Cathy Jamieson
Main Page: Cathy Jamieson (Labour (Co-op) - Kilmarnock and Loudoun)Department Debates - View all Cathy Jamieson's debates with the HM Treasury
Finance (No. 2) Bill
Cathy Jamieson Excerpts(11 years ago)
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The Temporary Chair (Mr Jim Hood)
I call Catherine Jamieson to move the motion.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I beg to move, That the clause be read a Second time.
Thank you, Mr Hood, for using my full name. My mother will be most impressed, as she is the only other person on the planet who addresses me as “Catherine”, rather than Cathy. She will be delighted.
I am sure that many Government Members are interested in the rate of VAT and perhaps rather relieved that they are not in the same frenzy over it that they were when we debated the Finance Bill this time last year. I see some hon. Members agreeing, because I think that we all learned far more than we ever wanted to about ambient temperatures, pasties and the impact of the VAT proposals on not only hot food, but caravans, churches, sports nutrition products and so on. Perhaps Government Members will be more relieved to talk about our VAT proposals.
We have tabled new clause 2 because, as has been said in earlier debates, we have concerns about the rising cost of living and its impact on ordinary people. In the last debate we heard many passionate speeches from Opposition Members, particularly on how the rising cost of living is impacting on their constituents, and I was struck by the number of Members who referred to constituents having to rely more and more on food banks. Having moved on from the debate on hot food, it is sad that we are now talking about more people having to rely on food handouts. Those handouts, of course, show the generosity of many people in our local communities, and I applaud them for the work they are doing, but surely in this day and age people should not have to rely on such initiatives.
Mr John Redwood (Wokingham) (Con)
Can the hon. Lady tell me her definition of the “strong growth” that her new clause says would trigger VAT being put up again?
Cathy Jamieson
I thank the right hon. Gentleman for his intervention. Given that I have not really got under way with all the details of the new clause, I will come to those points later. However, I will say that one thing we know is that the Office for Budget Responsibility has halved the growth forecast for this year and downgraded it again for next year, so we are not in a situation of strong growth. The Government really have to take responsibility for that, because since the Chancellor’s spending review in 2010 the UK economy has grown by just 0.7%, compared with the 5.3% forecast at the time. I do not think that anyone could suggest that that was particularly successful. Last year, of course, the UK went through a double-dip recession and the economy shrank by 0.3% in the last quarter.
Mr Redwood
The hon. Lady is quite right that growth has been very disappointing and that the forecasts have been revised downwards, but we are debating her policy, which is that VAT should go up again when the UK economy returns to “strong growth.” It is a very simple question: can she tell us what strong growth would trigger an increase in VAT?
Cathy Jamieson
As I have indicated to the right hon. Gentleman, whose views I listen to and who always raises pertinent questions, I will come to that, but the Government must also take responsibility for, as we heard in the previous debate, trying to give all sorts of reasons why the economy has not recovered. As my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) suggested, we were surprised to hear that the latest reason given seems to be the issue of the 50p tax rate, rather than looking at the situation in the round. I want to talk a little more about some of the issues that the economy currently faces and why we think our proposal is one way of stimulating the economy and looking to the future in order to help local businesses.
The Temporary Chair (Mr Jim Hood)
Order. I say to the hon. Gentleman, in case he is going to make any further interventions, that he should make them a bit shorter and get straight to the point.
Cathy Jamieson
I am interested to hear that the hon. Gentleman has some sympathy with our proposal—I suspect that we might not have the same agreement over some of the other issues up for debate today. He raises important issues. That is why, through new clause 2, we want to ensure that a report would be produced. We are calling on the Government to do that now, rather than put it off into the future. The Government could put in place monitoring measures now; that would allow for a temporary VAT cut, which would help stimulate the economy.
Borrowing to pay for the cost of economic failure has risen—it is now forecast to be £245 billion more than planned at the time of the spending review. That, of course, excludes the one-off transfers of the Royal Mail pension fund and asset purchase facilities. The Government are not going to balance the books by 2015 as the Prime Minister promised. National debt as a percentage of GDP is not now forecast to start falling until 2017-18. It is important to remember that, as it breaks one of the Government’s own fiscal rules.
As this week’s labour market statistics show, halfway through a Parliament, Britain is still being scarred by rising unemployment, an issue raised in earlier debates by many hon. Members, who brought attention to what was happening in their constituencies in the real world.
Not only are more people unemployed than at the election, but the number is rising. Earlier, my hon. Friend the Member for Newcastle upon Tyne North referred to the rising numbers: 70,000 more people are on the dole now than last month; long-term unemployment has risen yet again; and, most damagingly of all, the next generation is paying the brutal price, with youth unemployment up yet again, by 20,000.
People are no longer giving the Chancellor the benefit of the doubt. I think I said that about this time during last year’s debate; I felt that at that stage the public were beginning to lose confidence in the Chancellor’s economic strategy. This week, we have to take note of what the International Monetary Fund’s chief economist said:
“In the face of very weak private demand, it may be time to consider adjusting the original fiscal consolidation plan”.
Mr Stewart Jackson (Peterborough) (Con)
I am following the hon. Lady’s speech with interest and read the new clause with greater interest. She really has not addressed the issue raised by the hon. Member for Dundee East (Stewart Hosie). The new clause represents a spending commitment. Given that she is not able to specify what “strong growth” means, how will she fill the fiscal gap? Will she increase another tax, and if so which one? Alternatively, which departmental budget would be cut to pay for the measure?
Cathy Jamieson
I thank the hon. Gentleman for his intervention. We argue that the new clause would be part of a package of measures. We have heard about other initiatives that could be brought forward, and it is important to recognise that others in industry and business are also saying that one way to stimulate the economy would be to introduce at least a temporary cut in VAT. There are serious questions to be asked about the other issues, but if we could get unanimity about this issue, it might be possible for the Government to consider it and bring forward further proposals.
In the Budget, the Government had the opportunity to change course, make the necessary changes and kick-start the economy. Sadly, however, more and more commentators are reflecting that all we got was more of the same from the downgraded Chancellor. As a result, the cost of living for people up and down the country is rising day by day. The economy is flatlining, inflation remains high and food bills are rising. Energy bills are soaring, thanks to the Government’s failure to break the stranglehold of the big six energy companies. The Office for Budget Responsibility’s most recent figures show that people will be worse off in 2015 than when the Government came to office.
The reality for people is that real wages are now £17,000 a year smaller than they were in 2010. To add to that hardship, any benefit that hard-working people might have received from the Government’s much trumpeted rise in the personal allowance has been uniformly swept aside by the raft of tax and benefit changes that the Government have made since 2010. Those changes mean that families will be an average of £891 worse off in the new financial year, according to the analysis of figures made by the independent Institute for Fiscal Studies—even more money out of the pockets of hard-working people up and down the country.
The truth is that even if those tax and benefit changes had never happened, any benefit from the rise of the personal allowance would have been wiped out by the Government’s 2011 VAT rise from 17.5% to 20% alone. Research from the TUC confirms that by the time of the next election, families of all incomes will lose more from the VAT rise than they will gain from the increase in the personal allowance and the changes to national insurance, with low-paid workers losing up to four times more per year from the Government’s increase in VAT than they will gain from the raising of the personal tax allowance to £10,000.
Neil Parish (Tiverton and Honiton) (Con)
I understand that times are tough, partly because we have to try to bring the economy together after the last Labour Government. The hon. Lady said that individuals are £17,000 worse off than they were. I cannot understand that. Has she added on too many noughts, or what?
Cathy Jamieson
I intended to say £1,700; if I said £17,000, I apologise. Obviously, Mr Hood, I need to put my spectacles on when I read the numbers. I am glad that the hon. Member for Tiverton and Honiton (Neil Parish) is accepting my apology.
Cathy Jamieson
I want to make a bit more progress. I come back to the point raised by the hon. Member for Tiverton and Honiton about times being hard and the idea that somehow the problem is to clear up the mess left behind, as he described it. People out there in the real world are getting tired of hearing that same old mantra. The Government have responsibility for what is happening now. They have to take responsibility for policy decisions taken in Budgets that impact on the lives of ordinary people.
I go back to the research from the TUC. Some Government Members may look sceptical about it, but I assure them that many ordinary people in my constituency and those of my hon. Friends recognise the value of the work that the TUC and trade unions are doing in standing up for those finding that their individual and collective incomes are being affected.
The TUC research considers the impact of direct and indirect tax changes over the Parliament. It shows that a household with an average weekly income of £195.92, the lowest income band for working people, will gain £1.09 a week—that figure is underlined, so I have not made an error—from the above-inflation rise in the personal allowance by 2015. However, and importantly, the same family will lose £4.26 a week through the increase in VAT, which went up in January 2011, leaving them with a total annual loss of £164.84 as a result of the Government’s tax policy.
Many on the Government Benches may say, “Well, that is not a huge amount.” I repeat what I have said in previous debates: it may not be a huge amount for someone with a decent job and income—I include all of us here in that—but it is a huge amount for those trying to have a reasonable standard of living and ensure that their families have food on the table and that their kids have clothes.
Mr Jackson
The hon. Lady is being most generous in giving way. Surely it is churlish of her not to concede that most independent specialists, such as the Institute for Fiscal Studies, have said that as a result of the fiscal changes since 2010 the biggest impact has been felt among the richest 10% of earners in the country. Is it not fair to put that on the record, too?
Cathy Jamieson
I hope I am not being churlish in hoping that the hon. Gentleman will understand that most of those independent commentators also point to what is happening to those on the lowest incomes. Opposition Members feel strongly that those people are taking a disproportionate share. It is not a case of, “We’re all in it together.” When ordinary people see millionaires and those on the highest incomes getting a tax break or a tax cut, it seems unfair to them that their wages or incomes are hit hard by the Government’s policies.
Andrew Gwynne
My hon. Friend is absolutely right to call for an assessment of the cost of living. Does she accept, though, that it should not be restricted to the impact of the fiscal changes announced in the Budget but should look more widely at the effect on families of expenses such as increasing fuel prices, increasing transport costs, and interest payments on payday loans?
Cathy Jamieson
My hon. Friend makes a valuable point. So that I cannot be accused of being churlish, let me say that we did welcome the action taken on fuel duty, but if VAT were reduced, as we are suggesting, that would provide a further reduction in fuel costs, which would make a difference to families.
My hon. Friend mentioned payday loans. Many people will be hard hit, with not only those out of work but those in work now finding it much more difficult to manage from month to month. The worry is that many more might feel the need to try to get such loans, believing that they will help but finding themselves further caught in a downward spiral. This is a very serious problem. In my constituency in the past couple of weeks, I have heard about people in that situation, which will be very familiar to other hon. Members. Perhaps equally worryingly, I have heard people say that they fear the impact of the bedroom tax will mean that, for the very first time, they might have to rely on food banks. The saddest aspect is that many of them will not be able to do that over an extended period because food banks are supposed to deal with the crisis points rather than sustaining people, and perhaps folk have not yet fully understood that. They are clutching at any hope to try to maintain their standard of living. James Plunkett, the director of policy at the Resolution Foundation, has stated:
“The squeeze will look worse over the next few years than previously feared”.
With all that going on, it is no wonder that working people feel that their lives are going backwards, because they are.
All this has had an undeniable and damaging knock-on impact on our economy and on our high streets and businesses up and down the country. That is why, for over a year and a half, Labour has been calling on the Government temporarily to reverse VAT back down to 17.5%. That would put about £450 back into the pockets of a couple with children, help to ease the squeeze on our constituents, and give our economy a much-needed stimulus. That is why we are calling for it again today. When consumers have less cash in their pockets, our high streets, local businesses and economy suffer. These are tough times for businesses.
Mr Iain McKenzie (Inverclyde) (Lab)
My hon. Friend has noted a number of ways in which people are suffering up and down the country. Does she agree that society suffers the most when the gap widens between rich and poor, that we are now seeing it stretched to the absolute limit, and that the Government either do not recognise that or choose not to do so?
Cathy Jamieson
My hon. Friend is a powerful advocate for the people in his constituency who are bearing the brunt of the Government’s policies, and he is absolutely right. It is important that there is no further widening of that gap. This is not just about the money in people’s pockets, important though that is, but the fabric of society and the relationships that people build in their local communities.
It is important to consider the impact on our high streets. For generations, local businesses have offered jobs and the convenience of shopping in the local high street, and have been involved in providing services there. They are now under pressure from the flatlining economy. Consumer spending has been constrained by high inflation and stagnant wages, leading to a 6% fall in real disposable income in 2008, with a devastating impact on our local high streets. Shops are lying empty, with a threefold increase in that trend since 2008. Household names such as HMV, JJB Sports, Blockbusters and Comet have been forced to close a large number of stores or to shut up shop completely. It is estimated that last year 1,800 shops were forced to close—a staggering tenfold increase on the year before. We have heard about the impact on the pub industry, and there has been a call for the VAT rate to be considered in that context.
Not only is retail suffering, but businesses of all kinds up and down the country are feeling the impact of the Government’s failed economic policies and the flatlining economy. That has led, and is still leading, to a lack of confidence, particularly in the construction sector, with many arguing that more must be done to get people back to work and to get projects under way. Sadly, Project Merlin did not deliver the new era of loans that it was supposed to. We learned this week that lending to UK businesses fell by £2 billion in December alone, and it is down by £18.6 billion over the past year, while businesses continue to suffer. The Business Secretary seems perhaps finally to be recognising this failure. He boasted at his party conference that he would set up a Government-backed bank to get billions of pounds to businesses that need it, but we are still awaiting the fine detail of what that bank will do and when and how businesses will be helped. They may well have to wait some time for it to be up and running.
I shall draw my remarks to a conclusion because I want to give other hon. Members the opportunity to raise issues on behalf of their constituents and put the case to the Government. There are things we can do to help businesses and individuals through these tough times. We could reform the funding for lending scheme so that banks can access the lowest rates of funding only if they increase lending to businesses as well as overall lending, and extend it beyond the end of 2013, as currently envisaged by the Government, to the end of 2014. Let us do what every other G8 economy has done and set up a state-backed investment institution to provide credit to small businesses where others will not by establishing a proper British investment bank. As we have argued, that could be done through a new network of regional banks like the German Sparkassen. That would also help to return SMEs to a local relationship with banking, with managers who know what is needed on the ground and have the discretion to make local lending decisions. Regional banks are committed to their regions and in touch with local business. We have called for, and will continue to call for, the Government to bring forward these measures to help boost our businesses and get our economy moving again.
Even if the Government accepted all those proposals and they were acted on today, the benefits would take some time to come to the fore and to be felt. However, the one step we could take now that would immediately make a difference would be for the Government to agree to reduce VAT to 17.5% to put money back into the pockets of hard-working people and give a stimulus to local economies. That would put something back into the pot to help the local businesses we have talked about, whether by reducing fuel costs or stimulating the economy such that people feel that they are able to spend again. We need to get consumers back out there spending their money, supporting our high streets and businesses, and helping our economy to grow again. It is for the Government to explain to the people of the UK why they will not listen to the arguments that have been advanced and are not prepared to take this action as a stimulus to the economy and to help to get things moving again.
Mr Redwood
The proposed new clause is designed to stimulate strong growth, which I suspect everyone in this House would welcome. I trust that the Government are in the market for ideas that would stimulate strong growth, but my sad conclusion is that a sudden cut in VAT of undefined duration is neither a sufficient condition for stimulating strong growth in the economy nor even a necessary precondition of such stimulation.
We have to ask what the alternative is to the Opposition’s recommendation, which we all agree is well-intended because they wish to see strong growth. I submit that the prime thing the Government need to do to raise the growth rate and get over this period of extremely disappointing performance is mend the banks. It is surprising that the official forecasters at the Office for Budget Responsibility thought there would be strong growth over the past three years, because they knew that the official policy on the Royal Bank of Scotland, which is largely state owned, was to push the bank through the most enormous slim-down, a continuation of the policy begun in 2008 when it was largely acquired by the state under the previous Government.
So far, £900 billion of assets and liabilities have been removed from RBS’s £2.2 trillion balance sheet since the state foolishly took them on. How can we expect the British economy to grow rapidly when its leading bank is going through a forced slimming programme of £900 billion? This is big money, even for a £1.5 trillion economy. We spend most of our time in this place discussing the odd £5 billion or £10 billion—we are now billionaires in our discussions rather than millionaires— but these figures have very little overall impact on a £1.5 trillion economy, whereas £900 billion is eye-poppingly large. We have to deal in trillions now if we want to see the things that really make a difference to the economy. I submit that the main reason why our economy is not growing rapidly is that the banks, led by RBS and abetted by HBOS, have been on a very sharp slimming programme. It is true that some of those assets were foreign and a lot of them were derivatives and so on, but overall, this massive slimming programme has clearly placed enormous pressure on the UK economy.
In addition, this place, as part of the political debate, has discovered that bankers are even more unpopular than politicians, so it has taken great delight in trying to do as much damage as possible to the banking industry. I understand that the banking industry did not do well for itself—I am enough of a politician to realise the politics of all this—but if we target one of our biggest and most successful industries of the previous decade and force it into slimming down measures and tax it more, we should expect a drop in output, and that is what has happened. One of the reasons why we do not have much growth in this country is that our lead sector of the previous decade has taken such a big hit and is now so politically unpopular that pressures remain to prevent it from growing and recovering as some of us would like.
A third area that has caused considerable problems is oil and gas. We cannot legislate to change the age profile of our reservoirs, many of which have aged a lot recently in terms of the amount of oil and gas left to exploit. There are arguments about other tax policies we could pursue to stimulate more finds and exploitation, but some of the big, successful reservoirs of previous years are now ageing, so whoever was running the country was going to experience a reduction in output from another of our high-value-added sectors—oil and gas—and that was bound to hit the growth rate.
What more can we do to overcome those difficulties in two of our lead sectors? Tax measures proposed by other clauses that we will discuss later could be helpful. Broadly speaking, the lower the tax rate, the better from the point of view of stimulating growth, and there have been some measures in the right direction.
The problem with the proposed new clause’s VAT measure is that it is so expensive and I do not think we would get a big enough return for the colossal loss of revenue that it would cause. We have already heard an estimate of about £10 billion, but the Labour Opposition have given us no figures whatsoever. They have not told us how much it would cost, how long it would be a concessionary rate and on what conditions they would return to the new rate. That weakens their case, because if they wish to make this a serious policy, they need to cost it and explain by how much the deficit would rise in the early stages and at what point the growth would accelerate enough to start to generate serious revenues from increased activity.
The evidence seems to be that, whereas it is possible to do serious damage to the revenues generated by income tax and capital gains tax if the rates are put up too much—I fear that that is what has happened under the Labour and coalition Governments in recent years—it is more difficult to depress the revenues of VAT. Indeed, the increase from 17.5% to 20% actually produced some increase in revenue, despite the poor performance of the economy, so the argument that cutting the rate generates more revenue—economists call it the Laffer curve argument—does not apply in the same way as it does to taxes geared towards gains and income, whereby more realistic rates would do two good things, namely generate more growth and, therefore, more tax revenue. I fear that the problem with the VAT proposal is that this short-term measure would definitely increase the deficit and that the stimulus from VAT would not be sufficient to replace the lost revenue in any serious period of time over which this experiment might be tried.
Mr Gauke
I would give way to the hon. Gentleman, but he was not here for the early part of the debate. He may not have read the new clause, but the policy depends on the definition of “strong growth” and the Labour party has not provided a definition.
Secondly, the cost of this measure will be £12 billion to £13 billion a year. How will that be paid for—an issue raised by my hon. Friend the Member for Peterborough (Mr Jackson)? Will it be through higher taxes, a reduction in spending or—as we believe—an increase in borrowing? What consideration has been given to the impact on the cost of borrowing? A 1% increase in Government bond yields would add around £8 billion to annual debt interest payments by 2017-18 and result in an increase of £12 billion in households’ mortgage interest payments—the equivalent of £1,000 for a household with an average mortgage in its first year. Has the Labour party considered the consequences of that discretionary fiscal stimulus?
What is Labour’s view on the profile of deficit reduction? We believe that over the whole deficit reduction period, 80% should be achieved through spending cuts and 20% through tax increases. The Darling plan had two thirds on spending cuts and one third on tax increases. What is the view of the Labour party, given that it has put in front of the Committee a proposal for a £12 billion or £13 billion tax cut? Does it suggest that the ratio should lean more towards public spending cuts rather than tax rises? What assessment has Labour made of the impact of different taxes on the economy? My right hon. Friend the Member for Wokingham mentioned the fact that VAT is, as many economists would argue, less harmful to growth than other taxes. Is that the view of the Labour party? Why has VAT been picked as a particular issue?
The Labour party does not come forward with policies often, but I am pleased that it has done so today so that Labour Members have the opportunity to tell the Committee exactly what their policy is. They can explain that policy, and if they would care to answer those questions the Committee will be able to judge whether it should support new clause 2. My advice to my right hon. and hon. Friends is that this is just more of the same from the Labour party. It is more borrowing and more debt, and it fails to get to grips with the fiscal situation and the mess in which the Labour party left this country and which we, the coalition Government, are addressing.
Cathy Jamieson
It is an interesting experience to see Ministers ask a whole range of questions without addressing why we introduced the proposal. The Minister failed to recognise work that shows how VAT hits those on lower incomes disproportionately hard. He shakes his head but we can point to research which backs that up and businesses that say—I have spoken to people personally as I am sure have other hon. Members—that a temporary cut in VAT would help to stimulate the economy and growth. The Minister asks what the definition of strong growth would be. It certainly is not what this Government have provided.
Mr Gauke
The Opposition propose a new clause that depends on the definition of “strong growth” but do not tell us what that means. They object to questions being asked about what the new clause means. It is the hon. Lady’s new clause, so will she tell the Committee what she is getting at, why she has chosen VAT, what the fiscal implications will be, and what will happen if borrowing goes up by £12 billion or £13 billion?
Cathy Jamieson
I am sure the Minister has heard what I have said. We believe that the new clause is one measure that can be introduced now to ensure that there is a stimulus in the economy.
The Government believe that consistently high rates of VAT are helpful to the economy. The Opposition disagree and believe there is an alternative. I find it interesting that the Minister constantly presses Opposition Members to define “strong growth” when it is clear that the Government’s policies are introducing something that is far from strong growth. It is important to recognise that, once again, the Opposition are standing up for the people whose incomes are being squeezed and who are being hit hard by the Government’s policies. The Minister can shake his head as much as he likes, but he knows in his heart of hearts that the Opposition are speaking out for the people who are hit hardest by the Government’s policies. That is why I intend to press new clause 2 to a Division.
Question put, That the clause be read a Second time.
Cathy Jamieson
I beg to move amendment 10, page 2, line 11, at end add—
‘(3) The Chancellor shall produce a report on subsection (1) which shall include an assessment of the impact of changes to taxation on the living standards of basic rate taxpayers which shall be placed in the House of Commons Library within three months of Royal Assent.’.
The Temporary Chairman (Sir Roger Gale)
With this it will be convenient to discuss clause 3 stand part.
Cathy Jamieson
It is a pleasure to be back at the Dispatch Box. Had amendment 4 been selected for debate, we could have engaged in further discussion about the mansion tax and the 10p income tax rate. However, I think that some of the broader issues that I shall raise in relation to clause 3 are relevant to that subject.
Clause 3 sets the 2013-14 basic rate limit for income tax at £32,010. In doing so, it overrides the indexed amount, which would otherwise have been set at £35,300 as announced in the 2012 autumn statement. The explanatory notes on the clause state that it is
“part of a package of measures”.
I shall say something further about the implications of that package of measures as we go on. Effectively, the rise in the personal allowance from £8,105 to £9,440 for this year and the rise to £10,000 from 2014, however welcome they are and regardless of the difficulties raised concerning those who will not necessarily benefit, will in part be clawed back by the measures implemented in this clause and a further reduction in the basic rate limit next year to £31,865.
Mr Gauke
As the Financial Secretary to the Treasury points out, people should be angry about the state of the public finances left to us by the Labour party. I described Labour as the “repository for people’s anger” and as a “simply fellow-traveller in sympathy”, not leaders, because those were the words of the last successful leader of the Labour party, Tony Blair. I am afraid that Labour is too often in its comfort zone. We know that there are pressures on living standards, but ignoring the deficit is no way to deal with them. The Government are prepared to take those difficult decisions, while Labour is failing to address them.
Cathy Jamieson
I am disappointed to hear the Minister resort once again to the same tired old mantra.
We have listened this afternoon to some passionate speeches from Opposition Members talking about the very real experiences of their constituents, and it is disappointing that once again the Government choose not to recognise them. They do not seem to recognise their responsibility for the deficit and debt now—for the fact that they have to borrow more, for the lack of growth, for the fact that people are not getting back into work in the way we would want and for the problems with living standards.
Sadly, we saw some crocodile tears from the Minister, who on the one hand wants to say, “Yes, we understand the impact on people”, but on the other is not prepared to do anything about it. Opposition Members are rightly angry on behalf of their constituents. They are angry about the bedroom tax and about the fact that the Government have chosen today not to do something on VAT that would have made a difference to people in our communities who will also be angry that the Government will not even accept a mild-mannered request, as I described it earlier, for a report on the impact of the Government’s policies on basic rate taxpayers. For that reason, I intend to press the amendment to a vote.
Question put, That the amendment be made.
Mr Reid
I gave way to the hon. Gentleman on the assumption that he would answer my question, rather than coming up with another one himself. I think that we have exhausted this debate. In conclusion, the SNP and Plaid Cymru have not made the case today, so I will not be following them into the Lobby.
Cathy Jamieson
It is always entertaining to hear the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), who moved new clause 3 on behalf of the SNP. I have shared a few flights with him, both short-haul and long-haul, and know how passionately he speaks on these matters. I hope to take a flight to Inverness in the not-too-distant future—[Interruption.] It is great to hear that SNP Members are so keen for me to get to the Labour conference, along with the other Scottish Labour MPs who will be playing a full part in proceedings.
Angus Robertson
Will the hon. Lady give the Committee a sneak preview and explain to Members on both sides of the Committee whether she will be voting in favour of the Scottish Labour party adopting a policy of devolving APD, and will she be joining the SNP in the Lobby later?
Cathy Jamieson
I will not be joining the SNP in the Lobby, and I will explain why shortly. I will first take this opportunity to remind hon. Members who have chosen to portray in a slightly different way the consultation exercise that the Scottish Labour party conducted that there is going to be a consultation process. I suppose it would be too much to hope that the SNP will contribute constructively to that process. I am sure that we will continue to have interesting debates and discussions.
Let me deal with the arguments relating to new clause 3 and new schedule 1. I think that my hon. Friend the Member for Central Ayrshire (Mr Donohoe), who speaks with some authority on these matters, and the hon. Member for Argyll and Bute (Mr Reid) have made clear the limitations of the new clause and the new schedule proposed today. They would not address all the issues on APD, which have been well rehearsed in a number of debates on the Floor of the House. In the Back-Bench business debate held in November last year, hon. Members on both sides of the House raised real concerns about how APD was operating. There was a suggestion that the Government should produce a report, a point I will return to later.
Phil Wilson
We should set aside the selfish approach shown today by the SNP, because APD is an issue not just for Scotland and Northern Ireland, but for many UK regions, including the north-east of England. Durham Tees Valley airport, in my constituency, is under capacity. One way to ensure that we fill such airports to capacity is to have a regional variation in APD. Would that approach not satisfy the whole UK and not just Scotland?
Cathy Jamieson
My hon. Friend makes an important and interesting point. In that debate in November, a number of hon. Members from different parts of the UK acknowledged that there were concerns and there needed to be a fresh look at the issue of APD, not only to tackle congestion in the south-east, but to recognise some of the representations made not only by Scottish and Welsh airports, but by those in the north-east—specifically, Newcastle and Manchester airports.
At that stage, the general view of those representations was that the issue did not affect only Scotland and Wales; it affected the wider UK. Air passenger duty puts a significant amount of funding into the Treasury so it is important to consider the issue in the round. A number of airlines as well as airports have made representations and different business and tourism concerns have been raised.
The issue of the perceived anomalies around the Caribbean destinations was raised as something that ought to be investigated further. The Caribbean Council has raised a number of issues; I believe that it has made direct representations to the Minister, as have some of my Labour colleagues, I understand, in the hope that something could be done.
I am also aware of the “A Fair Tax on Flying” campaign, as part of which more than 200,000 e-mails were sent. Many MPs received hundreds of e-mails during that time from constituents concerned about the issue.
Kate Hoey (Vauxhall) (Lab)
Obviously, my hon. Friend will know that there were special circumstances for Northern Ireland; the Northern Ireland Committee, of which I am a member, made that clear. Does she not accept that the United Kingdom has the highest air passenger duty of any part of Europe and that we should be moving towards taking the duty completely away? In the meantime, does she not feel that devolving the matter to Wales and Scotland might be a way forward?
Cathy Jamieson
I thank my hon. Friend for that intervention. I know how much of an interest she has taken in the issue. My concern is to look at the matter sensibly in the round. The problem is that, if the amendments were implemented, we would once again have a piecemeal arrangement in which something might happen for Scotland and Wales, but nothing would happen across the wider UK.
As SNP Members reminded us, we are a United Kingdom and we want to ensure that we have the benefits of the United Kingdom and continue to do so. The comments from the SNP suggesting that somehow the 2014 referendum was a done deal and that Scotland would be independent are far from the reality on the ground when we speak to the people of Scotland. Without wishing to open up earlier debates, I should say that I have absolutely no difficulty in arguing for a strong United Kingdom. That does not mean that I would support everything that the Government would do, as some suggested. I am sure that the Minister and others know that that is far from being the case.
Mr Llwyd
How closely has the hon. Lady monitored the views of Welsh Members on this issue? The right hon. Member for Neath (Mr Hain), the former Secretary of State for Wales, said:
“Given the Secretary of State’s admission that this measure could be included in a Finance Bill, it could be in the Finance Bill”—
this one—
“in a few months’ time. Then we could get on with it.”—[Official Report, Welsh Grand Committee, 23 January 2013; c. 30.]
The shadow Secretary of State for Wales, the hon. Member for Pontypridd (Owen Smith), said:
“Why on earth are we waiting and not pressing ahead? The people of Wales need growth in the economy.”—[Official Report, Welsh Grand Committee, 23 January 2013; c. 17.]
Cathy Jamieson
The right hon. Gentleman asks how closely I have been monitoring the situation. I have not only been doing that; I have had discussions with a number of Members, including those from Wales. My hon. Friends from Wales, and from Scotland, appear to be able to distinguish between what has been put on today’s Order Paper as a political fix or stunt in order to grandstand and make some wider arguments, and having a sensible debate about the real issues, which is entirely different.
Jonathan Edwards
On a point of order, Mr Evans. Since when has an amendment agreed by the Clerks of this House been a political stunt? This is what the Labour party is saying in the media. It is a disgrace and it brings dishonour on this Chamber. [Interruption.]
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
Order. Everything that is being debated today is in order; otherwise it would not have been selected. It sounds to me like part of the current debate.
Cathy Jamieson
Thank you, Mr Evans.
I have no concern about whether what is on the Order Paper is in order; of course, if the Clerks have accepted it, it is indeed in order. I recall some of the Members who are bickering and heckling from the Back Benches making similar remarks about perfectly legitimate amendments that Labour Members have tabled in the past, and perhaps making similar suggestions. I am criticising not what is on the Order Paper but the fact that hon. Members apparently wish to widen this debate to the whole question of breaking off certain parts of the United Kingdom instead of focusing on the specific issue.
This is a very serious matter, as was highlighted during the Back-Bench debate that we had back in November. At that time, we as a House came to an agreement that the issue should be looked at in more detail. I would be interested to hear from the Minister what action has been taken. Prior to the election, the Conservatives gave a commitment to look at the per-plane duty. The resulting report was not taken forward for very good reasons; certainly, the industry did not support it. Following all the representations that have been made and the Back-Bench debate that took place, is the Minister now in a position to respond to some of the issues that have been raised today and to say whether a further report is necessary?
Pete Wishart
We do not have a clue what the Liberal position on APD is, and the hon. Member for Argyll and Bute (Mr Reid) does not have a clue himself. We have the “jam tomorrow” commission looking at this, but what is the view of the hon. Lady and the Labour party on APD?
Cathy Jamieson
Our view is that we will not support the new clause because we do not believe it is the correct way forward. The Labour party’s position, as already outlined by the leader of the Scottish Labour party, is to put forward some points for consultation. That is the right and proper thing to do. It is of course for the Liberal Democrats to answer for themselves rather than for Labour to do it for them.
Mr Reid
Let me put it on record that I will not support the new clause because, as I said, the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) did not make the case for it. There has been no proper impact assessment. There are mechanisms by which the case could be made, but SNP Members have not done so today.
Cathy Jamieson
I thank the hon. Gentleman. He has put his position firmly on the record in exactly the way I would anticipate, because I know from the work that he has done on the Scottish Affairs Committee and elsewhere that he takes this issue extremely seriously and is not slow to make points that are often not entirely in line with his Government colleagues if he feels that that is the right thing to do. His comments are very important.
I want to finish by probing the Minister further to see where the Government intend to go with this. Although representations have been made, the Government have not committed to anything other than looking at the rates for this year and the year ahead. It is unclear whether they intend to address any anomalies and conduct further work—perhaps building on various independent reports and the work of the Transport Committee—in order to consider the issue in more detail.
Those who tabled the amendments will not be surprised to hear—I suspect they expected me to say this—that we will not support them. I look forward to hearing what the Minister has to say about how we might usefully take this issue forward, not just for the benefit of Scotland, Wales and Northern Ireland, which are very important, but for the benefit of the various regions and areas of England where hon. Members are making a case on behalf of their constituents.
The Economic Secretary to the Treasury (Sajid Javid)
I thank all hon. Members who have taken part in this energetic debate, which has aroused strong passions in some parties.
Clause 183 sets the air passenger duty rates for 2013-14. These rates were first announced at Budget 2012 and took effect from 1 April 2013. The rates have increased by inflation only. Because of rounding, band A has remained the same, so about 80% of passengers have seen no cash-terms increase in the rates they pay.
Clause 184 gives Her Majesty’s Revenue and Customs the power to require payments on account in relation to the APD annual accounting scheme, which was introduced to minimise administrative burdens for the extension of APD to business jets and will improve the fairness of the tax overall. The clause also updates the list of territories in band B of APD to include the new nation of South Sudan.
It is important to recognise the need for the aviation sector to make a fair contribution to the public finances. I remind hon. Members that no tax is levied on the fuel used in international and almost all domestic flights. Moreover, no VAT is levied on international flights and, unlike many other countries, the UK does not charge VAT on domestic flights.
It was in recognition of the fact that aviation was under-taxed compared with other sectors of the economy that APD was first introduced in 1994. It was introduced purely as a revenue-raising tax and it remains a vital revenue-raiser today. However, despite the challenge of the budget deficit that we inherited, this Government have limited increases in APD to inflation only in the period since 2010-11. During this period, rates have increased by only £1 for the vast majority of passengers. Furthermore, recognising the sector’s need to plan ahead, we have provided greater clarity on future rates. Budget 2013 set out that the rates for 2014 and 2015 will rise in line with inflation only. The real burden of APD will remain unchanged for a further year.