Amendment of the Law

Angela Eagle Excerpts

Tuesday 29th March 2011 Commons Chamber

[Ms Angela Eagle (Wallasey) (Lab)]

I am gutted that the Chancellor is not present to listen to the winding-up speeches on his Budget.

In the Budget, the Chancellor had the opportunity to help millions of British people and families who are being hit hard by the biggest squeeze in their living standards for 80 years. He also had the opportunity to admit that ploughing full-steam ahead with cuts at the speed and on the scale that this Government have planned is about to have a devastating impact on people and communities up and down the country. People wanted some hope for the future from this Chancellor and this Government, but what they got was a Chancellor and a Government on autopilot. They got a man who refuses to see that the economic storm clouds are gathering around us once more; they got a man who will not admit that his cynical electoral strategy of scaremongering about a sovereign default has collapsed consumer confidence and weakened our prospects of recovery; and they got a man who has been so boxed in by his own political strategy that his only resort is to glory in the folly of sticking to his plan A, even if all the economic indicators show that it is hurting but it is not working.

Of course we accept that the deficit has to be reduced, but we disagree with the sheer speed and scale of the Government’s cuts plan. In the Chancellor’s self-styled emergency Budget last June, he embarked on a risky and extreme experiment with our nation’s future. He chose to cut the deficit deeper and faster than was economically necessary; he chose to cut it faster than any other major economy; he chose to order the largest spending cuts since the second world war with a nasty ideological relish; and he was cheered to the rafters by Members of both coalition Government parties in a distasteful display of enjoyment that none of us on this side of the House will ever forget.

Some £80 billion is to be sucked out of the economy in the next four years, in cuts to services and the public sector. With tax rises included, £126 billion in all will be withdrawn from the economy by 2015. Only Iceland and Ireland are cutting faster than this Government have decided that we should cut, and now the Chancellor is claiming, with his usual modesty, that he has rescued the British economy, but aside from his own vainglorious rhetoric, what are the facts actually telling us? The truth is revealed by the Office for Budget Responsibility: there has been a significant deterioration in economic performance since the Chancellor’s slash-and-burn Budget last year. As its latest forecast demonstrates, things are getting worse, not better, and that is before most of the cuts have really begun to bite.

After just 10 months of the Chancellor’s fiscal masochism, virtually all the important economic indicators are now moving in the wrong direction. Consumer confidence is at a 20-year low; inflation is at more than twice the Bank of England’s target; the VAT rise has pushed prices up, and the OBR expects them to rise even further this year; unemployment, which was falling last year, is now at a 17-year high—in my constituency, 22 people are now chasing every job; and the growth forecast has been downgraded again and again and again.

Because of this lower growth and higher inflation, the Government have admitted that they will have to borrow £46 billion more than they planned in November. We warned the Chancellor that huge and rapid cuts in public expenditure risk choking off growth, thereby increasing unemployment, and that that might make the deficit worse rather than better. Last March—conveniently before the election—the right hon. Member for Twickenham (Vince Cable), now the Business Secretary, said:

“We must not cut Government spending too soon and risk plunging a fragile recovery back into recession. Cuts without economic growth will not deal with the deficit”.

I could not agree more. It is a pity that he, like the rest of his party, is now supporting an economic policy which is the exact opposite of the one that he campaigned for.

We warned the Chancellor last year that he needed a growth strategy, alongside any deficit reduction plan, if the economy was to be restored to balance without doing untold damage to our social infrastructure. We waited and waited, but meanwhile growth faltered and then stalled. The economy shrank by a shock 0.5% in the last quarter of 2010. The Chancellor crossed his fingers and blamed the snow, and the Government’s spin machine then cranked into action. Just two weeks ago, at the Tory spring conference, the Prime Minister and the Chancellor promised to make this a pro-growth Budget. The Chancellor said that it was going to be “unashamedly pro-growth” and the Prime Minister went further, by declaring that it was going to

“tear down the barriers to enterprise and be the most pro-growth Budget this country has seen for a generation.”

If we look behind all the Government hype and the propaganda, and check out what really happened last week, we see something a bit different. The Chancellor actually came to this House and downgraded the growth forecasts—they are down this year to 1.7% and down next year too. Far from being a pro-growth Budget, this is actually a no-growth Budget which puts Britain into the slow lane. To distract attention from that inconvenient fact, the Government published, alongside the Budget document, “The Plan for Growth”, a self-styled “urgent call for action”. But this much-trailed growth plan achieves nothing in the short term, when growth is in such short supply. It consists of loud invocations of motherhood and apple pie, and it rehashes the familiar laissez-faire mantras shared by the Orange Book Liberals and the Thatcherite Tories. It is nothing more than a mish-mash of reheated, failed 1980s Thatcherite orthodoxy.

The passages on the Government’s growth strategy in the Chancellor’s speech were so riveting that the Justice Secretary actually fell asleep on the Front Bench right in the middle of them. We sympathised with him, but the 50 punters who had put money on at odds of 16:1 that he would sleep during the Budget were richly rewarded. Now I hear that Ladbrokes has slashed the odds that there will be a double kip from him some time in the next year.

The Office for Budget Responsibility was almost as unimpressed as the Justice Secretary, because page 39 of its report on the Budget states:

“we judge there is insufficient evidence at this stage to adjust our trend growth assumptions in light of these measures.”

In other words, despite all the ministerial proclamations, all the Government propaganda and all the cynically pre-arranged third-party endorsements, this is still a no-growth, go-slow Budget.

The Chancellor’s extreme austerity programme will suck demand out of the economy, and if growth continues to falter the plan will be irrelevant. We know that inflation is higher than it should be and unemployment is higher than it should be: there will be 30,000 fewer jobs this year and 80,000 fewer next year, and 200,000 more people will be unemployed by the end of this Parliament. I do not know what the Secretary of State for Work and Pensions finds so amusing about that.

Two weeks ago, at the same Tory conference where the Chancellor promised to make his Budget unashamedly pro-growth, he also promised to listen to public concern about the cost-of-living crisis. It is all very well listening, but it is real help that people need. Instead, we got a Budget in which the Chancellor gave a little with one hand but took away much more with the other. The well-trailed £45 tax cut next year is more than clawed back by the decision to raise national insurance thresholds only by the lower consumer prices index. That is a small-print stealth tax that, funnily enough, was not briefed in advance to the press but will raise more than £1 billion extra in income tax by 2015. The VAT rise is already costing a family with children an extra £450 this year alone. The banks have been given a tax cut while families and children bear the brunt of the spending cuts. Even the Chancellor has almost stopped claiming that we are all in this together and he can hardly keep a straight face when he does.

Pensioners were excluded from the tax cut con, only to discover that their winter fuel payment will be lower, too, by £50 or £100. The Treasury explained that that was not actually a cut but merely allowing a top-up to expire, but it seems that no one had told the Deputy Prime Minister that. He clearly had not even bothered to read the Budget that he had just signed off, because during a radio phone-in last Thursday he was questioned about this and claimed at first that winter fuel payments had been increased. He then resorted to accusing my right hon. Friend the shadow Chancellor of frightening people by

“throwing around a lot of…wild allegations”.

The trouble for him was that those wild allegations were actually part of his Government’s plans and, worse still, he had agreed to them. We all know that he will not accept any paperwork after 3 o’clock in the afternoon, but I really think he ought to have made an exception for the Budget. He should really learn that the pesky details in big documents can sometimes be quite important.

The headline-grabbing centrepiece of the Budget was the 1p off petrol duty announced with a great flourish and much waving of Order Papers on the Government Benches, but that is a paltry reduction when compared with the 3p a litre increase that the VAT rise has already added to fuel bills. I wonder how many Members of the parties opposite would have cheered quite so loudly if they had read the small print and understood that the Chancellor has merely delayed and not cancelled future fuel duty increases. Duty is due to rise by 3p a litre on 1 January and to rise again in August next year. VAT at 20% will only make it worse.

There is also mounting evidence that the fuel duty cut has not been fully passed on to motorists, despite the Chancellor’s pledge to watch “like a hawk” to see that it was.

[Dame Anne Begg (Aberdeen South) (Lab)]

What does my hon. Friend make of today’s announcement that Statoil, a Norwegian company—from a country where tax is not exactly low—is to put on hold its £3 billion-plus North sea development as a result of the Budget increase in oil and gas tax?

[Ms Eagle]

This smash-and-grab raid on the oil companies to pay for the tax cut appears to be unravelling. Certainly, sudden changes to tax regimes without notice have big implications for investment. The Government need to pay particular attention to what the oil companies are saying, especially about their investment intentions. Having a North sea oil regime that can switch and is not set, because of the $75 a barrel oil price, which is going to change the regime again, may be particularly damaging. We will have to take a close look in Committee at how the Government intend to implement this mechanism.

[Dame Anne Begg]

The offshore oil and gas industry, which was a growing industry and could have been the driver that took the country out of recession, tells me that the one thing it needs to invest in this country is stability, but the fuel duty stabiliser will not give it that stability. Indeed, it will do the very opposite and make things even more volatile.

[Ms Eagle]

My hon. Friend makes a very important point. We will have to look at precisely how the stabiliser mechanism will work. How long will the oil price have to be at $75 a barrel to trigger it and how will that be measured? What will be the implication for future investment decisions? We know that there is a great deal of competition in the oil and gas industry for the use of very expensive infrastructure. My hon. Friend has made very important points and we will be watching like a hawk—to use a phrase that has already been used—to see about the practicalities of the announcement.

I note that the Government are reportedly urgently considering handing out hundreds of millions of pounds in tax breaks to compensate energy companies that are apparently considering shelving existing plans for further investment in UK gas fields or raising domestic prices still further to make up for profits lost. By

“squeezing the maximum amount of tax revenue from Britain’s oil and gas assets,”

the Chancellor

“is putting further offshore investment at risk…He’s more interested in cash today than investment tomorrow.”

That was the current Chancellor speaking in 2007, but now he is in Downing street he seems to be ignoring his own advice. The truth is that this policy was cobbled together at the last minute, the OBR did not have sight of it and now it is descending into chaos. I must issue a warning to the Chief Secretary to the Treasury, because I read over the weekend that he is being blamed for this incompetent piece of policy making on the hoof—apparently it was all his idea. I would be watching my back if I were him. We now see the reality that the fuel duty cut was a classic Tory con that really will not help anyone at all.

Meanwhile, the small print of the Tory-Lib Dem Budget shows that the NHS will be hit with a £1 billion cut in real terms, breaking the Prime Minister’s pre-election poster pledge that he would not cut it. The OBR’s new inflation forecasts reveal that spending on the NHS will fall for the next two years for the first time since records began—that is before the Government waste billions more on a reorganisation that nobody wants. The Tories drained the life out of the NHS in the 1980s and now they are back and are trying to do it all over again.

We were told that the Budget was all about growth and the Government promised to help Britain’s hard-pressed families with the cost-of-living crisis, but they have failed dismally on both counts and today the Bullingdon boys have sent along a Lib Dem whipping boy to defend it. If the Chancellor has “Je ne regrette rien” playing on his iPod, then the Chief Secretary has “Puppet on a String” playing on his. Just last year he promised his party’s Scottish conference:

“In our first year in government, we will invest to create new jobs and boost the recovery.”

Well, 10 months later and two Budgets in he has done precisely the opposite. The fact is that this Government’s extreme experiment with the British economy is failing and British people are suffering.

This Budget was a dodgy Conservative con that was signed off by the ever-compliant Liberal Democrats—the human shields of British politics. Far from making life easier for people, the Budget will make life tougher. The Government’s agenda of cuts, cuts, cuts is ruining lives and dividing the nation. It seeks to pit the private sector against the public sector, the young against the old, the north against the south, the weak against the strong, and the rich against the poor. We reject the politics of division. This is the wrong Budget in tough times. The Government should come back and have a second attempt which does not cut too far, too fast. That is why we will vote to reject the Budget tonight.

--- Later in debate ---

[Danny Alexander]

I am not going to give way to the right hon. Gentleman. I must press on. I have answered his point.

Small businesses, in particular, have been the innocent victims of the credit crunch. They have seen the flow of affordable credit dry up, which is why we have agreed with the banks a £10 billion increase in the availability of—

[Ms Angela Eagle]

Will the right hon. Gentleman give way?

[Danny Alexander]

I will give way to the hon. Lady.

[Ms Eagle]

Will the Chief Secretary turn his attention to page 44 of the Red Book, and the “Measures announced at Spending Review 2010”? Measure d states:

“Disability Living Allowance: remove mobility component for claimants in residential care.”

It is scored to save £155 million in 2013-14, £160 million in 2014-15 and £160 million in 2015-16, so how could the Prime Minister say that it was not happening when it is still scored in the Red Book?

[Danny Alexander]

As I said in answer to the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke), that question is a subject of the review that my right hon. Friend the Secretary of State for Work and Pensions has announced and we are carrying out. We have made it very clear that we are looking at that question, and we will provide the mobility component at a level that is necessary in care homes when we have removed the overlaps and the issues quite rightly identified.

The Government’s third ambition for growth is to encourage investment in exports as a route to a more balanced economy. In “The Plan for Growth”, which we published last week, we set out specific measures to help out a range of businesses. In life sciences, which the hon. Member for Macclesfield (David Rutley) mentioned, we will radically reduce the time it takes to get approval for clinical trials; in our digital and creative industries, we will improve the intellectual property regime; and in manufacturing, which the hon. Members for Wolverhampton North East (Emma Reynolds) and for Warrington South (David Mowat) addressed, we are launching Britain’s first technology and innovation centre for high-value manufacturing, creating new export credits to help smaller businesses, doubling the limit on the capital allowances for short-life assets from four years to eight years and investing in infrastructure, which my hon. Friend the Member for Manchester, Withington (Mr Leech) referred to. These are some of the measures that we are taking to ensure that growth is more balanced and more sustainable, and supports employment across a wide range of sectors.

On green growth, first, we have announced that we will become the first country in the world to introduce a carbon price floor for the power sector. The price will start at around £16 per tonne of carbon dioxide in 2013 and move to a target price of £30 per tonne in 2020. That will provide the incentive for billions of pounds-worth of new investment in our dated energy infrastructure.

[Ms Angela Eagle]

rose—

[Danny Alexander]

I will not give way.

The second step that we are taking is to create the green investment bank, as the hon. Member for Stroud (Neil Carmichael) mentioned. As part of the spending review we committed £1 billion to this new facility. Last week, we announced £2 billion more, funded from asset sales and underwritten by the Treasury. This is another step to ensure that we are the greenest Government ever.

[Ms Eagle]

rose—

[Danny Alexander]

I will not give way.

That leads me to our fourth ambition for growth—a better educated work force who are the most flexible in Europe.