Finance (No. 3) Bill

Alec Shelbrooke Excerpts

Tuesday 26th April 2011 Commons Chamber

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I welcome the Finance Bill in so many ways, many of which are to do with creating growth and jobs. The former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), noted in his comments after the Budget that it will create growth, so it is interesting that some of the newer members of the shadow Cabinet on the one hand praise him for the things he said but on the other ignore his praise for a Budget that creates growth.

The Budget is helping to rebalance the economy, which is never an easy thing. We need to get more from private sector, as we have been over-reliant on the public sector. An important point that is often missed when discussing the private and public sectors and whether the Government should spend more money here or there is that the Government do not have any money. It is not our money; it is the public’s money. It is the money we take off people and businesses and from trading throughout the world. It is not our money for us to do with as we like. It is the public’s money, and we should ensure that we deal with it responsibly.

[Mel Stride (Central Devon) (Con)]

I am following my hon. Friend’s powerful argument closely. Will he add that, to the extent that we go into debt, it is actually our children’s and grandchildren’s money?

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[Alec Shelbrooke]

Absolutely. My hon. Friend makes an important point. That leads me to the problem, which I had not intended to mention, of how indebted the nation was personally. Indeed, my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) made the point that a total private sector debt that is 450% of GDP is something to fear and shake at.

One reason I believe we did not see the increase in the public’s spending in certain areas despite the historically low interest rates—the Bank of England brought interest rates down and I think we understand why—was because people saw the opportunity to use the extra money they had in their pockets from the reduction in their mortgage payments to start paying off credit card debts, although many were on fixed-rate mortgages. That money was not poured back into the economy as was originally envisaged because people saw the writing on the wall and started to reduce their personal debt, and the Government should take a big lesson from that. We need to get debt down if we are to sustain future growth. We talk about interest of £50 billion a year on £1 trillion-worth of debt, but that does not mean anything to people because those numbers are huge. However, when we tell them that £120 million is being given to foreign nations every day because of the money we have borrowed, they start to realise the situation we face.

We all face such situations in our constituencies, where certain services are being cut—there is some politics involved, but that is not my point—and local councils need more money, which they cannot have because of the situation we are in. People realise that rather than going to foreign nations, that £120 million could be used to go some way towards addressing, for example, the closure of a leisure centre in my constituency that is losing £100,000 in a year.

That is why we needed to rebalance the economy. We became far too reliant on public debt and public money—public money that comes from private money—and we cannot keep magicking public money out of the air, because in the end it leads to hyperinflation. Indeed, the shadow Chief Secretary to the Treasury, the hon. Member for Wallasey (Ms Eagle), made some link, which I could not follow, between our policies and the rise of the far right in the 1930s, which in turn led to the second world war. Hyperinflation certainly played a big role in nationalism among Governments, however, and it came about precisely because of the economic circumstances that we were moving towards recently.

I take issue with the hon. Lady when she says that we are attacking ordinary hard-working people. That is, quite frankly, a disgraceful comment to make. There is not a person on either side of the House who deliberately wants to attack the ordinary hard-working person, so let us just put down a few facts. We have just brought in an income tax cut for 23 million people and taken almost 1 million people out of income tax altogether. Let us compare that with doubling income tax for the lowest paid in society.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

indicated dissent.

[Alec Shelbrooke]

But you cannot deny that your Government doubled income tax for the lowest paid in society and destroyed pensions—not you, Mr Deputy Speaker, but the previous Government. The previous Government destroyed pensions, leaving many people whom we would class as the most vulnerable in society to take their pensions with fear and trepidation. At least we have brought in the triple lock on pensions, meaning that people should never again get the 75p rise in their pension.

[Matthew Hancock (West Suffolk) (Con)]

In addition to the facts that my hon. Friend is bringing to bear in this debate, is it not shocking that the amount that the Government have borrowed only over the past year is equivalent to more than £2,000 for every family?

[Alec Shelbrooke]

Again, that illustrates my earlier point: when the figures are brought down to a smaller level, people can understand their full impact and the state of the nation’s finances. When I compare that to our personal finances, I say to people, “For every £1 we’ve spent, we’ve borrowed 25p. How long would your household finances survive with that sort of economics?” They simply would not. Indeed, the increase in private debt and in people’s credit card debts, with some even committing suicide because they used credit cards to pay off credit cards, is a lesson that Governments should learn.

Let us look at the growth and debt figures. Our debt is 10.4% of GDP, Spain’s is 9.2% and Portugal’s is 9.1%, but I do not see our interest rates on the gilt markets being as high as Portugal’s. My hon. Friend the Member for North East Somerset made an excellent point when he described the percentage rates being below RPI by 300 unit points, or 500 unit points below normal. That shows that a credible plan had to be put in place.

I find it distressing when we get into this argument with the Opposition, who say, “You don’t need to do all this.” I will give the House an analogy. For 13 years, the previous Government fed everybody chocolate and burgers, and every person in this country now weighs 35 stone. Along comes the doctor, in the form of this Government, who says, “I’m afraid if you don’t lose at least 20 stone you are going to die very young and it is going to be disastrous for you.”

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Your doctor said that?

[Alec Shelbrooke]

Yes, probably! I am in a rotund position to say this, and I certainly speak with a certain authority on these matters, but it is never easy to lose weight, as indeed I can testify. I am getting married in a month’s time—[Hon. Members: “Hear, hear!”] Thank you. I am desperately trying to lose weight, and it is not easy, but it is never easy for someone if the previous lot who fed them when they were trying to lose weight say, “Go on, have another bacon sandwich, it won’t do you any harm. Have another chocolate. We’ll pay for that on the credit card by the way, which we’ve nicked off you.” But seriously, if we do not get the economy under control, we will find that it leads to the situation that we see in Portugal.

What does that mean to the public? The Opposition have attacked the Government and said that they have not done anything to protect people, but what would higher interest rates do to people? We have had an interest rate of 0.5% for well over a year. We used to think that 3% or 4% was a low interest rate when the Bank of England maintained it at that level for a good period of the last decade. If the interest rate went back to 4% in the next six months, what effect would that have on the people of this country? Having spent a great deal of time with interest rates at an historically low rate, they have learned to live within those means. We do not have the option to go back to 4% interest rates—that would be a disaster for hard-working families. Ironically, it could increase the pound’s value against the dollar, reduce the oil price and reduce petrol prices—I suppose there is a quid pro quo to everything—but let us not get away from the fact that going back to what we then thought were historically low interest rates would be seen as an absolute disaster.

I get annoyed with the twisting of the Keynesian argument when people say that in times of recession Governments should pour money into an economy. That was only half the truth: the other half was to invest it in capital investment.

[Ben Gummer (Ipswich) (Con)]

My hon. Friend misses the other half of the other half, which was to accrue a surplus in a time of plenty.

[Alec Shelbrooke]

My hon. Friend pre-empts me, because I was going to say that the Swedes put aside 2% of gross domestic product during the good times and the Australians paid off their national debt in the last quarter, leaving them well placed to deal with these issues.

People often say that the new deal in America, with its Keynesian attitude, dug the American economy out of its hole. No, it did not—that was achieved by the second world war and the fact that America was able to lend money and sell armaments to the rest of the world while not having its mainland invaded. That put the Americans in the economic driving seat, from which they have never looked back.

I want to talk about fuel prices. The Opposition were going to add another 5p to the price of petrol. I know that it is difficult to prove a negative. If we say to people, “We’ve cut 6p off a litre of petrol,” they will say, “No, you haven’t—you only cut a penny,” because if they are not paying that 5p it is difficult to prove it to them. However, at least we have done something to help, and we have to pay for that somehow. We cannot just go on printing money and saying, “It doesn’t matter. It’s the Government’s money—we’ll supply it, don’t worry about it,” because that completely misses the point and gets us into these problems. Under the previous Government, fuel prices rocketed because of taxation; under this Government, fuel prices have gone up because of the oil price, over which we do not have influence. If we are to believe what is said, we may have reached peak oil. We could have a discussion for three hours about whether that is so, and people would say, “Well, more oil comes online because at the current high oil price it becomes more economical and there is plenty of oil out there—it isn’t going to run out.” However, the key to that argument is that it relates to the current oil price. Let us not forget that the oil price is controlled by the oil traders and speculators, and if they believe that we are at peak oil, that oil price is here to stay. We have tried to cushion the impact and help hard-working families, and it is pretty cheap for Labour Members to snipe at that.

Drawing on the comments by the shadow Chief Secretary to the Treasury, at the same time as the argument that we should try to reduce our carbon emissions, we hear that we should not build any nuclear stations or put any subsidies into moving forward with nuclear power. We have seen an absolutely terrible and disastrous event in Japan—something that shocked the world and daily covers the newspapers, and still gets talked about constantly, with Russia now making criticisms. As far as I am aware, that nuclear reactor has not killed anyone. It is funny how quickly people completely forget about the 20,000 people who died in the tsunami: the real human cost. But no, they focus on a nuclear power station hit by the third biggest release of energy the world has ever seen and a 30-foot tsunami doing 60 mph, and everybody says that that is why we should not have nuclear power. Nobody adds that more than 20,000 people have been killed by this natural disaster. Let us get some perspective. We know that nuclear power may not be the best way forward, but it is the best way forward at this moment. Until we develop the technology so that we can get to nuclear fusion and perhaps some better green technologies, these are our options and this is what we face. We cannot keep saying no to everything.

The Opposition always want it both ways. They want to cut the fuel price, but they do not want to tax oil companies. They want the banks to lend more, but they want to tax them so much that they would leave the country. They want to reduce carbon and to have secure energy, but they do not want to go nuclear. They are a joke. Their speeches vary from Member to Member. Some could be on this side of the House, some could be old Labour and some could be new Labour. I do not know what their policy is, but the blank sheet of paper is certainly something that they are all sticking to vigorously. We have seen very little in the local election campaign except for criticism of the Government.

[Jim McGovern (Dundee West) (Lab)]

The hon. Gentleman speaks about nuclear energy and fossil fuel energy. Does he have an opinion on the Scottish National party’s view on nuclear energy?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The hon. Gentleman must sit down. He has asked his question. Members should not just walk into the Chamber and intervene.

[Alec Shelbrooke]

I am not aware of the SNP’s policy. It may have escaped the notice of the hon. Gentleman, but I stand here as a Conservative Member of Parliament.

I have a final plea to the Minister. I know that there are problems with the European Union interfering in all aspects of alcohol and that we cannot do certain things, but can he look at putting higher taxation on non-draught beer? He may have done so already and it would be interesting to hear about that when he sums up. That does not involve saying that if beer is sold in a supermarket it will be taxed more, which brings competition law into play, but just that draught beer will not be taxed as much as other beers. The reason for raising tax on non-draught beer is that draught beer is served in pubs and publicans have a responsibility to ensure that people do not drink out of control, because they are licensed and controlled. I think that that idea would go some way towards countering the binge drinking problem. It may be that we cannot do that under European law, but I make the plea to the Minister. I will be interested to hear whether it is something that he has considered.

I support the Bill and believe that it is the only way we can secure growth. It is an intelligent and credible way forward that, frankly, is not just trying to get a good headline in The Guardian, which the shadow Chancellor seems keen on.

Oral Answers to Questions

Alec Shelbrooke Excerpts

Tuesday 22nd March 2011 Commons Chamber

[Danny Alexander]

I did indeed meet senior retailers from the British Retail Consortium and we discussed a whole range of issues in a private meeting. If the hon. Gentleman is interested in the consortium’s views, he should listen to what its director general said on 20 October, the day of the spending review. He said that delays in public expenditure cuts

“would just store up more pain for later, risking increased borrowing costs, higher taxes and more job losses.”

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Which does my right hon. Friend think is the lesser evil: a rise in VAT that does not apply to food or children’s clothes, or taking almost 1 million of the lowest paid workers out of income tax altogether?

[Danny Alexander]

I certainly think that our Government have got their priorities right when it comes to lifting the burden of income tax on low-income workers. The increase in the personal allowance by £1,000, which will come into effect in April this year, will ensure that 880,000 low-income workers will no longer pay income tax. Furthermore, 23 million basic rate taxpayers will see a tax cut of £200 next year.

Budget Responsibility and National Audit Bill [Lords]

Alec Shelbrooke Excerpts

Monday 14th February 2011 Commons Chamber

[Justine Greening]

My hon. Friend makes an excellent point. We cannot allow the Treasury to be judge and jury. That was the problem under the last Government. The Institute for Fiscal Studies said recently:

“If an OBR had been in existence over recent years it might have discouraged Gordon Brown from persevering with fiscal forecasts that most independent analysts thought over-optimistic from 2002 onwards.”

We believe that the OBR can have a real impact on the Government’s financial and fiscal management.

We are clear about the fact that we need to put our country’s public finances back on a sustainable footing. Both the IMF and the OECD went from issuing warnings and cautions about the UK’s economy and public finances to describing the measures introduced by the coalition Government as “essential” and “courageous”. Only a couple of weeks ago the Secretary-General of the OECD urged the British Government to stay the course, and we will. Our bold action has taken Britain out of the financial danger zone, but we must not forget that none of this would have been possible without the crucial first step of increasing the credibility of our fiscal framework. The Bill will put on a statutory footing our reforms of the way in which fiscal policy is conducted in this country.

Let me remind the House of the origins of the Office for Budget Responsibility. Within a week of taking office, we had set up a new independent body to return credibility to official forecasts. Until then, the final decision on official Government forecasts had always been made by the Chancellor and his advisers—one of whom is now shadow Chancellor—rather than by independent experts. Over the past 10 years, the last Government’s forecasts for growth in the economy have been out by an average of £13 billion, and their forecasts of the budget deficit three years ahead have been out by an average of £40 billion. Unsurprisingly, those forecasting errors have almost always been in the wrong direction.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

The transparency that the Bill brings to finances is part of an overall package of transparency. My hon. Friend mentioned budgets that have overrun. Does she agree that the Bill will help to prevent Departments from losing control of their budgets in the way that was described recently by a senior civil servant?

[Justine Greening]

My hon. Friend is right. The fact that, for the first time, official forecasts will be prepared by a body that is independent of the Treasury is critical. It will not only return credibility to the assessment of whether the Government are on course to meet their fiscal mandate, but will make that more likely to happen. I believe that Governments will be reticent about introducing policies that seem to take them off course. There is a clear distinction between the responsibilities involved. The fiscal mandate and the policies will continue to be determined by Ministers. It is not for the OBR to do that; what it must do is assess the economic and fiscal forecasts in the light of those policies, and in the light of their likelihood of meeting the fiscal mandate.

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[Alec Shelbrooke (Elmet and Rothwell) (Con)]

In this debate on the Bill and the Office for Budget Responsibility, I would like to focus on the word “responsibility”. Interestingly, Members in other parts of the House have focused on the downgrading of the growth forecast from 2.6%, to 2.3%, to 2.1% and possibly lower, but at no point has it been said that this allows the Chancellor to ensure that we have a Budget that is based on facts rather than on what he would like the growth figures to be. That is the problem of previous years that led to a bunker scenario.

[David Rutley (Macclesfield) (Con)]

I wonder whether my hon. Friend has noticed that the Institute for Fiscal Studies has said:

“If an OBR had been in existence over recent years it might have discouraged Gordon Brown from persevering with fiscal forecasts that most independent analysts thought over-optimistic from 2002 onwards”.

[Alec Shelbrooke]

I am most grateful for my hon. Friend’s intervention, which makes my point. If the OBR had been there in the past, it would not have been possible to proceed with the bunker mentality that I mentioned. Alternatively, the Chancellor could still have moved forward with the same forecast, but everybody would have known exactly where the blame lay and got rid of the arguments that we hear time and again whenever we talk about the horrific financial mess that this country is in—the chorus from Labour Members saying, “It’s the banks, it’s the banks.”

[Mr Bain]

It is!

[Alec Shelbrooke]

My point is proved by that sedentary intervention. Labour Members think that the whole financial crisis is down to the banks.

There is no doubt that the banks contributed to the global recession, but there is equally no doubt that this country was one of the worst placed countries in being able to deal with the downturn. Let us not forget what a structural deficit is. Again, I see Opposition Members shaking their heads, completely in denial of the fact that this country was living way beyond its means. One does not rack up a £1 trillion debt in the good times if one is acting sensibly. While £120 million a day in interest is going to foreign nations, we see councils around the country, especially Labour-run councils, cutting front-line services that impact on the public and trying to blame the Government, yet never mentioning what we could have done with that £120 million a day. We have to get a grip on the economy.

I want to return to the OBR, because I am conscious, Mr Deputy Speaker, that you have been trying to keep the debate on track. Let us consider the name of this body —the Office for Budget Responsibility. “Responsibility” is a word that has been lacking in the governance of this country and its fiscal policy, not only in the Treasury but, as we recently learned from senior civil servants, in other Departments that lost control of spending. We in this House have to be responsible and move things forward.

[Alison McGovern]

The hon. Gentleman rightly says that we should be cautious. How successful does he feel that previous attempts to add caution to Budgets were? The National Audit Office has previously examined the assumptions made by the Treasury. For example, it was assumed in the March 2010 Budget that GDP growth was 0.25% lower than it really was. Would he like to comment on how those previous attempts at caution might feed into the OBR’s future work?

[Alec Shelbrooke]

As the hon. Lady suggests, previous forecasts and attempts at caution came from many different angles. The public will recognise that the OBR is giving us a proper set of figures that can be relied on. If the Chancellor of the Exchequer then ignores those figures and ploughs ahead, not only would the calls from the Opposition be deafening but the public would know that the Chancellor was acting against their interests.

[Matthew Hancock]

Does my hon. Friend know that in 1995 the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) called for a panel of independent forecasters to express their views on public finances? Does he agree that it is a great shame for the nation that the right hon. Gentleman did not act on that when in government, because it might have meant that there was restraint and, in turn, that he would not have left this country in such a terrible mess?

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[Alec Shelbrooke]

I am grateful for that intervention. Needless to say, one of the very first things that our Chancellor of the Exchequer did was to give away the forecasting power to an independent body so that our statistics be relied on. This is about not just public faith in the statistics but the faith of the money markets internationally. That is why the forecasts and credit ratings of this country have been upgraded since the emergency Budget, and secured since the Government laid down a clear, responsible fiscal policy on how they were moving forward. These are highly important matters.

Like many people, I am sure, I am sick to death of the cherry-picking by Labour Members. Stopping that taking place strengthens the case for the Office for Budget Responsibility. The hon. Member for Glasgow North East (Mr Bain) told the House about GDP figures between 1997 and 2010, when Labour left office, but he never mentioned that the private finance initiative was taken off the books. That meant that huge amounts of public debt and public spending were not linked in to those GDP figures because of a fiddle done with the statistics. That cherry-picking must, and will, stop under the Office for Budget Responsibility.

We are told that forecasts can change and that it is therefore not the fault of the previous Chancellor that we are in such a mess. I would like to have seen the forecasts that were made for the price of gold in 2000, when it was at its lowest level ever. Was everybody saying, “It will just drop further and further, so sell the lot now”? I very much doubt it. When things go wrong, it is too easy for the Opposition to say, “It wasn’t our fault—forecasts change.” We now have a Chancellor of the Exchequer who has taken the bold step of passing responsibility to the Office of Budget Responsibility and has put together a Budget that is based on realistic figures rather than what he would like them to be, buried in his bunker at No. 11.

[Alison McGovern (Wirral South) (Lab)]

It is a pleasure to follow the hon. Member for Elmet and Rothwell (Alec Shelbrooke), whose robust arguments I always enjoy, if not agree with.

The purpose of this Bill is to separate politics and economics, which is not always an easy job but is one that it is important to do. There is a body of academic understanding about the importance of the independence of judgments, forecasting and transparency, and that importance is recognised and understood on both sides of the House. In many ways, the Bill makes clear Labour’s economic legacy of the past decade—rules-based economic policy. The reasons for the sustainable investment rule and the golden rule were clear: after decades of boom and bust, it was felt that the way forward was to establish clear lines of accountability and rules by which economic policy might be set.

[Alec Shelbrooke]

I agree that the golden rule was important, but how does the hon. Lady respond to the fact that the dates of the cycles were moved to fit in with what the then Chancellor was claiming instead of sticking to the timeline that he originally outlined for the fiscal cycle?

[Alison McGovern]

Understanding the business cycle has been the job of economists since the dismal science began. The fact that it is difficult does not make it the wrong thing to try to do. I applaud some of the work that has been done by the Treasury and others in trying to find a better way forward. The hon. Gentleman asks an important question that cannot be dismissed by saying, “Oh, this is just people politicking.” Understanding the business cycle is extremely difficult.

When we consider the importance of rules-based economic policy, it is important to reflect on the fact that the Office for Budget Responsibility is to fiscal policy what the independence of the Bank of England was, and remains, to monetary policy: that is, it is an external-to-the-Treasury body that is charged with an important economic function that will drive the policy prescriptions that the Government make, in liaison and discussion with, and working alongside, independent chairs and officials from the organisations concerned. I have no doubt that that is an extremely difficult job. I wonder how real that independence can be. That is an important question for us to consider as the Bill moves through the House. The OBR’s work will be inextricably linked with Departments.

That point was brought home to me by the answer to a parliamentary question in which I asked the Department for Work and Pensions for forecasts of the number of young people who would be unemployed through the life of this Parliament. The Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling) wrote:

“The Department produces projections for business planning purposes which are aligned to the overall independent claimant count forecasts published by the Office for Budget Responsibility”.—[Official Report, 31 January 2011; Vol. 522, c. 587W.]

I wondered what the nature of that alignment would be. I understand that it will be an iterative process as business planning projections are made and discussed in challenged conversations with the OBR. It will not be easy to maintain the independence of this body, but we must all strive to do so.

If you will allow me, Mr Deputy Speaker, I will take this opportunity to say that I mentioned that parliamentary question in Treasury questions last Tuesday, and said that

“the Government’s own business planning projections show that the proportion of young people on the dole by the end of this Parliament will be reduced by less than 1%.”—[Official Report, 8 February 2011; Vol. 523, c. 153.]

I misspoke, and should have said less than one percentage point.

It will be a difficult job behind the scenes to maintain the independence of the OBR. Lars Calmfors, who has been mentioned, has argued that it will be difficult to stop or prevent behind-the-scenes negotiations with the Treasury. However, I believe that the Government have set such store by the independence of the OBR that they want it to succeed and its independence to be maintained. As hon. Members have suggested, it could have increased accountability to Parliament via the Treasury Committee. I am sure that the members of that Committee will be perspicuous in demanding that accountability and independence.

To conclude, I will make a few remarks about rules-based economic policy. I take it from this debate that it is agreed across the House that the right way to make economic policy is to set out ahead of events the rules and principles that the Government wish to stick to, and that the Government should allow themselves to be held up and judged on the basis of those rules. What could possibly be the problem with that approach to making economic policy? In some ways, we are already seeing the problem. Young people in this country who are unemployed because of the global shock face significant difficulties. We have to ask ourselves how the rules that we have set as the basis of our economic policy allow us to act to ensure that our economy runs well. Surely, economic measures are the tools to aid a well-functioning society, not the other way round. If so, our economic policy must be able to respond to shocks.

Not only must the Government say what the rules for their economic policy are and allow themselves to be judged by independent bodies on those rules, as they are doing; they must also say how they will respond to crises. Should this country find itself in a further economic downturn, facing an even worse situation for residents of this country, especially those on the lowest incomes and at the start of their careers, who face severe unemployment, how will the Government use the flexibility in their economic policy to return the country to growth, and how will their economic rules take account of the possibility of shocks? This is a significant challenge for the Government and I hope that all hon. Members will add to the scrutiny of the Bill as it progresses.

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[Stephen Williams]

I was talking about events prior to the crash, rather than the policy response to the crash itself, which was in any case initially rather timid and slow. My right hon. Friend the Member for Twickenham (Vince Cable) repeatedly urged the Chancellor to nationalise Northern Rock, which was the first symptom of the crisis, but those urges were resisted for quite some time.

[Alec Shelbrooke]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We are getting tempted into an area where we should not be. We are dealing with Second Reading. I am sure the hon. Member for Bristol West (Stephen Williams) will stick to that, and that Mr Shelbrooke’s intervention will be relevant to it, and not a history lesson for those in the Chamber.

[Alec Shelbrooke]

Thank you, Mr Deputy Speaker. My hon. Friend was trying to make the point that the key word in the name of the Office for Budget Responsibility is “responsibility”.

[Stephen Williams]

I thank my hon. Friend for that intervention.

Predictions and forecasting are at the heart of the Bill. I slightly disagree with my hon. Friend the Member for Cities of London and Westminster (Mr Field), my coalition colleague, who has now gone off to his black-tie dinner, because the crash—if not its scale—was forecast by my right hon. Friend the Member for Twickenham. I remember him being derided and sneered at in the House at the time, including by the hon. Member for Wallasey (Ms Eagle), who today led for the Labour party.

I welcome the setting up of the OBR, and particularly the appointment of Robert Chote from the Institute for Fiscal Studies as its first permanent chair. I am sure that all hon. Members have cited IFS reports in support of our policies at various times, and that we have all been on the receiving end of its critiques, which are not always welcome. Nevertheless, everyone recognises that those reports were arrived at independently, and therefore that they had authenticity and credibility about them. I also welcome the appointment for five-year terms of Mr Chote’s fellow board members and the ongoing Treasury Committee scrutiny, of which my hon. Friend the Member for Macclesfield (David Rutley) spoke. As we heard, the Bill is not a panacea for dealing with economic ills, but I am sure that the OBR will none the less restore credibility to our statistics and give a sound basis for decisions.

The second part of the Bill, which has not been mentioned much, deals with the National Audit Office. As I have mentioned Disraeli, I will mention in balance Gladstone, who set up the NAO. All Members of Parliament will recognise that the reports produced by the NAO are excellent and well informed across the range of policy issues. As the hon. Member for Stretford and Urmston (Kate Green) said, it is the role of the NAO to review the impact of Government policy especially in financial areas, and to examine whether money has been spent efficiently according to the original remit of the policies. Although the NAO formally reports to the Public Accounts Committee, of which I was briefly a member in the last Parliament, its reports and its work are fundamental to the operation of the House of Commons itself.

I welcome the statement made by the board of the NAO and the professional qualifications now held by some of its board members. I remember going to a briefing by the NAO not long after I became a Member of Parliament and being astonished by the lack of financial qualifications of many people in the civil service—I shall avoid looking in their direction—who none the less managed the purse strings of billions of pounds of public money. Professional qualifications should also be rolled out around Departments.

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[Sheila Gilmore (Edinburgh East) (Lab)]

I seem to be fated—this is the second time in two weeks—to be the last Back Bencher to contribute to a debate. Tempted though I am to continue to speak until as close to 10 pm as allowed by the need for wind-up speeches, I shall resist temptation—I can see my colleagues’ looks of horror. For those of us who are far from home and whose potential valentine is 400 miles away, we have nothing better to do than speak in this debate.

More seriously, it will be useful to have independent forecasts; indeed, it already has proved useful. In the short life of the Office for Budget Responsibility we have seen some figures that even this Government, who have professed a desire to be transparent, might not have been too happy about. Several of my hon. Friends have referred to figures such as the forecasts for unemployment and for economic growth. Had it not been for those reports, the Chancellor and other members of the Government might have been tempted to be a little more optimistic and gung-ho. We saw a little of that even last year when some Ministers talked about economic growth in the second and third quarters. We might have thought that everything was now motoring forward, but the OBR was able to tell us that that was not quite the case. The OBR’s forecasts may not always be palatable, even to the Government who have set it up.

I appreciate, Mr Deputy Speaker, that you have not wanted people to discuss the economy generally, but it was clear from the context in which this debate was put by the Economic Secretary that we cannot entirely avoid doing so. She made it clear that the OBR’s remit is determined by the Government’s view of the economy and what needs to be done to deal with it. She said that deficit reduction was the priority and the context for the OBR, but the question of how to do that remains. How do we reduce the deficit, how fast, and what are the implications of reducing it too fast? The Opposition believe that the actions that have been taken in order to fit the framework set for the reduction of the deficit in this Parliament may be counter-productive. The deficit may in fact rise, because if unemployment rises, demand falls and the economy does not grow, tax revenues will fall even further—and that was part of the reason for our current position. If that happens, we will see the deficit grow.

[Alec Shelbrooke]

As the hon. Lady has said, the OBR will indeed stop a Chancellor saying, “Growth is going to be this amount, and therefore I will borrow this amount,” while knowing full well that growth might not be so high and he might not be able to repay it. Surely that was the problem in recent years, and it is hoped that the OBR will stop such mistakes from being made again.

[Sheila Gilmore]

Our views of when it is appropriate to borrow and what the Government should do about the economy are clearly different. Emotive words have been used in this debate, including the term “mountain of debt”. Coalition Members are fond of saying that interest payments on borrowing are wasted. They are also fond of domestic analogies, and we hear a lot about the national credit card being maxed out, but there is another domestic analogy that we might use. When we pay our mortgage payments, we do not say that that is money wasted—it is money being invested for the purpose of acquiring a home.

When I was the convenor of housing for Edinburgh city council, 40p in the pound of tenants’ rents went on debt repayment. Sometimes the local newspaper and council opposition members would say, “This is terrible mismanagement”, but it was not mismanagement—it was an investment in building homes over many years and improving homes with such luxuries as central heating and double glazing.

Financial Assistance (Ireland)

Alec Shelbrooke Excerpts

Monday 22nd November 2010 Commons Chamber

[Mr Osborne]

The fact that we export more to Ireland than to Brazil, Russia, India or China is a statement of the interconnectedness of the Irish and UK economies, but also an indictment of our exports to the fast-emerging BRIC countries, which is precisely why, since taking office, the Prime Minister has led major trade delegations to India and China, and why we want to ensure that companies in Macclesfield and throughout the country can export more to those fast-emerging new markets.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

The Chancellor has been asked whether he has a smidgen of regret about his comments on the Irish economy, but does he not find it more incredible that the Opposition still believe that we should join the euro after the devastation that it brought to a thriving Irish economy?

[Mr Osborne]

As I have said, it is for the Opposition to speak to their own policy. As I understand it, they are still committed in principle to joining the euro—

Oral Answers to Questions

Alec Shelbrooke Excerpts

Tuesday 16th November 2010 Commons Chamber

[Mr Osborne]

I would say to them what I would say to everyone in this country: that we inherited the largest fiscal—[Interruption.] Well, I do not know how many times Opposition Members have to hear this but it is the truth. They left us the largest Budget deficit in the G20 and the European Union at a time of heightened sovereign debt concern. They can either be part of the debate that the rest of world is taking part in on how to deal with the deficits or they can completely ignore that debate and become irrelevant.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Does the Chancellor agree that he should ignore the advice of the Opposition on all matters fiscal relating to the European Union, because it is still their policy to join the euro and because their MEPs voted to double our contribution this year?

[Mr Osborne]

As you will remind me, Mr Speaker, I cannot speak for the policy of the Opposition or say whether they have changed their official position which is to support joining the euro, but I make it clear to my hon. Friends and others that we certainly will not join the euro while this Chancellor and this Prime Minister are in place.

Comprehensive Spending Review

Alec Shelbrooke Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

I do not have the exact number to hand, but I shall give it to the hon. Gentleman this afternoon. We are funding the project as it was set out. I know the chief executive of Halton borough council because he used to be the chief executive of my local borough council. I have discussed it with him and I hope to have further discussions to ensure that the bridge is built and that the private investment linked to the bridge comes in. I shall give the hon. Gentleman the exact number later today.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

May I thank the Chancellor for taking the decision to give to Equitable Life more than three times the amount that was recommended in the Chadwick report? Will he describe to the House and to my constituents what settlement he thinks that the Equitable Life policyholders might have got if the Opposition were still in government?

[Mr Osborne]

We know the answer to that because they had 13 years to address the problem and gave absolutely nothing. They then set up Sir John Chadwick’s report and, although I thank him for it, I do not agree with its conclusions. I strongly suspect that if Labour had won the election, they would have agreed with his conclusions, which would have meant just a third of the money that I have set out today for Equitable Life policyholders. We are helping policyholders across the piece, but our particular priority has been the trapped annuitants, whom we will fully compensate.

Finance (No. 2) Bill

Alec Shelbrooke Excerpts

Monday 11th October 2010 Commons Chamber

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Does my hon. Friend agree that the protests that we are hearing from those on the Opposition Benches are in stark contrast to the fact that the measures taken by this Government have secured our triple A rating?

[Mr Gauke]

My hon. Friend is absolutely right. The fact is that the Moody’s triple A credit rating was deemed to be at risk, and has now been stabilised. Our market interest rates have fallen, and we are restoring confidence in the long-term capability of this country. If we refused to take these measures, we would be taking the most enormous risk.

It may be helpful if I give some of the background. As I said earlier, there remain some technical changes that we could not include before the summer, and the Bill provides for those changes to be made.

I think it safe to say that Members on both sides of the House will agree on the contents of the Bill. I should be disappointed if they did not, given that within the last year all but one of the measures that we are debating were proposed by the last Government I am glad that we have reached a consensus on that, if not on other matters. None the less, we wanted to ensure that the public and interested parties had an opportunity to provide input.

In the Budget we set out our approach to tax policy making, with consultation at the heart of the strategy. In the spirit of that new process, we published the Bill in draft over the summer. That has not only allowed key interest groups to comment, but reassured those affected by the Bill. More than 60 responses were received, and nine clauses have been modified as a result. Furthermore, many groups have voiced their approval of the provision of a draft Bill to allow for additional scrutiny, which has made the Bill better, clearer and easier to apply.

We also increased opportunities for consultation by creating the Office of Tax Simplification over the summer. We need to increase transparency for businesses and the tax profession: that is a message that we hear frequently. We also hear about the importance of greater predictability, stability and simplicity in the tax system. The Office of Tax Simplification will identify areas in which complexity in the system can be reduced, and we will publish its findings for the Chancellor to consider before he presents his Budget. Simplifying the tax system is not just a means in itself, but a vital sign that Britain is once again open for business.

The Bill is not just a good example of engagement with the public; it also supports our aims of helping businesses and promoting fairness. Clause 10 provides support for real estate investment trusts by relaxing their distribution requirements. Clause 13 removes intellectual property conditions linked to research and development tax credits, enabling more small companies to claim. Clause 11 fixes issues in the worldwide debt cap regime to allow it to operate properly. The changes affect businesses large and small. Clause 9 removes an unintended tax charge from company distributions, and clause 7 makes changes to the venture capital schemes to guarantee state aid approval.

The coalition Government are committed to ensuring that the decisions that we make are fair, and that we protect the most vulnerable in our society. The choices that we have made to date, and the actions that we will take as part of the spending review, will help to make Britain fairer. Clauses 1 and 2 play their part by easing the tax rules for carers and extending the scope of the current tax relief. Clause 31 provides tax relief for trusts that compensate sufferers from asbestos exposure. I am sure that many Members will particularly welcome that clause. Clause 16 guarantees that those providing support under an adult care placement do not suffer capital gains tax as a result of sharing their home. Those too are small measures, but they provide significant and welcome support for those affected.

One clause has not been included in the Bill, although it was intended to feature. The aggregates levy credit scheme in Northern Ireland was introduced in recognition of the impact of the levy on legitimate businesses as a result of tax evasion on imports from Ireland and illegal quarrying. Over the summer, we consulted on legislation to be included in the Bill to extend the scheme beyond April 2011 to March 2021. Since then, the European General Court has annulled the Commission's state aid approval for the scheme, for the period covering April 2004 to March 2011. In those circumstances, it would not be appropriate to extend the scheme and we therefore decided to remove the clause from the published Bill. However, the Government strongly support the scheme and, if the Commission were to come to a fresh decision that the aid was approvable, legislation to extend it can be introduced in the Finance Bill in 2011.We will continue to work closely with the Commission, the authorities in Northern Ireland and representatives of the quarrying industry to find a solution that provides a level playing field for legitimate quarry operators in Northern Ireland, while maintaining environmental standards.

The other clauses help to align HM Revenue and Customs’ interest and penalty regimes; enable the National Employment Savings Trust to operate as a registered pension scheme; assist with the correct allocation of overpayments of tax to settlers of trusts; and tackle evasion of excise duties. Although those clauses could not make it into the previous Government's final Finance Bill—although 71 clauses did make it into their four-hour Bill—we are ensuring that these necessary but less glamorous changes are made.

This is a simple, straightforward Bill that eases burdens on individuals, businesses and HM Revenue and Customs. It is one that the previous Government all but enacted themselves. In brief, it is an important but, I hope, uncontroversial Bill, and I commend it to the House.

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[Ms Eagle]

I look forward to the debate that will take place within the Government on that, as I can see that Liberal Democrat Members are not exactly enamoured with the hon. Gentleman’s point.

At the weekend, the Cabinet seemed to send incoherent messages about the £83 billion cuts agenda that lies ahead. The Energy Secretary told The Daily Telegraph that spending cuts were not

“lashed to the mast with a particular set of numbers”

and could be scaled back if economic conditions deteriorated, but the Transport Secretary insisted that the Government would not deviate despite fears that the drastic cuts would damage the economy. The latter clearly regards himself as the real Chief Secretary—or perhaps it would be more accurate to say the Tory Chief Secretary—but which of the two is presenting the Cabinet’s real view? They both serve in it, so which of them is right? Perhaps when the Economic Secretary responds tonight, she would like to enlighten us about which of their positions is the real Government policy, at least for today.

Some things that I would have thought would be in the Bill, given the formidable economic challenge that now faces us, are conspicuously absent. Where is the plan for growth? We all know that growth is one of the most effective ways of dealing with a deficit. Thus, plans to get the deficit down need to be growth-friendly, but precious little in the Bill is intended to address that urgent requirement.

Since May there have been plenty of cuts that may well have a bad impact on our growth prospects, such as the abolition of regional development agencies and the savage cuts in the funding available to assist regional growth strategies. The decision to scrap the loan to Sheffield Forgemasters is another example. That company could have played a leading role in the developing global nuclear industry, but its chances of doing so have been set back significantly by that decision. The increase in VAT, which estimates suggest will cost each household in the country more than £500, will hardly boost demand, so where is the plan for growth? The Prime Minister claimed that his first Budget would be

“a Budget that goes for growth”,

but after the Chancellor’s theatrical efforts in June, the Government’s own forecaster, the Office for Budget Responsibility, downgraded its growth forecast for this year from 1.3% to 1.2%, and for next year from 2.6% to 2.3%. The CBI also decided to lower its growth forecast for next year from 2.5% to 2% to take account of the June Budget.

[Alec Shelbrooke]

I welcome the hon. Lady to her Front-Bench position. If the 2.5% rise in VAT is so wrong, why was it right for the previous Government to return it from 15% to 17.5%? Although there had been a reduction, that was still a 2.5% rise.

[Ms Eagle]

The hon. Gentleman was not in the House at the time, but the reduction in VAT was part of the fiscal stimulus that kept the economy afloat during the most dangerous parts of the credit crunch. The growth figures for the early part of this year show that that fiscal stimulus package was working.

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[Nic Dakin (Scunthorpe) (Lab)]

This is primarily a technical Bill and I support much of the detail in it. For example, the measures to close tax loopholes are welcome. I am sure that we are all united on the need to close such loopholes and recognise that successive Governments will need to be ever vigilant in that respect. But as the spending review approaches we need to be very careful to ensure that Revenue and Customs has the appropriate capacity and resources to tackle tax evasion and avoidance effectively. Assurances from the Economic Secretary on that point would be very welcome, as my hon. Friend the Member for Wallasey (Ms Eagle) said earlier.

There is much in the Bill to applaud. Unfortunately, there is also much to regret. It represents a missed opportunity to put in place a plan for growth. This is not surprising, as the Government see deficit reduction as the beginning, middle and end of their economic strategy—a symphony of despair, orchestrated by a coalition agreement and targeted at the lowest common denominator.

It is worth reminding ourselves of what the great British public voted for in May. They had two alternative economic strategies presented to them during the election. That promulgated by the Conservatives said that there was a need to cut hard and cut fast. The alternative argument was put forward by Labour and the Liberal Democrats—that the deficit reduction should be more carefully managed, as my hon. Friend the Member for Bassetlaw (John Mann) has suggested. A more gradual reduction would allow growth and tax increases to play their part. In that strategy, the reduction in spending would be managed in a way that allowed growth to pick up the economic slack. Doing so would avoid the spectre of a double-dip recession, with all the personal distress and misery that it would bring to people up and down the land. The British people delivered an inconclusive result at the last election, but one thing was clear: they did not support the Tory argument for fast and furious cuts. They backed Labour and the Lib Dems’ more considered approach.

[Alec Shelbrooke]

I am listening carefully to the hon. Gentleman, but I find it hard to understand how he can say that the Conservative party’s policies were rejected at the general election, when the party had its biggest result since 1931.

[Nic Dakin]

I think that there was a large feeling at the Conservative party conference last week that the Conservatives should have done better in the general election, given that they faced a Labour Government who were clearly struggling in the face of many challenges. I am interested in the hon. Gentleman’s spin on the outcome of the last election, but the reality is that nobody won it. What has happened since is that the Government parties have shown skill in developing a narrative that runs along the lines of what the hon. Member for Boston and Skegness (Mark Simmonds) outlined—it was also added to by the hon. Member for Bristol West (Stephen Williams)—which is essentially that everything comes down to Labour spending profligately and a massive deficit that needs to be tackled fast and furiously. That is the narrative, but it is not the truth. The truth is far closer to what we heard from my hon. Friend the Member for Bassetlaw, who demonstrated that what has really happened is that our deficit lies alongside that of Germany. The problem is serious, but it does not require us to go as far as is being suggested.

--- Later in debate ---

[Nic Dakin]

I thank my hon. Friend for that intervention. She is completely right to suggest that world public opinion is moving in the direction of expressing concern about global cuts in spending and their impact on the world economy. She is completely right to draw attention to that.

[Alec Shelbrooke]

rose—

[Nic Dakin]

I have already given way.

In the summer, the Chancellor was keen to hold up Ireland as an example of a country with an approach to the economic challenges that we face that should be applauded. There is less talk of Ireland now, as that economy spins into double-dip recession and loses its triple A rating, as we heard earlier. The Irish Government’s debt has increased rather than decreased, as a result of over-aggressive cuts in public expenditure, and the economy is now in serious peril. The last time we had a peacetime coalition, the then Governor of the Bank of England’s advice—to take an aggressive approach to reducing spending—was followed, precipitating the great depression of the 1930s. I am afraid that Governors of the Bank of England, like politicians, are only mortal and do not always get it right.

There is something very pessimistic about the Government’s approach. Where once they were optimistic, now they see only negatives, hence the biggest rise in VAT—the most unfair and regressive of all taxes—in a generation, despite cast-iron promises from the leaders of both parties in the coalition during the election that this would not happen. Representing Scunthorpe, I know a bit about cast iron: it should last a bit longer than a few months. There has been further pessimism, with the attacks on universal benefits signalled by last week’s breaking of another promise—the promise not to cut child benefit.

--- Later in debate ---

[Mr Binley]

I do not accept that point of view. This is not just about the size of the national debt; we need to consider its size in relation to the economy. Therein lies one of our problems. The fact is that ours is one of the worst situations in the G20. I should like to advise the hon. Gentleman that, as long as he and his party remain in denial, they will be unable to move forward, and that, for the good of politics, they need to move forward just a little.

[Alec Shelbrooke]

I should like to expand on my hon. Friend’s point about the national debt. Is it not true that the size of personal debt in this country, which was encouraged with a quiet wink by the previous Government, has also held back our ability to recover from the recession?

[Mr Binley]

My hon. Friend’s intervention takes us back to a Chancellor of the Exchequer—later Prime Minister—who suggested to the Financial Services Authority that it should apply a light touch. A light touch meant 125% mortgages, self-assessment of mortgage requests, and people with five, six and seven credit cards with their credit up to the hilt. My hon. Friend is absolutely right.

Let me return to the subject of the banks. I made the point that banks had to be soundly based, but that it was a question of the balance. As I said, research by the Federation of Small Businesses suggests that 24% of small and medium-sized enterprises are already experiencing difficulties in coming to terms with current increases in the cost of money, and the new capital requirements will compound the problem.

This could not have come at a worse time. More businesses are in danger of going to the wall through overtrading. I want to explain that a little more, because it is not readily understood in the House. Business growth costs businesses money: it is as simple as that. The more orders a business gets, the more employees it needs and the more raw materials it requires. Those are all up-front costs that simply cannot be recovered in the short term. Cash flow drag must be financed if growth is to be sustained, and growth will not be sustained if working capital is not forthcoming. That may be a simplistic view, but it is a very honest view of the reasons for which people are more likely to go to the wall during an upturn than during a downturn. They overtrade, and find that they do not have the capital to sustain that overtrading.

Owners of SMEs have spoken in their thousands of the collapse of their relationships with the banks. The number of complaints to the banking ombudsman about draconian demands placed on loans and overdrafts has increased by 119% in this year alone. So what should the Government do? First, they should recognise that the new capital requirements called for by global regulators should be balanced, and that their implementation should be sensibly programmed to ensure that real money is freed to support real growth in the SME sector. If that means getting tough with the banks and the regulators, so be it. Governments still have to get tough on occasions, and this is the area in which they need to start.

However, the Government need to go further. They need to provide greater choice and competition in the high street, particularly in the banking sector. They might even consider the creation of post banks, as suggested by the Federation of Small Businesses. That is not a quick answer, but it will help to sustain growth through the third, fourth and fifth years if the Government get down to it now. Both moves should increase available credit, and reverse the decline in local lending resources.

The Government could also encourage the mutual sector to play a greater role. I find it regrettable that Nationwide, the country’s largest building society, has chosen to restrict its banking services to just 30,000 small businesses, a minute fraction of the total. It has also decided to close its business investor account to new customers and to limit the number of account transactions to just two a month, levying 30 days’ notice of account closure for any customer who breaks that limit. Members may agree that that is a particularly unfortunate trend at a time when greater competition, wider options and a more flexible approach are needed. I hope that the Chancellor will talk to the mutuals collectively, because they have a role to play and can be more effective than they are being at present.

Recent reports suggest that Barclays, HSBC, Lloyds, HBOS and NatWest collectively handle 85% of the SME banking market. The Bank of England financial stability report suggests that banks are capable of consolidating their capital while at the same time improving their lending to the real economy, which suggests that there is an attitude among banks that needs to change. We have said that in the House week in week out, month in month out: when are the banks going to listen?

I appeal to the Chancellor to talk straight, talk tough and talk honest to the banks, many of which we now own. They have a responsibility, not only because we helped to bail them out, but because they were a major factor in getting us into trouble. The message should be sent loud and clear from the Chamber that they should face up to their responsibilities, and recognise that it really is time that they came to the aid of their nation.

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[Alison McGovern (Wirral South) (Lab)]

First, may I congratulate the hon. Member for Skipton and Ripon (Julian Smith) on his fine maiden speech? As a railwayman’s daughter, my recollections of being forced as a small child to suffer the Settle to Carlisle railway as a holiday are still with me. His is an extremely beautiful part of the country and he made an excellent maiden speech.

I welcome many of the measures in this Bill. As has been said, many of them will receive cross-party support and were due from the previous Government’s Budget in March. A good, effective tax system, well resourced, is the mark of an excellent democracy, so it is important that Members of Parliament take care to ensure that our tax system functions well. I therefore want to say something about tax and its collection, and to highlight two vital points where this Government have missed an opportunity to implement change that could benefit our economy at this very difficult time.

Hon. Members may not be aware that many employees of Her Majesty’s Revenue and Customs work in Liverpool, the Wirral, Merseyside and the Liverpool travel-to-work area. Many such staff now work in my area as a result of the shifting of Government work to areas where wages are lower and it is more effective to locate staff. Their work is largely not commented on, especially in this place, even if it is good, high-quality work. We often talk about public servants, but few of us ever think to congratulate those working to ensure that our tax system functions well—that is part of what I want to do today.

I hope that the House will permit me to share the fact that one of my first experiences as a newly elected Member of Parliament was of some HMRC staff coming to see me at my newly opened constituency office. They were very fearful of changes that the new Government looked as though they might implement and they wanted to raise some of their concerns with me, particularly those relating to the resources that might be available in the future. As has been mentioned, over the past three years they have increased the yield from interventions by 60%. That is a good record and all of us want to see that continue. We legislate in this place—we debate and we pass Bills that become law—but that is all just words; we are dependent on the good work of HMRC to make real our choices and decisions. So we should not treat those staff with scant regard and we should take seriously the problems that they might have. In fact, my experience of meeting and speaking to HMRC staff has revealed that, like many in the public sector at this time, they are operating under a cloud of uncertainty.

I appeal to Ministers to act with transparency as much as they can, to keep in consultation with staff at all times and, in particular, to pay attention to whether HMRC has sufficient resources to act out the consequences of the choices that they make. The child benefit changes might place further work burdens on HMRC staff and we politicians owe it to those staff to ensure that they have enough resources to act on the consequences of our decisions.

I wanted to discuss a couple of opportunities that the Government have allowed to pass them by. One main feature of the Budget that concerned me greatly was the VAT rise to 20%, and I believe that Grant Thornton has estimated that that increase will cost individual households about £500 a year. There is sincere concern among many people about the harm that that could do to our economy. In my area, the recovery is fragile. I am very grateful for the intervention of Deloitte, which has put on record where business and consumer concerns lie. However, I know from speaking to people in my constituency that business confidence is still fragile and I worry what the increase in January will do. I worry what the increase in the cost of the contents of their shopping baskets in January will do to families, and I worry that because of the VAT rise many small businesses in my constituency will face a tougher time after Christmas than they have in the past 12 months.

Let us be clear that we have every indication that that measure is a permanent rise—it is a permanent shift in who pays what tax. We debated earlier the contrast with Labour’s temporary VAT reduction. I remember very well the restaurants in my area putting out temporary notices amending their menus—it was very clear to everybody that it was part of the stimulus and part of the Government’s work to get us through that time. That is not the case with the current VAT rise, which is a totally different thing. It is a regressive increase in tax.

I absolutely believe that, over time, we must seek to reduce the deficit, but I do not feel that raising VAT is the way to do it. One thing that has not been mentioned so far is the impact of a lower tax take on the deficit. We need to recognise that part of that lower tax take has come from unemployment caused by the global downturn. We need to make strategic investment in this country in the things in which we have a competitive advantage—in high-tech areas—so that we can increase employment and bring the budget back towards balance. That is the way to do it, rather than introducing a permanent shift in who pays tax in this country. It will hit families in my area harder than many; in fact, it will hit families harder in Wirral than it will hit those who live down the road in Cheshire, in the Chancellor’s constituency.

My second point builds on some of the debate that we have had this evening about businesses of all sizes. I am thinking specifically of small to medium-sized businesses in my constituency, representatives of which I have met recently. In fact, since I was elected in May I have been speaking with businesses in my area, which—hon. Members might not know this—are science-led. We have an excellent part of the knowledge economy in my constituency as well as many high-tech businesses that supply the electronics industry in Korea and other places. We have Unilever, which carries out high-end research; staff at Unilever’s research and development lab in my constituency have more than 200 PhDs among them. There are also many feeder businesses to those science and high-tech industries. Investment allowances are no small fry to us.

In two cases recently, I have been called in to meet a business that is about to move jobs out of my constituency. In both cases, after having analysed the situation, it has seemed that capital investment in new technology could have stopped that. The motivating factor for the removal of those jobs is the lack of capital investment and I want the Government to pay great attention to what more they can do to incentivise business to make capital investment in our country, because that will make our economy sustainable in the long run.

Let me contrast that with corporation tax, which helps big businesses that are already in profit to keep their profits. A corporation tax cut across the board does nothing to incentivise business to make capital investment. Only this morning I was speaking to people at a business in my constituency. I asked what one thing I could tell the Government to do that would help their business to invest for the long term, and they said, “Help us make those investments: introduce more allowances that enable the investment that will help to protect our employment for the long term.”

[Alec Shelbrooke]

Does the hon. Lady not agree that competitive corporation tax would attract international investment into this country and develop jobs for our economy? We must play on the global stage, not just in Britain.

[Alison McGovern]

We have competitive corporation tax. The hon. Gentleman is right that we must play on the global stage. Many of the companies in my constituency that I am talking about play on the global stage. I have seen the difference that other countries have made in working with business to ensure that they invest in their technology, which keeps them here for the long term. Let us consider, for example, the historical difference in the German automotive industry, where the Government did just that. We came very late as a country to that approach—to that industrial activism and to that investment in high-tech industry to secure employment for the long term.

I ask Ministers to consider their role. When we are dealing with global companies, the Government must always discuss with them the changes in their industry and what the next move needs to be in investment. I do not feel that an across-the-board corporation tax that hands profits back without any discussion about what is done with them is the way forward.

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[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I start by welcoming the hon. Member for Nottingham East (Chris Leslie) to his party’s Front Bench. He has been in the Chamber for most Finance Bill debates, and we have sparred a little bit along the way. I am glad to see him taking part from the Front Bench, but what a baptism of fire this is for him. You were not here earlier, Madam Deputy Speaker—one of your colleagues was in the Chair—but the hon. Gentleman heard an unfortunate tirade from his hon. Friend the Member for Bassetlaw (John Mann), who gave one of the most entertaining speeches that I have heard in this Chamber.

The hon. Member for Bassetlaw had us all going. At one point, we wanted to cheer, but almost immediately afterwards we wanted to boo—and that goes for Members on both sides of the Chamber. His argument developed in quite an incredible way. As my hon. Friend the Member for Northampton South (Mr Binley) said, the hon. Member for Bassetlaw is the only Member who could play for both teams during a football match. It was quite an incredible speech. However, he did talk about deficit deniers, a term illustrated quite well by the hon. Member for Scunthorpe (Nic Dakin) and even better by the hon. Member for Sefton Central (Bill Esterson), who has just spoken.

The hon. Member for Sefton Central spoke about capital spend and investment, but surely he recognises that the previous Chancellor of the Exchequer also wanted to cut capital spend. We understand that the new shadow Chancellor and the shadow Cabinet are following the former Chancellor’s plans for deficit reduction, which involved a reduction in capital spend. It would be fascinating to know whether the hon. Gentleman totally disagrees with his Front-Bench colleagues and thinks that they are completely wrong, or whether his argument was just confused. I really do not know where his argument was going.

[Bill Esterson]

Will the hon. Gentleman give way?

[Alec Shelbrooke]

In one moment; I just wanted to draw on your comment about the US economy. You said that it was a model to follow. There has been an $800 billion investment—or stimulus, if you will—put into the US economy, yet unemployment rates there have grown quite significantly. That is why President Obama’s popularity ratings have fallen.

[Bill Esterson]

I am sure that I did not mention the US economy, but we can check that in Hansard later. I want to pick up the point about capital investment. We need to be clear about the differences between the two sides on that issue. We Labour Members were clear that we would keep Building Schools for the Future and a number of other major projects going. We were looking at a long-term process for reducing the deficit. Those on the Government Benches proposed cutting all capital spending more or less straight away.

[Alec Shelbrooke]

I am glad that I gave way to the hon. Gentleman, because he makes my point. You say that you want to keep the investment going on these capital projects, but you also say that you will reduce the capital budget. How? That does not add up. You simply cannot go on saying that you will spend money here and there, not raise taxes, and carry on borrowing. The argument simply does not add up. I became confused halfway through the speech made by the hon. Member for Bassetlaw—

[George Freeman (Mid Norfolk) (Con)]

So did he.

[Alec Shelbrooke]

Yes, so did he. He seemed to be saying that unless the Government employ everybody in the country, no money will ever be spent. He said, “You can’t reduce the number of people in the public sector, because they’re the people who have to go to the sandwich shop.” Of course, people in the private sector do not eat or buy anything; they have a robotic existence. I wonder what happened before there was such a large public sector. The hon. Member for Sefton went on to give examples of private industry in his constituency that have benefited from loans from the regional development agencies. That is where I think the confusion lay. He was talking about Government investment, not Government spending on public sector jobs and so on.

The hon. Gentleman talked about the regional development agencies, but there was provision for a regional growth fund in the Budget. The Government have also put measures in place in the Budget to reduce national insurance contributions for those setting up companies outside the south-east, and have reduced capital gains tax. As I pointed out in my intervention on the hon. Member for Wirral South (Alison McGovern), that helps investment from international business to come in.

Yorkshire Forward, a regional development agency, says at the bottom of its e-mails, “We have created more than 52,000 jobs.” No, it has not. Private business creates the job. If Government money is used, the job is not “created”; there was a subsidy that eventually has to be paid back.

Government money is just private money that the Government have nicked and are trying to put back. It is not our money. We do not earn it. We take it from the wealth creators. If we are not creating that wealth in the first place, how can we go on and spend it? The deficit deniers do not understand or do not accept that every one of us would like to stand here and say, “Do you know what? I’m going to replace every school in my constituency, and I want a first-class service.” Every one of us wants a first-class service—that is why we went into politics—but we must be realistic. We must be pragmatic. We must understand that we cannot go on spending money as we have been doing.

I take issue with the suggestion that the move to a 20% rate of VAT is permanent and that we have no intention of lowering it because ideologically we want to tax more. Ideologically we want to tax more? I have never heard such nonsense. We are the party of low taxation. We made it clear in every speech that at each Budget we would review and lower taxation if we could. It has never been said that VAT would remain at 20%. One would hope that we may be able to move to a lower taxation rate.

In the short time that I have left, I shall move on to a specific topic. The Bill refers to closing tax loopholes. Everybody in the Chamber wants to achieve that because there is a great deal of revenue out there that the Government are not getting. Let us look at the way money circulates in the economy. Representations have been made to me that red diesel be used in emergency service vehicles. We can see the sense in that. Emergency vehicles are paid for through Government money, VAT is paid, and money is being circulated and coming back. That is a sensible argument and would impose no cost on the Exchequer.

I make a plea to the Minister to consider something else. I am proud that we have an excellent Yorkshire air ambulance—indeed, we have two. They are on BBC 1 every day at 9.15 am, relating their exploits in rescuing people who have got into difficulties in areas such as the Yorkshire dales. That leads me to say what an excellent maiden speech my hon. Friend the Member for Skipton and Ripon (Julian Smith) made, describing that countryside, where people like to go hiking. We know that accidents can happen, so we have the air ambulance.

Yorkshire air ambulance costs £2.628 million a year to run and not one penny comes from Government. It is all raised through charitable giving. I therefore urge the Minister to consider, when the time is right, exempting from fuel duty Yorkshire air ambulance, the other air ambulances and the people who contribute to the emergency services? They would still raise their money through charitable giving, but that exemption on the 162,632 litres of fuel that the Yorkshire air ambulance used last year would help greatly to reduce overall costs.

I close with a further plea. We have had several Finance Bill debates and all we hear, all the time, is cherry-picking: “We don’t want to do this bit. We don’t want to do that bit. The Government are hitting the poorest here. They are not doing enough for the rich there.” Can we please start to look at the Finance Bill holistically? We have raised tax thresholds. We are reducing national insurance. We have raised capital gains tax. We are reducing corporation tax to bring in more businesses and create more jobs. We are putting in place regional growth funds. Can we please stop the cherry-picking, have a sensible debate and look at the arguments sensibly, holistically and in a grown-up way, and can we please stop denying that the deficit exists?

[Sheila Gilmore (Edinburgh East) (Lab)]

In the course of the debate, yet again, we have heard an awful lot of myths and legends. One of the biggest of those is the notion that because the Opposition have a different view of the economy, we are deficit deniers. You do not have to be denying a deficit to hold a different view of how it arose and the background circumstances, and a different view of how we get out of the situation that we are in. That is quite reasonable.

It is healthy that we have politics within which there are different viewpoints. The proof of the pudding will be apparent in a few years. If you are right, I will have to eat my words. I do not believe that those on the Government Benches are right, but we cannot tell just by throwing words at each other. It is not correct to say that somehow the Opposition hold the view that there is no deficit. That would be plain nonsense.

There are other myths and legends that we have heard today. One, which we heard from the hon. Member for Northampton South (Mr Binley), is that the previous Government were guilty of not mending the roof when the sun shone. We hear that repeatedly. If building schools, hospitals and roads was not mending the roof, I do not know what it was. If by that Conservative Members mean that we should have saved the money and put it in a reserve somewhere, that may be a legitimate criticism, but to suggest that we were not investing in the country’s infrastructure is plain wrong.

The hon. Member for Northampton South also suggested that the economic crisis was entirely our fault because of light-touch regulation. I may have been asleep through the years of the Labour Government, but I always thought I heard Conservatives saying that there was too much regulation, that we were the party of red tape and regulation, and that we over-regulated not just financial services, but everything. We heard an excellent maiden speech from the hon. Member for Skipton and Ripon (Julian Smith). Although I disagreed with the entire political content, it was a good speech. The hon. Gentleman said that in his view there was too much regulation.

It is easy to say with hindsight that there should have been more regulation of the financial services industry, for example. I believe that there should have been, but when people say that we were over-regulating the economy, that is one of the myths and legends.

We are told that we do not want to leave our children and grandchildren in a big financial mess by not paying off debt, but equally, and perhaps more importantly, do we want to leave our children and grandchildren in the position that generations have been placed in by previous economic failures, by destroying jobs and creating long-term unemployment in various parts of the country? I do not want to leave that to my children and grandchildren.

We are allowed to differ and to hold different points of view and different economic theories. The difference is not about whether there is a deficit, but about how we got into the present situation and how we get out of it.

The previous Government managed to stop the rise in unemployment reaching the levels that had been predicted. That was the cause of economic stimulus. Far from the deficit spiralling, as we heard earlier from the hon. Member for Stratford-on-Avon (Nadhim Zahawi), the deficit did not rise as much as had been expected. Therefore, we were not in some sort of new crisis—that is what has been suggested—which justified an emergency Budget which had very little in it. The Finance (No.2) Act 2010 that we passed in a great hurry before the summer also had very little in it, and we lost an opportunity to make some important changes.

The public and private sectors are inextricably linked, and slashing jobs in the public sector will further reduce the tax-take, increase the demand on benefits and, in itself, increase, not decrease, public borrowing and the deficit. Equally, reducing our investment in infrastructure—not stopping it entirely, but reducing it more than we need to do—will ultimately put us in a more difficult position.

Just last week I visited two constituent households at their request. The problems that they asked to see me about had nothing to do with jobs; nevertheless, by no coincidence in both households there was a working-age construction worker who was desperate to work but could not find any in my city. One said that the last job on which he had worked was now a complete university building in the city, but we will not see much more of that kind of building by our educational institutions. He is very keen to work, but the jobs are simply not there.

[Alec Shelbrooke]

Everybody would like to see that investment, but, and this is the point that I tried to make in my speech, the previous Chancellor would also have cut the capital budget. I talk about deficit deniers because I do not understand how you can ask for capital investment to carry on when your shadow Front Benchers would, as I understand it, follow that plan to reduce the capital budget.

PAYE Contributions

Alec Shelbrooke Excerpts

Wednesday 8th September 2010 Commons Chamber

[Mr Gauke]

I reiterate that additional resources will be provided for call centres—I believe there will be about 20% extra staff by the end of the month, with contingency for more if needed. HMRC is focusing on that. I welcome the hon. Gentleman’s remarks about tackling fraudsters, and we can take back to our constituents the message that they should be wary, particularly of e-mails. HMRC will not e-mail people about this matter.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

A lot has been said during these exchanges, and it may be confusing to some members of the public. May I ask my hon. Friend to give some ABC points to members of the public who have been affected or feel that they may have been, so that it can be recorded properly on tonight’s news?

[Mr Gauke]

First, I would say that people should wait until they receive a letter. When they receive one, if they are asked to pay money back they should go through the details carefully, and if they are concerned at that point, they should contact HMRC. They can be reassured that we are not demanding immediate payment, as there will be an opportunity either to spread it out over future months and years or at least to talk to HMRC about the details.

Finance Bill

Alec Shelbrooke Excerpts

Tuesday 20th July 2010 Commons Chamber

[Matthew Hancock]

Let me make some progress; I have only a couple of minutes left.

The final argument is about productivity. Greater tax competitiveness not only helps productivity in the private sector, as consolidation can also help productivity in the public sector. We read only this morning that the police have said that they can take 12% out of their budget without affecting front-line services. I wonder what that 12% was spent on under the previous Administration.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Paperwork.

[Matthew Hancock]

My hon. Friend is probably right.

Oral Answers to Questions

Alec Shelbrooke Excerpts

Tuesday 8th June 2010 Commons Chamber

[Mr Osborne]

There does seem to be collective amnesia on the Labour Benches. They were in government for 13 years, they ran up the largest budget deficit in the European Union and they handed over office to us after an election in the middle of a eurozone crisis. The threat to the British economy is what will happen if we do not deal with this budget deficit. Let me say to the hon. Gentleman and all Labour Members that until they have their own proposals to deal with the problem that they have bequeathed the new Government, they are not going to be taken seriously.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I ask my right hon. Friend the Chancellor to outline to the House exactly what not tackling the deficit would mean for my constituents in Elmet and Rothwell and for their mortgages.

[Mr Osborne]

Unfortunately, my hon. Friend would have to tell his constituents that interest rates would start to rise and international investor confidence would be lost. Today, one of the credit rating agencies has published a report that makes the observation that the UK’s deficit reduction plan is particularly weak. That is the situation that we have inherited, and we are going to put it right.