the Secretary of State for Energy and Climate Change’s contribution in opening this debate, and by the idea that when the Liberal Democrats talked about the tax bombshell, what they meant was that VAT was regressive only if it was levied on food, a suggestion that nobody had made and which was never part of the debate. His speech was one of the most bizarre contributions that we have heard over the past three days. I look forward to watching it on iPlayer tonight and reliving the moment, because it is something that will live long in the memory.
I want to talk about the choice that the Labour party made. What we enjoyed under the previous Labour Government was 11 years of stable economic growth. That was the longest period of stable economic growth in this country’s history, yet unlike the Conservatives, we went into recession only when the entire world went into recession. The Conservatives did it differently: they could go into recession when the rest of Europe was in a strong position. It was only the global economic crisis that threw the economy off course under a Labour Government.
Kwasi Kwarteng
Will the hon. Gentleman enlighten me on one thing? What does he think the former Prime Minister and then Chancellor meant when he suggested that there would be no more boom and bust?
Toby Perkins
What he was probably referring to was 11 years of stable economic growth. What he did not foresee was that we would be hit by the biggest global economic crisis for more than 80 years. Of course, nobody foresaw that. There were no Conservative Members suggesting that the ways in which our banks were regulated would lead to the economic crisis. To pretend that you knew that that was coming or that the deficit that has been built up is somehow irrelevant to that is just ludicrous, and no one believes you, so you really must stop trying to treat people like fools when you say that the deficit that has been created was something that happened just because we had a Labour Government—
Mr Deputy Speaker
Order. I ask Members please to refrain from using the word “you”, because that means me, and the hon. Gentleman has just accused me of saying something that I have not said.
Toby Perkins
Please accept my apologies, Mr Deputy Speaker. I shall make sure that I address you and hon. Members correctly in future.
It is right to talk about the choice that Labour made, which was to protect the jobs that people relied on and to prevent an extra 500,000 going on the dole. Labour’s choice was to protect the homes that people had saved up over their whole lives to be able to buy. Labour’s choice was to support industry and bring forward public spending projects to keep the construction industry working when the private sector was sitting on its hands. Labour knew that the price of salvaging those jobs, those homes and those businesses would be an increase in our deficit. We delivered a plan for the recovery, which is working, and a plan for reducing the deficit after the recovery had been secured in the following year. The hon. Member for Bromsgrove told us that we could not keep living beyond our means, but of course we already knew that; that is exactly what the shadow Chancellor was referring to in the previously attributed quote. He made it absolutely clear what our strategy was.
Jonathan Reynolds
Does my hon. Friend agree that there is something deeply disingenuous about the fact that the Conservative party supported our Government spending plans until 2008—before the economic crisis hit home? They believe that we are living beyond our means, but they supported our spending at the time.
Toby Perkins
My hon. Friend effectively anticipates my speech, for which I thank him. He makes a very wise contribution. The reality between 1999 and 2008 was not that the Conservatives were calling on the Labour Government to reduce spending; quite the opposite, they were complaining about all sorts of things that we were not spending enough money on—from police to flood defences and all sorts of other things. Now they sit there and say that we should have known all along what was going to happen. No one can take what they say seriously.
Toby Perkins
Talking of no one taking the Conservatives seriously, I give way to the hon. Gentleman.
Matthew Hancock
The hon. Gentleman referred to the Labour Government’s plans for significant cuts in public spending. Can he give us one single example that they have set out?
Toby Perkins
Yes, as the shadow Chancellor made clear, we would have maintained spending over the course of this year and put in place a different Budget from that of the Conservatives, along with headline measures about what future spending would be. Of course it was too early for us to have a comprehensive spending review; when the Conservatives were in opposition, did they ever do a comprehensive spending review and tell us every line of the Budget they would have carried out? Of course not. That is the reality of the situation.
My hon. Friends have pointed out that under the former Prime Minister the Labour Government led the rest of the world to the solution when the global economic crisis was at its worst. Labour made the choice to protect jobs, as I said. Just as Labour made a choice—an ethical and a political choice as well as an economic one—so the Chancellor has made his choice with the Budget. He did not choose fairness; he chose to gamble. His gamble is based on an ideology that says that the growth of the public sector somehow constricts the private sector, but it is utterly fallacious to suggest that the success of the one has to be to the detriment of the other and that the role of Government is to keep taxes low for businesses and keep out of the way. That is the wrong choice. That is taking a gamble with the recovery that Labour was delivering in a stable and managed way. It threatens our recovery at a time when the economy is still fragile.
The choice to increase VAT is, of course, regressive. When even the TaxPayers Alliance denigrates the policy as hitting the poor, we really have to listen. This will take approximately twice the amount from the incomes of the bottom 20% as it does from the top 20%, and it will stunt growth. That is acknowledged on page 97 of the Red Book, so the Chancellor is introducing a policy that he knows will stunt growth. As a business owner myself, I know that this tax will directly remove 2.5% from the bottom line of my firm if it were not passed on to my customers.
I also know that cuts in corporation tax are not as important as having a market in which one can make a profit. While the VAT cut introduced by Labour in 2008-09 stimulated growth, this VAT increase will take about £300 out of the average family’s pocket at a time when families are crying out for more help from Government, not less. That will have a knock-on effect on business. The Government seem to think that reducing the corporation tax burden, already historically low on businesses, will stimulate growth, without recognising that the environment in which businesses trade is the most important part of making a profit.
Taking money out of the pockets of consumers also takes money out of the pockets of businesses. It increases redundancies and business failures, and it stunts our ability to grow our way out of recession. For the hundreds of extra businesses that will now struggle to stay afloat, the thought of a cut in corporation tax will merit little more than a mirthless laugh. At every level, the Budget stunts growth. Cutting the allowances on which manufacturing firms were relying, and replacing them with a corporation tax cut over the next few years, will result in businesses being less likely to invest and more likely to focus on bottom-line profits.
The starkest aspect of the Budget, however, was a complete lack of a sense that the Liberal Democrats have been a moderating influence on the Tory plans. Where were the Lib Dem influences in this Budget? Seriously, does anyone in the House believe that if the Budget had been delivered by a Tory majority Administration, the Liberal Democrats would have marched through the Lobby and supported it? I will take that as a no. Where was the £2 billion capital gains tax increase? It was less than halved. Where was the commitment to restrict tax relief on pensioners to the basic rate? It disappeared. Where was the mansion tax? It does not exist. Where were the green taxes? How can one justify a £2 billion bank levy that will be compensated by corporation tax cuts for the banks that caused so much damage? Where was the Robin Hood tax on bank transactions, which would have brought in more than treble the amount?
Toby Perkins
I am afraid that I do not have time.
This was a Tory Budget without a shred of Lib Demery about it. I will applaud the hon. Member for Colchester (Bob Russell) if he sticks to his guns and refuses to vote for it. The Chancellor had a choice: he made the wrong choice, and we will all pay a heavy price for years to come.
Mr Deputy Speaker
Three Members wish to catch my eye, and I intend to call the winding-up speeches at half-past 5. I am sure that Members will wish to show their characteristic generosity in sharing the time.
Kwasi Kwarteng (Spelthorne) (Con)
I am very grateful to you for calling me to speak in the debate, Mr Deputy Speaker, and I feel privileged to follow my hon. Friends the Members for West Suffolk (Matthew Hancock) and for Bromsgrove (Sajid Javid), who outlined in their compelling speeches why the Budget is incredibly important. The issue that we have not really focused on enough is the context of the Budget. We all—even Opposition Members—accept that the deficit is too large and that at some point in this Parliament we have to deal with it. The big point of contention between the coalition Government and the Opposition is how soon we should grapple with the deficit.
We forget the fair hopes that we had in 1997 when the then Chancellor of the Exchequer produced his first Budget, entitled “Equipping Britain for our long-term future”. That was the message that he wanted to send. That financial statement and Budget report came out in July 1997, and it was in that report that he famously stated his golden rule:
“The golden rule means that over the economic cycle the Government will borrow only to finance public investment and not to fund current expenditure.”
So far so good. The second rule was that he would maintain stable public finances—a requirement for our long-term economic stability.
Toby Perkins
The hon. Gentleman will be aware that those rules were changed only in the face of huge, global economic crisis. His party supported the change when the economic crisis struck, so was it incorrect to do that?
Kwasi Kwarteng
The hon. Gentleman will remember that the second rule was that
“public debt as a proportion of national income will be held over the economic cycle at a stable and prudent level.”
The then Chancellor concluded the 1997 report by stating:
“These rules will ensure that borrowing will be kept under firm control.”
Everyone applauded him. He was talking about prudence; he was the Iron Chancellor and very much the hero of the hour. In the same report, he referred to the recession of the early 1990s. His conclusion was that the public sector borrowing requirement rose to a peak at 7% of GDP and he said:
“The Government regards it as important that no similar risks should be taken with fiscal policy again.”
That was the position of the Labour party in 1997, and in 2006 Labour was repeating the same mantra and the same pie in the sky ideas. It was saying that
“public sector net debt is projected to remain low and stable over the forecast period”.
In 2007, it said:
“The Budget 2007 projections for the public finances are broadly in line with the 2006 Pre Budget Report”,
and so on.
Justine Greening
My hon. Friend is absolutely right. Let us just talk about the Office for Budget Responsibility. I still cannot quite work out whether the Opposition support it. I am happy to take an intervention from the shadow Secretary of State to clarify that. We are none the wiser.
On the point about changing forecasts, and the OBR forecast pre-Budget and its forecast on the Budget, let me be clear about what it said about comparing those two forecasts. If the Opposition have any shred of credibility, I hope that they will pay attention to this. At the bottom of page 94 of the Red Book it says it is
“misleading to interpret the difference between the pre-Budget and Budget forecasts as the economic impact of the Budget measures.”
The Opposition want it all ways. They want to quote some figures and, as my hon. Friend says, conveniently forget the key figure, which showed that the structural deficit was worse. They want partially to welcome it warmly, but to ignore what it says about the impact of comparing false statistics. They do the debate, which is important for people throughout the country as we go through an incredibly difficult process, a real disservice, because the British public need them to play a role, which should be for them as the Opposition to come up with some constructive comments. It would have been better if they could have come up with some kind of an alternative, but we have had none today.
We need take no lectures from the Opposition about fairness. This is the party that did a pensions raid. This is the party that came up with the 10p tax fiasco. This is the party that widened the gap between rich and poor. This is the party that told us we had an end to boom and bust. It is no wonder the savings ratio in Britain went down. If people had listened to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown)—who knows where he is now?—they would never have thought that they needed to save for a rainy day. The British people get it, because they have started paying down their debts, but the Opposition parties have totally missed the point. They seem to be living in a post-election bubble, and they have not taken a moment even to reflect on what has happened or on the verdict of the British voters, let alone to reach the stage at which they might apologise for the mess that they handed over to the coalition Government. The two parties in government have taken the decision that they need to work together for the British public’s interest in order to find a resolution to our crisis, and to get ourselves out of this financial mess.
Toby Perkins
The hon. Lady has referred to the election result a couple of times, but we remember the election result in 1997 after a long period of Conservative Government, when that party lost so badly that it was out of power for 13 years. If people were so dissatisfied with the Labour Government, how come the Conservatives could not even secure a majority?
Justine Greening
The hon. Gentleman, if he is not careful, might be projecting the political fate of his own party. With this Budget, we want to ensure above all else that we start addressing our country’s dire financial situation. By the end of this Parliament, we will have started to return to a sustainable set of public finances which puts us in a position to make sure that our debt is more affordable. He might think it acceptable that the average taxpayer pays almost £1,400 in interest to service the debt that his party racked up, but I do not, and over a period of years we want to get into a position where our debt is affordable once again. The process will not be quick; it will take us time, because of the gravity of the situation.
Let us make no mistake: we have no time to wait. Before the election, we had only to look across the water at some of our European partners to see what was happening to their countries. I shall draw an analogy, because in Spain the equivalent of the bank manager—the markets—said that they simply were not willing to lend to that country at the same rate of interest as previously. That debt now costs Spain’s taxpayers millions of pounds more in interest than it did when their credit rating was better. Greece has gone one step further and, effectively, has the bailiffs knocking on the door.
Our Budget was all about ensuring that we do not reach the position where the bank manager says that he is going to raise interest rates on us. We as a nation cannot afford it, and British households cannot afford it. We definitely do not want to reach the stage where we have the bailiffs knocking on the door, which is what has effectively happened in Greece. I am concerned, however, because in spite of everything that has happened in our country, including the election and the state of our public finances, we have still not heard a meaningful debate from the Opposition.
Budget Resolutions and Economic Situation
Toby Perkins Excerpts(15 years, 7 months ago)
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Margot James (Stourbridge) (Con)
May I congratulate my hon. Friends the Members for Dewsbury (Simon Reevell) and for Bedford (Richard Fuller) on their maiden speeches, and also my hon. Friend the Member for South Northamptonshire (Andrea Leadsom), whose maiden speech, sadly, I missed? I shall have to catch up with it in Hansard tomorrow. I also congratulate any other Members who made their maiden speeches this afternoon.
It is said that “You can’t make a silk purse out of a sow’s ear,” but I must congratulate my right hon. Friend the Chancellor of the Exchequer for doing just that. What a sow’s ear it was, however. Let me revisit the legacy we have inherited from the Labour party. We are borrowing £1 for every £4 that we spend. National debt is running at £3 billion per week. We have a budget deficit of £155 billion, which is 10% of GDP.
As if these headline statistics are not bad enough, there has also been the corrosive effect of some of the shibboleths that the previous Government instilled in our country. My hon. Friend the Member for Esher and Walton (Mr Raab) has just mentioned the fact that public spending grew at a dramatic rate under the previous Government, from less than 40% in ’97 to 48% in 2007. They established the lie that for every social ill—for every problem—there must be a Government solution, and that every Government solution must carry an ever-rising price tag.
The right hon. Member for Birkenhead (Mr Field) has just taken on the dramatic challenge of reducing poverty in our country. He could give a very good answer to the question the hon. Member for Telford (David Wright) asked of the previous speaker about where we might have seen some cuts. The right hon. Gentleman described a situation in his constituency, where children were being sent to school with nothing to eat and having had no breakfast. The Government’s response was instantly to set up a breakfast club—paid for from hard-pressed taxes on people on low pay—thereby undermining the parents who struggle alongside other parents who think it acceptable to send their children out of the house in the morning with nothing to eat. That undermines those parents who struggle and who do provide for their children and do bring them up properly. That is just a small example of additional expenditure that is merely undermining family life.
There is nothing progressive about taxing the next generation for our out-of-control consumption. There is nothing progressive about putting our recovery at risk by continuing the borrowing, and the spending that will inevitably result in higher interest rates and higher mortgages and more people out of work, which all of us in this House are—
Toby Perkins
The hon. Lady mentioned higher interest rates and, of course, her party knows all about that because it was under a Conservative Government that we had record repossessions and interest rates went up to 15%. Is she aware that interest rates under the Labour Government have been lower than at any other time in history?
Margot James
Interest rates reduced partly, of course, thanks to the excellent management of the economy by the former Chancellor of the Exchequer, now Lord Chancellor and Secretary of State for Justice, and also partly because of our exit from the exchange rate mechanism, which I feel all of us on the Conservative Benches were only too relieved to see at the time.
If I may return to the present day, I was pointing out that there is nothing progressive about some of Labour’s policies, and with the interest on our debt heading for £70 billion a year by 2014, we cannot sit here and do nothing. That really is the ultimate hypocrisy given Labour’s fiscal plans, of which we are all aware, and which were revealed in the previous Budget. Some £59 billion-worth of spending cuts and tax increases were made public, but where they would hit was never made clear. My right hon. Friend the Secretary of State for Health was able to unearth some of the detail through freedom of information requests. Many trusts throughout the country revealed exactly where those cuts were going to be made. In my area, the West Midlands strategic health authority was going to make them by ordering cuts in front-line services, hospital beds and the number of nurses and doctors. So we in the west midlands were clear about the nature of some of the cuts that were going to be on order had Labour stayed in government.
Given that we are faced with the terrible legacy that I have just outlined, I applaud the Chancellor for his many acts of brilliance in the Budget, which I shall outline, starting with those concerning pensioners. I am connected with groups that represent older people, and have been for many years. I think that the late, great Baroness Castle of Blackburn would have been very pleased to see at last the restoration of the link between pensions and earnings, for which she long campaigned, but she would have been very sad that after 13 years of Labour Government it has taken a Conservative Chancellor, in his first Budget, to bring that sense of hope back to our pensioner community. Indeed, he has gone one step further by introducing the triple lock of ensuring that, whichever is the greatest of the rise in prices, the rise in earnings or the figure of 2.5% will be our tribute to pensioners, as a minimum, year on year.
On the tax proposals, I can say from the bottom of my heart that none of us wants to increase tax. The VAT rise, which I feel is the legacy of the Labour party, is not such a regressive tax according to the Institute for Fiscal Studies, which makes a greater study of these matters than I do, given that the poorer population spends a greater proportion of its income on items that are exempt from VAT. That is a point worth remembering. I am very pleased that the low paid are being taken out of income tax to the tune of 800,000 people a year, and I acknowledge the presence of the Liberal Democrats in our coalition as the authors of a number of these policies. I am delighted that low-paid people are being helped in that way.
I was one of the Conservative Members who were deeply concerned about the prospect of a rise in capital gains tax, and I am very impressed by how the Chancellor has gone about increasing that tax in a way that protects business assets, protects people at the lower rate of income tax and assigns a more modest increase than we were all expecting to those paying tax at the higher rate. We can all be very pleased by the outcome of the concerns that we expressed on that subject.
I was also delighted to see protection built in for capital spending, which has been really slashed in the past 12 months. I have been lobbying on behalf of the hospice in my constituency, which had received approval for capital funding, not all which was funded—that is a familiar refrain. I was delighted to hear last week that it had received approval in full for its funding. I shall meet the Minister for Housing on behalf of Dudley council to press for the completion of funding for new council housing in the Quarry Bank ward of my constituency, which was promised and partially committed to in funding terms. I was very pleased to see that signal in the Budget.
None of us likes freezes and none of us likes the idea that someone living on benefits will receive a cut, but in the current climate it cannot be right that families with an income of up to £80,000 a year benefit from tax credits. I applaud the Chancellor for bringing in limits for housing benefit, which has risen out of control over the past 10 years.
Overall, I welcome the Budget. Despite some of its measures, which we deeply regret having to take, it rebalances the public and private sectors—not before time. The reduction of corporation tax to 24% by 2012 and its reduction to 20% for small and medium-sized enterprises is very welcome indeed. There are many SMEs in my part of the world, so that measure is marvellous. Manufacturing can continue to claim full allowances for depreciation, albeit over a longer period, and that is welcome news for the manufacturing sector.
I welcome the review of public sector pensions. We will see the detail in due course, but the £25 billion cost to the public purse of unfunded public sector pensions is a great worry. There is deep unfairness. The gap between public and private sector pensions is daylight robbery from people struggling on lower-paid jobs in the private sector. It must be righted. I was horrified to hear the general secretary of Unison say that the Government
“won’t know what has hit them”
if they attempt pension reforms. That bullying defence of vested interests flies in the face of the fairer society that, through the Budget, we are trying to build.
Coming from the west midlands, I warmly welcome the commitment to tax incentives for employment outside London and the south-east. That rebalancing of our economy is long overdue.
The best way to support the crucial public services that we all want—on both sides of the House—is to put them on a sound financial footing, something the previous Government so miserably failed to do. It falls to us to put that vision into practice.
Chris Heaton-Harris
It certainly contributes to tax income, but if we were to rely on only the public sector, an ever diminishing circle of tax income would come into the Exchequer and, in the end, we would not be able to pay for anything.
The way out of this mess is undoubtedly to boost and revitalise the private sector, so I welcomed the announcements in the Budget on regional job creation and the measures to cut waste and unaffordable cost from the public sector. That is exactly what our European partners and competitors are doing. Jean-Claude Trichet, the president of the European Central Bank, told the European Parliament—my old place of work—that firm control of Government spending and tax policies is essential to restore the confidence of households, businesses and investors. He said:
“We are in a situation where a lack of confidence is operating against recovery. A budget policy which you”—
if he were addressing the House, I assume that he would mean Labour Members—
“might describe as restrictive from a certain point of view is in fact a policy which we would call confidence building.”
He went on to say that if public finances continue along an unsustainable path,
“households are going to be frightened. They will not spend or consume as much, companies will not prepare for the future and investors will know they are going to have difficulty getting a return.”
Those investors have choices: they do not have to choose the United Kingdom or, indeed, Europe, as other markets are becoming increasingly attractive. France and Germany—in fact, nearly all our major competitors—have taken tough measures to sort out their public finances, and make their economies strong and attractive to future investors. We would weaken the chances of prosperity for our children if we did not do the same.
As the Chancellor noted, we need to increase the incentives to work. Welfare costs under the Labour Government rose by nearly 40 per cent., but there are still more than 5 million people on out-of-work benefits. Youth unemployment is a massive problem—1.4 million people under 25 are unemployed—and Labour’s spending to alleviate poverty failed, and has fractured society. Many people thought that the previous Government built barriers based on welfare payments that disincentivised individuals from finding a job. At the same time, those who are working pay more in tax, but why should they work hard to do the right things for themselves, their communities and their families when people who choose not to do so seemingly have everything that they do? It is a terrible disincentive.
I am a bit of a supply-side economist. I do not like tax rises, but anyone who looks at our structural deficit will understand that we need to remove as much of it as we can as quickly as possible. I will swallow my pride on the capital gains tax rise, but I note that it is a voluntary tax—people can sit on their hands and not realise the value of their shares, their property or whatever it might be. I certainly welcome the cuts in corporation tax, but I accept that the cuts in departmental budgets will be tough. I suggest that there is a great deal of waste to remove, especially from middle and upper management in some Departments. I recently received a letter from a constituent who works for the Vehicle and Operator Services Agency, who said that the directors, who were all based in the Bristol headquarters, travelled to Edinburgh for meetings, for no reason other than that it was a nice place to go.
Toby Perkins
The hon. Gentleman is raising an issue that many of his colleagues have raised, and said that somehow under a Labour Government there was profligate, wasteful spending that could easily be tidied up—[Interruption.] They all agree, and I am glad to hear it. Why, therefore, have the Government cut not that wasteful spending but the future jobs fund, thus pulling the rug from under the economic recovery? Why has the Sheffield Forgemasters loan been cut? Why do they not cut this waste, rather than all the things that will hit the poorest people most?
Chris Heaton-Harris
If only we had the money to spend on some of those projects, it would be wonderful but, unfortunately, your party spent it all. If you live in Northamptonshire, you can see areas—
Financial Services Regulation
Toby Perkins Excerpts(15 years, 8 months ago)
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Mr Osborne
Well, it was a very good maiden intervention by my hon. Friend. I find it strange that the Labour party does not want to engage in this debate. One would have thought that the Labour party was interested in how banks will be regulated, in how we learn from the mistakes and what went wrong, and in the structure of banking in the future, but the shadow Chancellor has set it against that. However, individual Back-Bench Members of the Labour party will probably be more interested in this than their Front Benchers. Of course, by setting up an independent commission and, indeed, by having the debate in the Treasury Committee and on the Floor of the House, those contributions will be heard.
Toby Perkins (Chesterfield) (Lab)
The Chancellor says that he is keen to learn the lessons from the economic problems that happened. Is one of those lessons that he was wrong to say that the Government should have let Northern Rock fold?