The Economy

Geraint Davies Excerpts

Wednesday 18th November 2015 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move,

That this House believes that the Government has failed to deliver on its commitment to stand up for working people; notes that the Government’s existing plans to cut tax credits will cost more than three million working families an average of £1,300 a year from next April; further notes that 4.1 million children now live in absolute poverty, an increase of 500,000 since 2009-10; notes that in 2014 the UK’s current account deficit reached the highest level ever recorded, at 5.1 per cent; notes that 85 per cent of the money saved from tax and benefit changes in the last Parliament came from women; further believes that the Government has failed to deliver the more sustainable economy the country needs; notes that, rather than investing in building new homes to cut housing benefit costs, housing investment has been slashed and housing benefit has risen by over £2 billion a year in real terms; notes that the gap between UK productivity per hour worked and the rest of the G7 grew to 20 percentage points in 2014, the widest productivity gap since 1991; believes that further deep cuts to the budget of the Department for Business, Innovation and Skills could damage the Government’s ability to boost innovation and productivity and could restrict opportunities for British businesses and workers to succeed in the global economy; calls on the Government to reverse fully and fairly its plans to cut tax credits from next April; and further calls for the Government to invest in growing a more productive economy with a focus on science, technology and green jobs to equip Britain for the future and share more fairly the proceeds of growth.

We have chosen to devote a section of today’s Opposition day to set the scene for next week’s autumn statement and comprehensive spending review. This will be the last chance many MPs from across the House will have to put their case to the Chancellor before he comes to his final conclusions on his spending plans and economic strategy for the coming period.

The Chancellor is not in the Chamber today. Naturally, we are disappointed, but I spoke to him before this debate. He is working hard on the comprehensive spending review, so I think we will forgive him if he gets his sums right and comes to the right conclusions.

The Chancellor’s decisions next week will have serious consequences for every constituency in the country. What we all need from the Chancellor is wise judgment and fairness. Our country faces serious challenges and risks ahead, which we should not underestimate.

Let me first deal with one issue that overrides all others. It has been heart breaking to watch the tragic events in Paris at the weekend unfold into the suffering of families coming to the realisation of their loss. I sent a message of condolence and solidarity to our counterpart Michel Sapin, the French Finance Minister, at the weekend. It is true that the first duty of a state is to protect its citizens, so may I therefore assure the Chancellor that he and the Prime Minister have our full support for the enhanced expenditure to strengthen our security services that they have announced this week?

May I also say that we share the view of the Metropolitan police commissioner and other police chiefs that the first line of gaining intelligence on potential hazards and threats to our safety, preventing terrorist attacks and responding to them is often the police officer in the community and on the street? There has been a great deal of speculation in the media about the scale of potential cuts to the policing service, prompting severe warnings from police authorities—on a cross-party basis—about the consequences for the safety of the public if this scale of cuts goes ahead. May I therefore assure the Chancellor that we would also support an urgent review of the policing budget proposals to avert this risk to the service, and that we would support any enhanced expenditure plans being placed outside the parameters of the fiscal constraints of the charter for budget responsibility?

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does my hon. Friend agree that the fact that the tragic atrocities in Paris were focused on young people in social environments suggests that such attacks could occur anywhere in Britain at virtually any time?

[John McDonnell]

We are all fearful of the risk that exists, but we place our confidence in our intelligence and policing services. To be frank, when our community is under such a heightened physical threat, now is not the time to be dogmatic. When it comes to national security and keeping the public safe, I say to the Chancellor and the Government that they will always have the support of the Labour party.

Let me turn to an issue of fairness—tax credits—which I hope Ministers can reassure us today that the Chancellor has now sorted out once and for all. It came as a shock to Members on both sides of the House when he brought forward the proposals to cut tax credits without fully understanding, or calculating the consequences of, his actions. Plainly, it was an error of judgment. I want to thank all the Members of this House from all parties and our colleagues in the other place who found that they could not support the Chancellor’s proposals and hence forced him to think again. What convinced many people was exactly what Gordon Brown, our former Prime Minister, summed up so eloquently last week—that this is an attack on children. The prospect of 200,000 more children being pushed into poverty pushed many MPs and Members of the other place over the edge to oppose the proposals.

There has been a lot of speculation in the press about how the Chancellor has been trying to resolve the tax credits question, with much talk of cuts to universal credit and threatened Cabinet resignations, but I am pleased that the quiet man may have had to raise his voice and has won the day. However, the threat seems to have moved on to housing support and other matters. I do not expect Ministers to reveal to us today the detail of the Chancellor’s proposals to resolve this matter, but for the 3 million families who face a cut of £1,300 a year, may I ask them at least to assure us and those families that they will withdraw the tax credits cuts in full and that no existing or new claimant will lose out?

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[Harriett Baldwin]

My hon. Friend is right. The bottomless pit of money from the magic money tree has been brought into service a lot over recent days, and we should focus instead on the good news about the UK economy. The employment rate has reached a record high—

[Geraint Davies]

rose—

[Harriett Baldwin]

Is the hon. Gentleman going to welcome that fact? I do not think he is. Wages have risen by more than 3% this year. Will he welcome that? For people in continuous employment, wages are up by more than 4%—[Interruption.]

[Mr Speaker]

Order. We cannot have hon. Members freelancing, or at least not any more than they are already accustomed to doing. The hon. Member for Swansea West (Geraint Davies) can seek to intervene, and the Minister must decide whether to respond. However, since the hon. Gentleman claims to have a point of order, I am keen to discover whether it is a point of order or a point of frustration, so perhaps we can hear from him.

[Geraint Davies]

On a point of order, Mr Speaker. When the Minister exhibits such massive ambiguity by seeming to say “Yes, yes, yes,” to my intervention, so that then I am getting up and down, does that not cause great confusion in the Chamber and among the greater public? Would you like to make a ruling on that?

[Mr Speaker]

My ruling on that, for the benefit of the hon. Gentleman and the House, is that any Member who has the Floor should indicate clearly whether he or she is giving way, and if so, to whom. Any gesticulation that obscures rather than clarifies, although not disorderly, is unhelpful.

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[Harriett Baldwin]

My hon. Friend is right to remind us of two important facts. First, no Labour Government have ever left office with the public finances in a better state than when they came to power, and secondly, no Labour Government have left office without leaving more people unemployed than there were when they came to office.

Do we agree with the other points made by the Labour party?

[Geraint Davies]

rose—

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

rose—

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[Harriett Baldwin]

The hon. Lady is wrong about that. Since 2010, in terms of relative poverty, some 300,000 fewer children are living in poverty. The Government losing control of public finances and not being able to do anything about that would be the worst thing that could possibly happen for the opportunities for those children. The people who suffer when the country loses control of its public finances are the low-paid, and the people who get turned out of work are the ones who suffer the most—

[Geraint Davies]

rose—

[Lucy Frazer]

rose—

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[Geraint Davies (Swansea West) (Lab/Co-op)]

It is always a hilarious pleasure to follow the hon. Member for Monmouth (David T. C. Davies). I am very sorry that the Economic Secretary to the Treasury, the hon. Member for West Worcestershire (Harriett Baldwin), who is so brightly coloured in her UKIP blazer, has left the Chamber after giving her black and white comedy speech. A part of that speech was about how Labour has caused the problems and misery of the current day, but that is completely false. In fact, in the 10 years to 2008 under Labour, the economy grew by 40%, which is why we could double the size of the health service and the education service and lift millions of people out of poverty.

In 2008, we saw the financial crisis caused by the bankers and the sub-prime debt crisis. The then Labour Government under Gordon Brown along with Barack Obama provided a fiscal stimulus that got us back to growth by 2010. The key strategic issue in this debate is the balance between growth and cuts to get down the deficit. Labour errs on the side of growth, and George Osborne, when he arrived in 2010, decided to revert to cuts—I am talking about half a million job cuts. People stopped spending and we have had flatlining growth until relatively recently. What that has meant is that, while we have had more jobs, the overall production per job has gone down.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Does the hon. Gentleman not recognise that, in 2008, the UK was in the deepest recession that it had been in since the second world war, and that we are now the fastest growing economy in the G7? Will he acknowledge those facts today?

[Geraint Davies]

The fact that I do recognise is that, when we left office in 2010, debt as a percentage of GDP was 55%, and now it is 80%. The Labour party borrowed less in 13 years than the Conservatives have in five years. There has been a complete failure to invest in strategic growth, productivity, and wealth creation. Instead, debt has been used as a cover to attack the welfare state and public services, which are part of the public-private partnership on which Britain relies.

[James Cartlidge (South Suffolk) (Con)]

I do not know what planet the hon. Gentleman is on. I was a mortgage broker who was running a business leading up to the crunch. I can safely say that the Financial Services Authority, which was created by Gordon Brown in May 1997, completely and utterly failed to regulate the banks. He cannot just walk away from responsibility. Labour has massive culpability for the unsustainable nature of the boom that led up to the massive crash in 2008.

[Geraint Davies]

The Labour party’s spending plans were all agreed to by the Conservatives. We introduced regulation through the FSA and greater freedom for the Bank of England. The Conservatives opposed greater regulation, yet the lack of regulation led to the awful situation we are in now.

Returning to the current, ridiculous attempt to reduce the deficit and the debt by cutting tax credits, the fact is that, in simple terms, poor people spend all their money in the economy, whereas rich people tend to save it, often offshore. Robbing 3 million people of £1,300 to try to balance the books will therefore massively undermine regional economies, when we already have regional imbalances. Taking money from people who would spend it and giving it to those who will not, through changes to inheritance tax, is economically loopy and, in my view, quite wrong morally. Rather than lifting millions of people out of poverty, we are thrusting millions into poverty, in particular the extra 400,000 children who will be put into poverty.

Tax credits are an American instrument to encourage people to work. They are targeted at working families, so that people with children, who have greater needs, can afford to work. If you ran a business, Madam Deputy Speaker, and you could only afford to pay £10,000 to employ someone and make it viable, and if they needed £15,000 and the difference was made up by the Government, we would end up with a job and a viable business. If we withdraw tax credits, we destroy small businesses, destroy incomes, impoverish families and generate inter-generational poverty. It is disgraceful and quite wrong.

The situation with housing benefit is also ridiculous. Seventy per cent of the growth in housing benefit has been paid into private sector rents. Why? It is because the Government have not built enough social housing. Instead of building more social housing, they are basically selling it off to give the right to buy in housing associations. That is not the way forward.

As for procurement, with HS2 construction we are giving something like a £50 billion contract to the Chinese. If a British consortium had, for example, a £55 billion contract, it would pay corporation tax, income tax and national insurance and would have local supply chains and build capacity in Britain—our steel would be going into the construction, rather than Chinese steel. Why have the Government failed to demand carbon tariffs on the cheap steel coming from China, which is produced more cheaply because China does not have the environmental controls that we demand in Britain?

We need more investment in city regions such as Swansea Bay city region, where the local authorities, industry and universities are working together. If we are going to have a national tax hub for Wales, which I am against, why is it being put in Cardiff, which can look after itself? It should be in Swansea Bay city region, a more deprived area. In terms of the trade deficit—[Interruption.] The point is that, as with the Driver and Vehicle Licensing Agency put in Swansea, if the Government can use the investment as an instrument of economic power, they should do so to help relatively deprived areas, not just London and the south-east.

The trade deficit is a massive 5%. We need to think more about emerging massive markets, such as China and India, whose middle classes are approaching 20%. Why are we not actively engaging to unite the creative and manufacturing industries to provide high-value products that we can sell in those markets, rather than moaning that we cannot produce spoons any more?

We also need to have an eye towards the Transatlantic Trade and Investment Partnership—obviously people will have heard of the free trade agreement with America—as well as the Comprehensive Economic and Trade Agreement with Canada, CETA, which is coming immediately. People are barricading the front door because of TTIP, while CETA is going through the back door—and will give companies powers to fine democratically elected Governments if we pass laws that impact on their future profits. We need to sort that out, but we also need to ensure that TTIP works towards a sustainable future for the world. My hon. Friend the Member for Islwyn (Chris Evans) mentioned global warming, and unless we embrace the need to ensure human rights, workers’ rights and sustainable development within the constraints of TTIP, which will be the blueprint for global trading, we will not have a sustainable world or a sustainable economy.

We need to think more clearly about growth in a focused way, rather than always looking to cut things. As a constituent in Swansea said to me, if a company is making a loss, it has two options: sack the workers and sell the tools, or invest in growth, productivity and products. That is the focus of the Labour party.

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[The Exchequer Secretary to the Treasury (Damian Hinds)]

Protecting the economic security of working people in Britain is precisely what we set about doing in 2010, it is what we fought the general election on earlier this year, and it is what the British electorate asked us to continue to do following the decisive result at the May election, as we were reminded of by my hon. Friends the Members for Dudley South (Mike Wood) and for Fareham (Suella Fernandes) and, graciously, by the hon. Member for East Antrim (Sammy Wilson), who speaks for the DUP.

Our programme for working Britain stands on four interlocked pillars. The first is a stable economy, backed by a credible long-term economic plan. Low inflation and low interest rates support productive investment. The second is to back business. It is firms that give people jobs and families economic security, and it is innovation that generates economic growth. We know that only business can create the wealth that affords us the quality public services we all value so much. The third is the right incentives to work and the support to do so as we strive towards our goal of full employment. The fourth is a fiscal plan to eliminate our deficit and face up to the challenges of this generation, in this generation, instead of leaving an even bigger mountain of debt to our children and their children, as we were reminded by my hon. Friend the Member for Thornbury and Yate (Luke Hall).

We have made important strides on all these fronts. We are cutting the jobs tax, cutting red tape for business and creating record numbers of apprenticeships—my hon. Friend the Member for Eastleigh (Mims Davies) talked about the apprenticeship revolution. Since 2010, the private sector has created almost 2.5 million jobs. We have record levels of employment—indeed, more employment growth in the UK since 2010 than in the rest of the EU put together—and more women in work than before. Real wages have risen by almost 3% on the year, and we are leaving more cash where it belongs—in the pockets of hard-working people. Through our increases in the personal allowance, we are making the typical basic rate taxpayer £905 a year better off. We extended childcare support, and are doing so again, with tax-free childcare extensions under universal credit and free entitlement for pre-schoolers worth £5,000 per child per year. We have also set out a path for sustainable but solid deficit elimination so that we can live within our means and start paying down the debt.

[Geraint Davies]

What would the Minister say to Ben Bernanke, the former chairman of the US Federal Reserve, who has basically said he disagrees with the primary legislation that states we should always run a budget surplus because it provides no flexibility to respond to another crisis? In other words, is it inept?

[Damian Hinds]

At the present time, I have no particular message for the former head of the Federal Reserve, except to say that we inherited the most enormous deficit. We will continue to bring it down, which the British people gave us a mandate to do, and we will pay down the debt, because if we do not do that in the good times, when will we ever?

My hon. Friend the Member for Cheltenham (Alex Chalk) reminded us that when the financial crisis hit, the cupboard was bare, because of the structural deficit the Labour Government allowed to build up. In 2010, we immediately began the programme to bring that down. Since then, despite the oil price spike and the eurozone crisis, we have made great progress and have halved the deficit, but much more remains to be done. We set out what that would entail before the election and in the summer Budget: a combination of departmental spending reductions, tax measures and reductions to the welfare bill. Importantly, however, we are maintaining our commitment to the institutions on which Britons most rely: our schools and our world-leading national health service.

Elsewhere, however, we need to make savings, and next week, my right hon. Friend the Chancellor will set out the remaining detail in the autumn statement, alongside an updated fiscal forecast from the Office for Budget Responsibility. I know that right hon. and hon. Members will not expect me to pre-empt what my right hon. Friend will say next week.

We have set out a new settlement for working Britain. My hon. Friend the Member for Eastleigh enumerated some of what we have been doing to help hard-working families, including the increase in the personal allowance. The introduction of the national living wage will directly benefit 2.7 million workers on low wages, and up to 7 million people in total, and it is a measure that will disproportionately benefit women. We are doubling the free childcare offered to working families with three and four-year-olds, we have frozen council tax and fuel duty and we have capped payday loans—all actions that the Government have taken to support working families.

In the little time available I want to respond to some of the important points that have been raised. The hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) spoke powerfully—as he always does—on behalf of his constituents. He reminded us, as we know all too well, that economic growth does not take place evenly everywhere, and that some places and sectors face significant difficulties. This is a difficult and uncertain time for many people who have been affected by the issues that he raised. As he knows, the Government cannot control the world price of steel, and we cannot cover that entire complex subject in this debate. It is right, however, that the multi-million pound package has been put in place for Redcar and Scunthorpe, and my right hon. Friend the Business Secretary is fully engaged on that issue.

Common System of VAT (Vouchers)

Geraint Davies Excerpts

Monday 2nd November 2015 General Committees

[Mr Gauke]

The first of the UK Government’s objectives was to address a level of inconsistency and confusion that exists under the status quo, so we were not in favour of the do-nothing approach. Equally, we see vouchers as having a role to play. Within the UK, we have one of the bigger markets, as one might expect—although it is perhaps bigger than one would expect based on the proportion of our economy. We would not therefore favour banning vouchers; that would be a very draconian approach.

To get the type of clarity that we think we need, we concluded that guidelines would not be sufficiently strong. Therefore, of the four options, we favour legislating and hope that we can reach agreement among all member states so that the Commission’s proposals can go forward in a legislative form, although, as I said, we have highlighted a couple of areas where we think they can be improved on.

[Geraint Davies (Swansea West) (Lab/Co-op)]

In the case of multi-purpose vouchers that are issued, for example, in Britain but redeemed in Germany, what account is the Exchequer taking of changes in exchange rates, in terms of the tax take?

[Mr Gauke]

The hon. Gentleman raises an important point. The reason why we think we need to make progress in this area is that, in itself, this area is complex. When one takes into account the potential cross-border nature of transactions, the need for greater clarity becomes all the more important.

If we want to facilitate cross-border trade—as the Government do, and there is cross-party consensus on that—addressing the VAT treatment of vouchers is an important factor. I have set out the principles of how the Government think that this should work; if we are looking at MPVs, the measure should apply at the end of the transaction as such. That principle would apply, notwithstanding any changes in the exchange rate.

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[Geraint Davies]

In the case of a voucher worth €1when it was originally issued, but €1.20 or €0.80 when it was redeemed, would there be any bearing on the tax situation? Presumably if the voucher is redeemed in Germany, the tax is paid in Germany, is it not?

[Mr Gauke]

In terms of the principle, if the supply is in Germany, the voucher is subject to German VAT, for example. The exchange rate is essentially not an issue here; the issue is the VAT payable at the point of the transaction, which, in the case of MPVs, is at the end of the process, as it were—at the final point in the shop. That is the rate of VAT that has to be paid.

[Geraint Davies]

To put it simply, let us say that somebody had a pack of 240 PG tips with a 50p voucher on it and they redeemed that in Germany. Although perhaps it would not be accepted at all, if it was, the amount would be translated into euros and the tax would be paid on it, so it would have a different value than anticipated. I am asking whether that poses any problems.

[Mr Gauke]

No, the exchange rate does not cause problems in those particular circumstances. I hope that provides some clarity for the hon. Gentleman.

Welfare Reform and Work Bill

Geraint Davies Excerpts

Tuesday 27th October 2015 Commons Chamber

[Graham Evans]

I think I am grateful for the hon. Gentleman’s intervention. This is about choices and what we spend our money on. There is no such thing as a magic money tree, and if Scottish nationalists are not happy with these measures, perhaps they will inform the Scottish people how much they will pay in tax—we never hear that from the SNP. If they do not agree with welfare reform, they should tell the House and the people of Scotland how much they will put up taxes.

The Bill continues on from the Welfare Reform Act 2012, restoring the ethos that it always pays to work to the heart of the British welfare system. The 2012 Act set in place a benefit cap.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the hon. Gentleman accept that this debate is between growth or cuts to get down the deficit? We are taking a lot of money from the poorest people—those on tax credits and welfare—but those people spend all their money consuming things while richer people save some of it. The macroeconomic impact of the cuts—especially across the country outside London—will be deflationary, undermine growth and increase debt. Is that not economically illiterate?

[Graham Evans]

The hon. Gentleman has a fine record of representing his constituents. That argument is often made by Opposition Members, but I do not necessarily agree with it. The most important thing is for people to get into work and to get into higher paid work.

The Welfare Reform Act 2012 wanted to reduce the benefit cap to £26,000, or £500 a week. That is a net figure. If tax and national insurance are taken into consideration, the cap is actually £36,000. The Bill expands on the 2012 Act, lowering the cap, rightly, to £20,000 per household, or £23,000 in the London area. The changes restore fairness to the welfare system: they are fair for the hardworking taxpayers, who have to pay for the welfare, and ensure that work always pays. The savings from the benefit cap will be used in conjunction with other measures to fund 3 million apprenticeship places to secure the future of our young people.

This is about choices. This House takes very seriously the security and defence of our country—we are committed to spending 2% of GDP on it. I am absolutely delighted that Labour Members are also committed to that 2% target, but if they are committed to 2% of GDP for defence, and to spending on welfare and overseas aid, where will the savings be made? If they want savings to be achieved through an increase in taxes, they should please tell the British people how much more tax they will have to pay.

I sat on the Work and Pensions Committee investigation into benefit sanctions. We hear a lot of noise from Opposition Members about benefit sanctions, but the truth is that the condition has always been applied to the payment of unemployment benefits. The concept of conditionality enforced by financial sanctions dates back to the 1980s. It is nothing new, even under 13 years of a Labour Government. Conditionality remains a necessary part of the benefits system and is still one of the most effective tools for encouraging engagement with employment support programmes at the jobcentre. Some 70% of claimants say they are more likely to follow the rules if they know they risk having their benefits stopped. Sanctions are used only as a last resort and in a very small percentage of cases. Only 6% of JSA claimants and 1% of ESA claimants have faced sanctions in the past year, and the number of sanctions issued has fallen by a third.

[Geraint Davies]

In Swansea, the area that I represent, 65% of JSA claimants have been sanctioned at some point in the past two years, according to the citizens advice bureau. That is intolerable.

Oral Answers to Questions

Geraint Davies Excerpts

Tuesday 21st July 2015 Commons Chamber

[Damian Hinds]

With the growth and employment levels that we have seen in Scotland, it becomes increasingly difficult every day for Scottish National party Members to continue to peddle their line, although I am sure they will. It is true that in the most recent short-term figures there was a slight adverse movement. As we move closer to full employment, we will not see the same large increases in employment every month, but year on year, as the hon. Gentleman will know, the position has improved.

[Geraint Davies (Swansea West) (Lab/Co-op)]

13. What assessment he has made of the likelihood of the Government meeting its 2020 export target.

[The Economic Secretary to the Treasury (Harriett Baldwin)]

The 2020 export target of £1 trillion is ambitious. UK Trade & Investment has doubled the number of businesses it helps since 2010. The productivity plan sets out steps to take this further by mobilising the whole of Government behind helping our great British businesses to export much more.

[Geraint Davies]

Britain needs export growth, not just cuts, to clear the deficit, but the Chancellor is set to miss his export target by a massive £350 billion and to deliver the worst peacetime trade deficit since 1830. What action are the Government taking to combine the creative industries with our manufacturing base to target emerging middle classes in BRIC countries—in particular, China and India—to fire up growth and not rely solely on hitting the poor with cuts?

[Harriett Baldwin]

We can see the disarray in the hon. Gentleman’s personal life, given that he walked through the Lobby to support one leadership candidate last night, while publicly backing another who abstained. He mentions the importance of exporting to emerging markets. I can confirm that UK exports to China have increased by 72% since 2010, while exports to South Korea—many of them in the creative industries—are up by 148% and to Hong Kong by 63%.

Budget Resolutions and Economic Situation

Geraint Davies Excerpts

Tuesday 14th July 2015 Commons Chamber

[Sajid Javid]

What I accept is that we need a welfare system that protects the vulnerable and is affordable and sustainable for the long term. As we deal with excessive welfare spending, we are able to strengthen the economy, which means higher wages for working people. I hope that the hon. Gentleman can support that.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the Secretary of State accept that child tax credits are, in fact, work incentives based on the American earned incomes tax credit, and that the reason the cost is so high at £30 billion is that productivity and wages are so low? In particular, there are 800,000 fewer people now earning over £20,000 than there were in 2010. Is that not a complete failure?

[Sajid Javid]

I think the hon. Gentleman would agree that it is better to have a sustainable welfare system that protects the vulnerable while at the same does not allow companies to get away with paying lower wages than they otherwise were. I hope he supports our national living wage, especially the fact that it means someone working at the national minimum wage today will get at least £5,000 more a year by 2020 because of our national living wage.

A business-led economy in which hard work is rewarded, entrepreneurs are encouraged and aspiration is applauded —that is at the heart of our Budget. Above all, it is a Budget that supports business. For all the rhetoric one hears from politicians, Governments do not create jobs; businesses do. As my right hon. Friend the Secretary of State for Work and Pensions said last week:

“It is only when businesses are thriving that the people of our country can thrive too.”—[Official Report, 9 July 2015; Vol. 598, c. 482.]

It is only a strong and growing economy that allows us to invest in the NHS and schools; and it is only a strong and growing economy that allows us to spend money on protecting our most vulnerable citizens. Anyone who is successful in business should be congratulated and not condemned.

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[Sajid Javid]

If the hon. Gentleman had joined me in Longbridge on Friday, he would have heard me set out the Government’s productivity plan, which I shall come to in a moment.

Productivity is not just some obscure measure that is of interest only to economists. Higher productivity means higher incomes. When productivity rises, standards of living rise too. That is why, as part of last week’s Budget, we published “Fixing the foundations: Creating a more prosperous nation”. It is our blueprint for getting Britain moving, building and growing, and creating the environment that is needed to tackle the productivity gap once and for all.

The productivity plan will support apprentices with a new compulsory apprenticeship levy that requires large businesses to invest in their own future. It will boost skills with a radical streamlining of further education qualifications and the creation of prestigious institutes of technology. It will support infrastructure, with vehicle excise duty paying for a new roads fund, and a plan to put Network Rail and the rail investment programme back on track. It will allow us to invest in innovation, putting nearly £7 billion into the UK’s resurgent infrastructure, and developing our network of Catapult centres for commercialising technology. It will make our world-class universities open to all, removing the student cap and putting higher education on a more sustainable footing. It will ensure that superfast broadband is available to 95% of UK households and businesses by 2017, and it will make it easier for the market to roll out fixed and mobile infrastructure by reforming planning rules on taller masts. It will mobilise the whole of Government behind exporting, working alongside a more effective UK Trade & Investment and building stronger links with emerging markets.

[Geraint Davies]

I am grateful to the Secretary of State for his generosity in giving way again. Why did the front page of The Economist sum up the Budget with the words “politically astute, economically flawed”? Why did its editorial observe that it was a result of quick fixing that focused not on productivity but on abandoning investment in the railways, not allowing enough easy access to universities, and not raising skill levels and improving infrastructure in order to make Britain strong?

[Sajid Javid]

Probably because The Economist was published before I launched the productivity plan on Friday.

The productivity plan will strip further red tape out of the planning system, making it easier to build the homes that British workers need. It will rebalance our economy, devolving further powers and responsibilities to the elected mayors of London and Manchester and working towards devolution deals with the west midlands, Sheffield, Liverpool, Leeds and West Yorkshire. It will create open and competitive markets with the minimum of regulation, an environment in which innovative businesses can thrive to the benefit of consumers.

The drivers of productivity are not a mystery; the barriers that prevent it are well understood. What has been lacking in this country for too long is the political will to do something about the problem by making the bold decisions that are necessary to unleash the full potential of British business. That is not lacking any more. This Government have the mandate and the will to deliver lasting change, and that is exactly what the Budget will do.

In the past few days, we have heard Labour’s former Chancellor say that his party lacks “a credible economic policy”. The Leader of the Opposition has attacked our changes in tax credits one day and supported them the next. We have heard the SNP’s economy spokesman, the hon. Member for Dundee East (Stewart Hosie), promise somehow to reduce the national debt while still running a deficit. On the Opposition Benches, economic competence is almost as rare as a Liberal Democrat Member.

Only this Government have the policies and the will to back British business. Only this Government have the foresight to invest in infrastructure and skills. Only this Government will build the homes that the country needs and the economy that it deserves. This Budget does not just fix the roof while the sun is shining. It fixes the foundations too, and I commend it to the House.

--- Later in debate ---

[Mr Umunna]

I could not agree more with my hon. Friend.

[Geraint Davies]

Does my hon. Friend agree that in the 10 years up to the 2008 banking crisis the economy grew by 40% under Labour, which is how we afforded to double spending on the health service, and that since 2010—when, incidentally, the economy was growing under Labour—the share of the economy that is debt has risen from 55% to 80% because of the Conservatives’ failure to grow the economy and their focus on cuts instead of growth to get the deficit down?

[Mr Umunna]

I will come on to that right now.

The Prime Minister said in a speech to the CBI in 2010:

“In five years’ time, we will have balanced the books.”

The Government have failed to do that. It is worth revisiting the promises made then before giving the Chancellor the congratulations he seeks now for this 2015 Budget. In June 2010 they set a forward-looking fiscal mandate to achieve a cyclically adjusted current balance by this financial year. It was a rolling target, but no one took the rolling nature of it very seriously, so let us put that to one side. In short, they were saying they would eliminate the deficit by this financial year. In 2010, by their own measure, we were told they would do this, achieving a surplus of 0.3% last year and 0.8% this year. That is what we were told would happen. In the event, the Chancellor completely failed to meet that goal. The deficit came in at 2.4% last year, is forecast to be 1.7% of GDP this year and does not move into a surplus until 2017-18, some three years later than planned on their own measures.

There was also a supplementary target for public sector net debt as a proportion of GDP to be falling by 2015-16. The Chancellor managed to achieve that through some jiggery-pokery with the numbers, namely rapid asset sales in the last Parliament to pay down enough of the debt for his supplementary target to be met. But rushed asset sales mean poor value for the taxpayer, as the disastrous sale of Royal Mail illustrated in technicolour.

It is also worth reflecting on what we were told the debt-to-GDP ratio would be in 2010. It was supposed to fall from 61.9% of GDP in 2010 to 69.4% and 67.4% last year and this year, but debt as a proportion of GDP was 80.8% last year and is forecast to be 80.3% this year.

--- Later in debate ---

[Mr Umunna]

Oh dear; I think I will move on.

Why does all this matter? It matters because reducing the deficit is a progressive endeavour. We seek to balance the books because it is the right thing to do. We will not stand by while the state spends more paying interest every year to City speculators and investors holding Government debt than on people’s housing, skills or transport. It follows that aiming to reduce the national debt in the long term, and running surpluses when the economic circumstances allow and the economy is robust, is the right approach. It means we can free resources to invest in people to help them succeed in an era of globalisation. I would much rather invest in people than spend the £36 billion the Red Book tells us we will be spending on debt interest this financial year.

By the way, I say to Conservative Members that this is in keeping with the history of our party. In our 1964 election-winning manifesto we criticised, as we did in the lead-in to the last general election, “an ever-increasing burden” of debt payment on the country. I note that the Chancellor wants to legislate to make surpluses a legal requirement in “normal times”. In 2010, when the then Chancellor Alistair Darling sought to enshrine in law, in the Fiscal Responsibility Act 2010, a deficit reduction target, the Chancellor said that it was “vacuous and irrelevant.” to enshrine such things in law. The Conservatives now need to explain what has brought about this change of mind.

This recognition that we need to reduce the national debt is why we said before the last general election that there would be efficiency savings and cuts under a future Labour Government. However, we were clear we would achieve this in a fair way—not by balancing the books of the nation off the backs of the poor and the vulnerable. The centrepiece of this Budget was to proceed with further fiscal consolidation, principally by slashing the support which helps—[Interruption.] I ask the Minister for Skills to wait for me to finish my paragraph, and then perhaps he can comment on the national living wage.

As I was saying, the centrepiece of this Budget was to proceed with further fiscal consolidation, principally by slashing the support that, for lower and middle income earners, helps to make work pay, and then by supposedly compensating them with an increase in the national minimum wage, which people such as the Skills Minister have sought to re-badge as a living wage, even though it is anything but. Let me say a few things about that. No one will ever forget how the Conservatives opposed the very establishment of the national minimum wage in the first place. They can say what they like about it now, but no one will ever forget that.

In the lead-up to the election, I received sustained criticism from the Conservatives’ supporters in business about our plans to increase the national minimum wage in this Parliament. People say that imitation is the sincerest form of flattery, and in some senses that is what this is, but there are important differences between what we were proposing to do and what the Government are now doing. First, our national minimum wage increase would have applied to all adults on the main rate. This Government, however, do not believe that anyone aged between 21 and 24 deserves an increase. Having abolished their education maintenance allowance and trebled their tuition fees, they are now saying that when those young people get into work, they do not deserve to earn what everyone else does when they reach adulthood.

Secondly, we would not have punished any adult benefiting from the increase we were proposing by subsequently withdrawing their tax credits. The Government have called this a new deal, but it is a gigantic con-trick. Thirteen million families will be affected by the changes, and the Institute for Fiscal Studies could not have been clearer when it said that it was “arithmetically impossible” for the increase in the minimum wage to make up for the withdrawal of the credits that help people to work.

Let us take as an example a couple, both aged over 25, with two children. Both adults work full time and earn the minimum wage. Yes, they will gain £1,560 from the increase in the minimum wage, but they will lose more than £2,200 next year as a result of the change to tax credits. [Interruption.] I say to the Conservative Members who are chuntering that I totally accept that it would be better for people to be in receipt of a salary that did not necessitate the payment of tax credits to make ends meet, but reforming our economy so that it delivers more highly paid jobs must come first; otherwise, it is the working poor who will suffer.

Let me remind Conservative Members that nearly half the people in poverty in this country are in work. The Government seem to forget that. That is why it is unsurprising that the IFS calls this a “regressive” budget and says that the tax and welfare changes between them will result in poorer households losing out quite significantly, and much more significantly than richer households.

[Geraint Davies]

Does my hon. Friend agree that the minimum wage increase cannot replace children’s tax credits? If a single man and a woman with two children both went for the same job, which paid the minimum wage, the woman would have greater needs due to her childcare responsibilities. Tax credits provide an incentive for people such as her to work, yet they are being withdrawn. We accept that increasing the minimum wage is a good idea, but this measure will not help business at all, because putting up the minimum wage while removing tax credits will clearly be a disincentive for families to work.

[Mr Umunna]

That is quite right. The problem with Conservative Members is that they just lump everyone into the same bracket. Anyone who is in receipt of support is told, “It’s your fault. You’re not working.” The thing about tax credits is that they help to make work pay, but that seems to be lost on Government Members—

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[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a great pleasure to follow my hon. Friend the Member for Hampstead and Kilburn (Tulip Siddiq), who made an excellent speech underlining the cruel regressivity of this awful Budget. She particularly mentioned the impact on child poverty, families and women, and the inter- generational poverty that will scar families for life. It is also a pleasure to follow excellent speeches by colleagues from the Swansea Bay city region, my hon. Friends the Members for Aberavon (Stephen Kinnock), for Llanelli (Nia Griffith) and for Swansea East (Carolyn Harris), and a number of maiden speeches, particularly that of the hon. Member for Paisley and Renfrewshire South (Mhairi Black).

This was a Sheriff of Nottingham Budget, robbing from the poor and giving to the rich. In fact, The Economist has commented that taking from the very poorest through tax credit changes and giving to the very wealthy through inheritance tax changes is “indefensible”. That is not some sort of left-wing ragbag but a keenly focused magazine that says it as it is.

We have the Sheriff of Nottingham, the Chancellor, living within his castle walls and feeding his fat noble friends with inheritance tax reductions, while the ordinary people just outside are being hoaxed. With one hand they are being given higher tax thresholds, but with the other they are being pick-pocketed, with something like £16 billion of stealth taxes on things like insurance for housing and cars, and with the vehicle excise duty changes. Even the withdrawal of climate change subsidies will come back and hit them through energy prices, and the withdrawal of BBC funding will hit them through the licence fee.

The Sheriff of Nottingham is also trying to persuade the ordinary people around the castle walls that the poorest people in the forest will not be painfully abused by the tax credit cuts. Instead he is trumpeting the minimum wage increase, which of course will not compensate families on tax credits. In 2012 the Chancellor gave a speech describing the “strivers” and the “skivers” and asking whether it was fair for a shift worker to get up in the morning to go to work and see the closed blinds of his neighbours who live off benefits. Of course, skivers are not eligible for working tax credits and child tax credits, because they are only given to people in work. They are based on the American earned income tax credit, as an incentive to work. Their withdrawal will undermine not only the individuals who are paid the money but business start-ups. The change is thoroughly regressive and counterintuitive to economic growth.

The Budget was more about politics than economics. On the minimum wage, the Chancellor has taken the Labour party’s clothes and hoped that people will not notice what he is doing to working families, and the Opposition cannot support him in that. Of course, the cost of tax credits has grown to something like £30 billion, but that is because productivity in the British economy has been so woefully poor that wages have gone down, leading to tax credits going up. In fact, 800,000 fewer people are earning more than £20,000 than was the case in 2010, which is an appalling failure. That is why this Government have borrowed more in five years than Labour did in 13. The Government should have focused on productivity growth in the Budget, rather than on fiddling around with tax and spend so that the Chancellor can position himself against the flamboyant part-time Mayor of London as the next Tory leader.

There is also the appalling situation whereby the third-born in each family will have their tax credits taken away. I wonder if that will be extended to education and health. When the third child, Johnny, has a broken arm and goes to the NHS, will he be told, “Sorry, we can’t treat that, you’re the third-born. Oh, don’t worry, your oldest sister has just died—so it’s alright now”? What is the change about? Is it an incentive for poorer people in society not to breed? Is some sort of positive eugenics returning to the Tories? It really is appalling.

[Simon Hoare]

Will the hon. Gentleman give way?

[Geraint Davies]

No, I will not. There is a time limit, and it is not really worth the air.

The overall welfare budget is £220 billion, only £2 billion of which is spent on people on the dole. A great amount of it is spent on pensioners, who are protected because they are more likely to vote. The political calculation is that poorer people are less likely to vote, and certainly less likely to vote Tory. This is a cynical Budget.

Oxford University has suggested that the number of people going to food banks will increase by 1 million to 2 million. I pointed that out to the Prime Minister, and he said, “Oh well. It doesn’t really matter. We won the election.” When I pointed it out to the Work and Pensions Secretary, he said, “Oh well. What can you do? Lots of people in Canada and Germany use food banks.” The Chancellor said, “Well, you know, we’ve got 1% of the people and 3% of the wealth of the world, and we spend 7% on welfare,” as if we should be ashamed and not proud that we, as a developed country, invest in the most vulnerable people to help them into work.

What sort of future is the Chancellor suggesting? Is he suggesting that we cut our welfare down to the levels of developing countries and provide taps and buckets at the ends of streets? What are the values of this Tory Government? The answer is that their values are squeezing the poor because they will not vote Conservative, and squeezing the state with a fraudulent proposition as a backcloth—that minimum wages can replace tax credits that are focused on poor families. The reality is that, under the last Labour Government, the economy grew by 40% in the 10 years to 2008. The banking crisis caused a problem, but by 2010 there was growth in the economy. Since then, debt as a share of the economy has grown from 55% to 80%, basically because a low-wage, low-productivity, austerity-driven Budget does not work.

The Government have driven down wages at the same time as they are putting up tax thresholds, which is obviously not a way of generating significant tax revenues. Therefore, the business model is bust. We need investment in productivity, skills and infrastructure. Why are we seeing another situation? Why has the train infrastructure in the north of England been removed or delayed? Why are the poorest given loans rather than grants to go to university?

The Budget is not the way forward for a high-skilled, high R and D, high-productivity and high-wage economy to pay its way. It is flawed economically and it is a political stunt. The sooner we get a Labour Government the better.

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[The Chief Secretary to the Treasury (Greg Hands)]

I am very pleased to be closing the debate on this historic Budget as the first Conservative Chief Secretary on behalf of the first Conservative-only Government since 1997.

We have had a good debate. Indeed, we have had four good days of debate. For me, the most remarkable parts were the commanding speech from my right hon. Friend the Chancellor on day one and the real passion from my right hon. Friend the Work and Pensions Secretary. Almost as remarkable were the opening exchanges on Thursday; for the last five years of the Budget, day two saw set pieces between Ed Balls and Vince Cable, but not this year, as we, the Conservatives, took both of their seats on 7 May.

Today we have had five high-quality maiden speeches from the three great nations of England, Scotland and Wales. It was a particular pleasure to hear from my constituency neighbour, my hon. Friend the Member for Kensington (Victoria Borwick). She made a marvellous maiden speech, with a great tribute to her predecessor Sir Malcolm Rifkind, who is actually my predecessor as well. We have another common predecessor; she told us how she appeared in the index of Alan Clark’s “Diaries” and the concern that had caused her husband.

Equally impressive was the maiden speech of the hon. Member for Paisley and Renfrewshire South (Mhairi Black), who spoke with great poise, engagement and passion, although I have to say that most of her speech seemed to be directed at the Labour party. She said that Labour had left her family, not the other way round. I congratulate her on a memorable maiden speech and on her first-class honours degree.

From Wales, we heard from my new colleague my hon. Friend the Member for Brecon and Radnorshire (Chris Davies). In what was a very entertaining speech he took us through his first day here—how he saw the mosaic of St David in the Central Lobby and his pride at being both Welsh and a Unionist, and how the Whips approached him sternly, with one Whip reminding him somewhat of his wife back home. I am wondering which member of the Whips Office that might have been. His speech was also peppered with references to all kinds of other battles and heroism.

Also from Scotland, we heard from the hon. Member for Airdrie and Shotts (Neil Gray). He made a very competent maiden speech and talked about life in Westminster and missing his family back in Scotland. I can tell him that that is not unique to those travelling from Scotland; it can happen to those of us who are MPs for London constituencies as well. He was generous about his predecessor, Pamela Nash, and talked about being the first Orcadian for 200 years to be an MP.

Again from Scotland, the hon. Member for Linlithgow and East Falkirk (Martyn Day) was generous to his predecessor, Michael Connarty, whom I knew well and served under on the European Scrutiny Committee, and gave us a radical, passionate and humorous speech. I wish him well.

A number of other Members also contributed to the debate, but I will not go into their speeches in detail. I was struck, however, by the fact that, although some Labour Members raised interesting points, so many of their speeches sounded like they were cut and pasted directly from their election hustings speeches and showed no recognition of what had happened on 7 May or what happened last week.

Let me now conclude the Budget debate. This is the Budget that gives Britain a pay rise and that cuts taxes for 29 million people. It is the Budget that protects our national security and that gives Britain the security of living within its means. To be fair, not all Labour Members ignored the results of the election or the Budget last week. The acting Leader of the Opposition, the right hon. and learned Member for Camberwell and Peckham (Ms Harman)—[Hon. Members: “Where is she?”] That is a very good question. She might be in hiding. She reprimanded the shadow Health Secretary over the benefit cap, reminding him:

“You may have noticed that we lost the election”.

It is remarkable that he or anyone else could possibly have missed that fact. It is equally remarkable that she now appears to be on the right of her party. I do not think that she moved; I think the party has moved to the left. We have heard from the right hon. Member for Birkenhead (Frank Field), who is so enthusiastic about our new national living wage that he wants it to be brought forward and to start sooner. It is resoundingly clear from this Budget debate that Labour has made no progress in economic policy since May.

[Geraint Davies]

Is not this a Sheriff of Nottingham Budget? Is not the Chief Secretary to the Treasury robbing the poor by removing their tax credits and giving to the rich by increasing the inheritance tax threshold? This Budget stinks, and his grubby hands are all over it.

[Greg Hands]

There you have it, Madam Deputy Speaker. The hon. Gentleman’s remarks epitomise everything that we have all been suspecting about the Labour party over the past 10 weeks—namely, that it has learned nothing from its defeat right across the UK on 7 May. It looks as though it intends to start this Parliament as it started the last one: in disarray, denying the deficit and failing to apologise for its past mistakes.

The right hon. Member for Doncaster North (Edward Miliband) lost the election, and the turning point was surely that moment in the TV debate when he denied that the Labour Government had spent too much. If they had not spent too much, how come there was no money left? Labour’s economic credibility was so bad that, at the election, it even lost the constituency of its own shadow Chancellor as well as those of half its Treasury team.

There was one senior Labour figure who avoided losing his seat, but he did so only by standing down voluntarily. That was the last Labour Chancellor, Alistair Darling. He is reported to have said something very interesting the day after the Budget, which was that Labour was “in disarray” and that it was

“paying the price of not having a credible economic policy.”

He hit the nail on the head. Labour’s response to the Budget has been totally incoherent. Who would have thought that a Labour Opposition could attack a policy to bring the minimum wage for workers from £6.50 up to a national living wage of £9 in the course of a Parliament? I invite the other parties to consider their positions. By the way, only the Labour party could have a leadership crisis without actually having a leader. If Labour Members vote against the Budget in a few minutes’ time, they will be voting against a national living wage, against dealing with the deficit and against meeting the UK’s NATO defence commitments. They will also be voting against £10 billion of extra investment in the NHS.

This is not a Government who shy from the tough decisions. It is right that higher wages, not welfare subsidies, should raise the standard of living of working families. It is right that those with the broadest shoulders should bear the biggest burden. It is right that we should help and support our businesses to bring prosperity to this nation and it is right that we should build ourselves strong, stable and secure public finances. We are doing that. This has been a landmark Budget, delivering for the entire country a bright and prosperous future. There are still tough choices ahead, but I commend the Budget to the House.

Question put, That the amendment be made.

Tax Credits (Working Families)

Geraint Davies Excerpts

Tuesday 7th July 2015 Commons Chamber

[Mr Gauke]

Let me put this as simply as possible. The debt is essentially the accumulation of deficit and for the past five years every measure that the Government took to reduce the deficit was opposed by Labour. Indeed, Labour’s economic argument—its whole case—was that we were going too far, too fast in reducing the deficit and that we should have a looser fiscal policy. A looser fiscal policy means borrowing more. If we borrow more, the debt will rise more quickly. The hon. Lady cannot have it both ways. She can argue that we should have been prepared to borrow more and to allow the debt to rise because that was a price worth paying, but she cannot then turn around and say, “We want the debt to be lower, even though our policies called for higher debt.”

[Geraint Davies (Swansea West) (Lab/Co-op)]

The Minister is construing tax credits as a welfare cost, but will he not accept that if someone is starting a small business and can afford to pay someone £10,000 to run a café, or whatever it is, but the person who is being employed needs £15,000, those tax credits would have helped generate a business with a much greater turnover than just the incomes of the individual employees? Tax credits are an instrument for generating new small businesses, not simply an act of charity from the Tories.

[Mr Gauke]

Cutting corporation tax rates for small businesses, introducing the employment allowance, helping under-21s and apprentices whose employers no longer have to face national insurance contributions, reducing the regulatory burden, restoring the economy to health and ultimately improving access to finance is what helps small businesses, and that is a record that we are proud of.

Oral Answers to Questions

Geraint Davies Excerpts

Tuesday 16th June 2015 Commons Chamber

[Greg Hands]

I congratulate my hon. Friend on taking his seat and on his fine maiden speech last week. He told us then:

“Our best days lie ahead.”—[Official Report, 3 June 2015; Vol. 596, c. 646.]

He is right, but only if we continue to get our deficit, and therefore our debts, under control. Thanks to the plans we have set out, we are set to eliminate the deficit altogether and deliver the tax cuts outlined in our manifesto. We are doing it with the strong endorsement last month of the British people.

[Geraint Davies (Swansea West) (Lab/Co-op)]

There are 800,000 fewer people earning more than £20,000 than there were in 2010. Is that why the Government have borrowed more in five years than Labour did in 13 years?

[Greg Hands]

The hon. Gentleman ignores the overall employment picture over the last Parliament, in which 2 million new jobs were created and unemployment fell by 1 million. It sounds to me as if the Labour party is starting this Parliament as it started the last one: in a mode of deficit denial and failing to face up to Britain’s problems.

Royal Bank of Scotland

Geraint Davies Excerpts

Thursday 11th June 2015 Commons Chamber

[Harriett Baldwin]

There seems to be no pleasing Opposition Members. They are not happy when Royal Mail shares go up and we sell them for more money; and they are not happy when the RBS share price is where it is today. They seem to argue that the best thing to do, in all these situations, is to borrow more, spend more and invest more in the banking sector.

[Geraint Davies (Swansea West) (Lab/Co-op)]

I welcome the Minister to her post and offer a sobering thought to the Chancellor, who might need it after his Mansion House speech. Given that the nationalisation of RBS was in response to an unforeseen sub-prime debt crisis in America, does the Minister agree that changes to the law to require a budget surplus every year might reduce the fiscal flexibility we need to respond to such a crisis in the future—even by renationalising the banks, if necessary?

[Harriett Baldwin]

I am sorry that the hon. Gentleman’s invitation to yesterday’s dinner got lost in the post—or perhaps he was not invited. What I do not understand about his question is why he seems to argue for ongoing fiscal irresponsibility, which is what got us into this mess in the first place.

Finance (No. 2) Bill

Geraint Davies Excerpts

Wednesday 25th March 2015 Commons Chamber

[Mr Gauke]

I suggest that the hon. Gentleman look at the analysis by the Office for Budget Responsibility of why its forecasts on deficit reduction were not met. It has been very clear that the three reasons it did not happen were the eurozone crisis; the after-effects of the financial crisis being greater than it or, indeed, other independent observers had expected; and higher commodity prices than had been expected. That made deficit reduction harder than it would otherwise have been.

The critique of Labour Members is sometimes to say that we have rigidly stuck to our plans to reduce spending, and on other occasions to say that we have failed to reduce the deficit as fast as we said we would. As regards our spending plans, the departmental and welfare spending reductions that we set out have been delivered. The automatic stabilisers came into effect; we have shown the flexibility to allow that to happen. As a consequence, we have delivered what we set out in terms of reducing spending, although we have faced more difficult circumstances. Labour Members are all over the place in this debate. Sometimes they say that we have stuck rigidly to plans that we should not have stuck to, and at other times they say that we have let the deficit rise.

We must remember that Labour Members opposed every single measure that we took to reduce the deficit. Had they been in power and had they been consistent in what they said—at least in their rhetoric—in opposition, we would have seen borrowing at a substantially higher level over the past few years, leaving our public finances in an unsustainable position, putting our recovery at risk, and damaging the economic credibility of the United Kingdom. Thankfully, they did not have the opportunity to crash the car, having done so once already.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the hon. Gentleman not accept that the deficit targets were not satisfied because the growth projections went down, and that is because consumption went down, and that is because VAT went up? I appreciate what the Prime Minister said earlier, but does the hon. Gentleman accept that if VAT went up now, when we have 0% inflation, that would spiral the economy down, and that it would be better to reduce VAT than to reduce tax thresholds in order to stimulate growth to balance the books?

[Mr Gauke]

Is the hon. Gentleman saying that we should reduce VAT?

[Geraint Davies]

I am saying that given a choice between lower VAT or lower tax thresholds, does the hon. Gentleman accept that lower VAT would give higher growth and help to reduce the deficit—or is he a just a politician without any economic sense?

[Mr Gauke]

Well, there we go: another pledge from a Labour Member that would increase borrowing levels. I should remind the House that when VAT was increased, Labour Members did not vote against it.

--- Later in debate ---

[Mr Gauke]

I am spoilt for choice. It is important to share these things around, so let me give way to the hon. Member for Swansea West (Geraint Davies), who has been very patient.

[Geraint Davies]

The Minister assumes that the choice is between tax and spend. Does he accept that if the tax and spend options are made in one way rather than another they will promote more growth and therefore more revenues? If more money goes to poorer people who spend all their money, as opposed to rich people who hide it in tax havens—10% of UK wealth is offshore—and if we had a Labour Government and a fairer distribution, we would surely have more growth and fewer cuts.

[Mr Gauke]

I am deeply unpersuaded of the idea that, somehow, magically, growth will shoot up if we have a Labour Government.

[Geraint Davies]

It did last time.

Finance (No. 2) Bill

Geraint Davies Excerpts

Wednesday 25th March 2015 Commons Chamber

[Chris Leslie]

My hon. Friend’s point about distributional analysis is a good one. We know that those on lower and middle incomes have been hit particularly hard: people on the lowest incomes do not benefit from many of the changes that the Government have made, and we must consider what data we need.

My point about parliamentary procedure is not just about the political dates of Budgets and so forth; it is also about the time that officials and civil servants have to draft some of the provisions and proposals. I do not understand why it has to be so last minute and by the seat of their pants. It is one thing to exclude one’s political opponents from the reveal moment of the Budget, but surely it would be good to ensure that proper internal arrangement are in place in the Treasury for drafting these arrangements.

The Institute of Chartered Accountants in England and Wales has its concerns:

“we do not think that Parliamentary consideration amounting to only one day is in any way sufficient to consider and pass another significant Finance Bill that runs to 349 pages and contains a considerable amount of controversial legislation.”

An article in today’s Financial Times quoted Heather Self of the law firm Pinsent Masons. She said that the decision to rush through the Finance Bill was

“an abrogation of the parliamentary process…Legislation this complicated should not be going through without parliamentary scrutiny”.

My hon. Friend the Member for Edmonton was right when he talked about Tolley tax handbooks—I know his walls are adorned with the tax code in fine, leather-bound tomes. He will know that when the coalition came to office, there were 17,795 pages in that tax handbook, but by the end of this Parliament that has risen to 21,414 pages. The Minister says that is not a good barometer. I suppose it is good for publishers and perhaps makes my hon. Friend’s library a little more expansive and extensive, but I suspect it makes things more difficult for people to understand and follow. I think that our constituents deserve better and want proper scrutiny of the Finance Bill, and we will try our best to do that. The House should bear in mind the fact that the Bill appeared in the Vote Office yesterday, so it is difficult even for my diligent hon. Friends properly to absorb and assimilate all the provisions and to do justice to the Bill. Nevertheless we will give it a go and try our level best.

Ultimately, the Finance Bill could not disguise the coalition’s failures of the past five years. There is a slow recovery, but it is not being felt far and wide. By the standards and tests that the Government set when they came to office and made their promises in 2010, the Conservatives and Liberal Democrats have failed, particularly on the public finances. They have failed to eliminate the deficit, which should have gone by now. In fact, in the autumn statement 2010 the Chancellor trumpeted that he would bring forward to 2014-15 the year by which the current structural deficit would be eradicated, yet we find ourselves with a £90 billion current budget deficit, which fell by only 5% on the previous year—not exactly the rate we were promised.

There are many other structural issues in the economy. I do not know whether my hon. Friends remember the Chancellor’s promise about the march of the makers, but I am afraid that this country’s exports have not lived up to the £1 trillion target set for 2020; we are already a mere £300 billion off course in achieving that. Before the last election the Chancellor set the litmus test of cherishing our triple A rating, but of course that was downgraded.

One thing in the Finance Bill that supports the Government’s fiscal strategy was the revelation of how extreme the cuts will be to public services over the next three years—twice as deep over the next three years as we have seen for the past five years. In the words of the Office for Budget Responsibility, the “rollercoaster” is about to go over the precipice, and public finances, social care, the police, defence and many other public services will be pushed over the edge of that cliff should the coalition parties Government have a further five years in office.

It is no wonder that when people look at the impact of deep and extreme cuts to what Government Ministers term “non-protected Departments”, and see how deep they will be, they say, “Well that isn’t going to happen; it’s impossible to countenance that they would end up taking 30%, 40% or 50% from some of those Departments.” It is no wonder that people then believe there must be another plan, either for raising taxes or for cutting other services that some assume ought to be protected, in particular the national health service.

We had the debate on VAT, but I find it difficult to take the Prime Minister’s words seriously. These days, he has a habit of shooting from the hip—about whether he is retiring or what his views are for the day—so I am not sure that people will necessarily say, “Oh well, the Prime Minister said he’s not going to do it. That’s that then.” That is sort of what he said before the last general election about having absolutely no plans to raise VAT, but it was only a matter of weeks before he got round to doing it.

[Geraint Davies (Swansea West) (Lab/Co-op)]

My hon. Friend will know that the number of people earning more than £20,000 has fallen by 800,000 since 2010, and the slack has been taken up by more and more people on low pay and zero-hours contracts. Does he accept that we are facing these draconian cuts because the Government are overseeing a completely unsustainable business model and creating more and more low-paid people who cannot pay any tax? The revenues are not coming in, which is why they have borrowed more in five years than Labour did in 13.

[Chris Leslie]

As ever, my hon. Friend manages to sum up the Government’s record in a pithy and simple intervention. I had not heard those statistics about the number of people earning more than £20,000, but I shall certainly take a look at the points he makes. We shall perhaps look at those statistics in more detail.

My hon. Friend’s point about living standards is a good one that all Members should intuitively and properly understand. If we do not include everybody in the growth of the economy, if everybody does not have a stake or a share in it, if their consumer capabilities are not stronger, and if we do not tackle the sustainability challenge for growth in the future, we should not be surprised to find that we have an unequal recovery. Britain will only succeed if working people succeed. That is a catchy way of summing that up, and Government Members may well hear it a few more times in the coming weeks, but it is true.

Ultimately, our public finances are not determined in isolation, as though they are frozen in aspic. They cannot simply be dealt with in terms of cuts or changes in revenue: there is a dynamic, strategic set of issues that relate to what is happening in the real economy and the real world. The health of our economy will ultimately determine the health of our public finances. The Prime Minister and others say, “Why are you talking about living standards? Why are you talking about these things? That is not really the economy; it’s not about growth.” Of course it is. Ultimately, these things are related.

The low-wage economy the Chancellor has been heading us towards is a danger to our public finances. We are enduring an epidemic of job insecurity. The number of zero-hours contracts has ballooned by more than 20% in the past year alone. That is a problem for those who cannot plan even for the child care they need for the week ahead, let alone for getting a mortgage. It is also bad because it undermines the tax receipts the Treasury needs to sustain and pay for public services. It means that tax credits need to be higher to subsidise low pay and it is why the social security bill is £25 billion higher than the Chancellor expected.

Those living standards issues come up time and again in surgeries, meetings and encounters that my hon. Friends have with our constituents. Some 900,000 people are using food banks, and some 600,000 people have been hit by the cruelty of the bedroom tax. These issues will come back to haunt Ministers. They have attempted to deal with the deficit by hurting those on the lowest incomes. It has not worked; it has not succeeded; and it is a strategy that will just get worse in the coming years.

--- Later in debate ---

[Chris Leslie]

We are delighted that the Government took a shine to our proposals for pension tax relief changes—I suppose that imitation is the best form of flattery. We will stick with our policy to reduce tuition fees to £6,000, and we will set out in our manifesto, in a matter of days and weeks, how it will be funded. Still at this late hour, the full costings in our manifesto are available for the Office for Budget Responsibility to audit and verify—if only the Minister had shaken my hand on that. I offered him the hand of friendship—was it on the “Daily Politics” the other day?—but sadly he could not do it. It is important that we have fully costed and funded manifestos and that all parties engage in the process. We will look closely at the Conservative party manifesto. The Conservatives have made some grand promises about tax which will cost at least £10 billion to implement, even in the final year of the next Parliament, yet we have not seen a dicky-bird—even in the Budget figures—on how they will be paid for. I am looking forward to reading that chapter in its manifesto.

[Geraint Davies]

I mentioned that low productivity was driving down wages. Is not the point of tuition fees policy to increase the number of qualified people, productivity and national wealth, to end the deterrence on going to university, to stop people having credit ratings that prevent them from buying houses and to stop them not wanting a pay increase in case they have to pay back more of their fees? Surely this makes economic sense, while the Conservative party’s unsustainable economics of low pay and austerity is sending us into bankruptcy.

[Chris Leslie]

My hon. Friend knows that the change from £9,000 to £6,000 would make an appreciable difference. Of course, it is still a significant fee, but we will only ever make promises we know can be kept and that are fully funded. I would love to do more on many other tax issues, but given the state in which the Chancellor will be leaving the public finances in only a matter of weeks, we must show students that we understand the burden of debt on them and the nation. The Government never appreciated that so many students would never be able to pay back their debts and that the bill would have to be picked up by the taxpayer sooner or later.

As well as measures on tuition fees, the Bill should have contained a proper bank bonus tax for the starter jobs that many young people who are having trouble finding employment need.

--- Later in debate ---

[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a great pleasure and privilege to follow my hon. Friend the Member for Edmonton (Mr Love), who has been a distinguished Member of the House, particularly through his service on the Treasury Committee, which has added enormous insights into the deliberations of successive Governments. It is a great joy to follow my good friend and colleague.

I just want to make a few remarks. The budgetary process in the immediate run-up to the election has been very much a political stunt. The first thing to deal with is the illusion—or delusion—that there has been economic success and turnaround under the Conservatives. That is simply not the case; it is simply not borne out by the facts. The national debt is about £1.4 trillion—up 44%. Reference is made to the deficit and how much the debt is going up, but of course the current Government have borrowed more in five years than Labour did in 13 years—and we had to bail out the banks. The Government have lost the triple A rating. As I pointed out earlier, the number of people earning more than £20,000 is down by 800,000. There is a reliance on a fudging of the facts; this is a “fudge it” Budget, to make up for the fact that we have more and more low-paid people who cannot make a contribution towards the revenues in a sustainable way. Meanwhile, the Government continuously put up the tax threshold and say, “Who’s going to disagree with that?”, knowing everyone is scared to disagree. But that is the management of irresponsibility, because the money simply is not coming in to pay the bills.

So what we need is not a spat about tax and spend, but a serious consideration of how we generate productivity and growth, in order to have higher wages and a more sustainable plan for the future. Obviously, part of that was the debate about tuition fees and about enabling people to go, without fear, to university, so that we could get higher productivity and the students would not be hobbled by massive debt throughout their lives. Such debt can mean that they cannot get a credit rating and cannot get a house, and are scared of moving into a higher pay bracket because it pushes up their repayments.

Sadly, the Tories are creating a two-nation Britain. One nation will be the better off, who, lucky for them, own their own house, can get their sons and daughters into university and pass on money for them to put down a deposit on a property. There are others who may be equally or even more capable of going to university and of boosting the productivity in our collective economy but who are being stopped from getting houses in the future. We are at a turning point now. The party that gets elected will determine whether we have a more unequal or a less unequal future. I very much want us all to pull together as one nation to invest in the future.

The Conservatives have this massively political Budget profile, which has been described as a “rollercoaster”. Deep and savage cuts were going to take us back to the 1930s, but because that was pointed out by the BBC, the Office for Budget Responsibility and the Institute for Fiscal Studies, an adjustment was made. Bank shares were sold off and oil prices went down so that the public service time machine was moved back only to the year 2000. None the less, we all saw the Tories in their true oils. They were happy to make those savage cuts until the BBC highlighted what they were doing. Then they said, “Oh no, we’re not going to do that.” But there will still be savage cuts until the final year of the next Parliament, 2019-2020, when there will be a sudden acceleration in public spending—the biggest spending increase for 10 years—presumably to try to get Boris Johnson elected as the next Tory Prime Minister. That is probably what will happen in the unfortunate event of the Tories getting in again in some strange alliance with the UK Independence party, which would be a disaster for Britain.

We must strike a balance between trying to achieve economic growth and having to balance the books, instead of scrabbling around trying to decide which poor people to clobber. As my hon. Friend the Member for Edmonton pointed out, welfare cuts such as the bedroom tax raised only £400 million, which is small change compared with the numbers that we are talking about. Two thirds of the people hit by that tax are disabled. The cuts to tax credits are hitting people with children who are trying to work. It is ridiculous to try to squeeze more and more out of the poorest to make ends meet. Clearly, it is right that the richest pay more, whether those with more than £2 million pay the mansion tax—

[Mark Garnier (Wyre Forest) (Con)]

They do pay more.

[Geraint Davies]

They need to pay lots more, not a bit more. Of course some of the very rich are paying more, but that is because they are getting richer and richer on massive pay awards. They are earning so much more than anyone else, and the situation is getting out of control

[Charlie Elphicke]

rose—

[Geraint Davies]

I will not give way to the rover from Dover, thank you very much. He is known as the Dover soul. [Laughter.] Obviously, that was the highlight of my speech.

Finally, I wish to comment on the rabbits that have been pulled out of the hat. Today, we were told, “Oh, there will be no VAT increases.” Is the Prime Minister going to commit himself to that in his five-year plan? A couple of days ago, we heard that another £46 billion was being spent on various railway connections in the north. There seems to be a desperate attempt to make things up on the hoof.

I do not necessarily disagree with this devolution of economic and service power to the north—to Manchester. We did that in Wales, but it was done on the back of an Act of Parliament and a referendum. In their haste to generate higher ratings at the polls, the Government are doing anything, including undermining the constitution and the economic balance and fragmenting the NHS in the process. Their recent track record, therefore, has not been impressive. The future looks bleak. I very much hope that we can focus on increasing growth. We should consider tuition fees, a cast-iron promise to stay in the EU, which is so important for inward investment, and procurement. The reality is that when it comes to procurement we should look at favouring, if we can, small British companies that pay British tax—corporation tax and income tax—rather than giving the work to foreign companies that do not pay our tax and do not contribute towards growth.

[Charlie Elphicke]

rose—

[Geraint Davies]

I will finally give way to the hon. Gentleman.

[Charlie Elphicke]

I thank the hon. Gentleman for being so generous in giving way to the rover from Dover. I gently point out that the reason why we cannot show a preference towards our own businesses in matters of procurement is to do with the European Union, which he loves so much.

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. Believe it or not, that discussion is outside the scope of the Budget resolutions. But given that the hon. Gentleman had just acquired a nickname—although I will not be addressing him as such—I decided to allow him to intervene. Mr Davies, I should be grateful if you returned to the Finance Bill.

[Geraint Davies]

Clearly, I accept the ruling on the rover from Dover. I was simply making the point that, in our growth strategy, we should be encouraging small businesses. In Wales, something like 60% of procurement goes to small businesses, half of which are based in Wales. In England, the comparable figure is something like 25%. I am suggesting that, through encouragement rather than breaking EU rules on competition, we should make things easier for small businesses in order to help growth, tax, and supply chains. We should do that, rather than just say, “What can we do?” Labour increased this economy by 40% in the 10 years to 2008, before the banking crisis.

[Madam Deputy Speaker]

Order. Mr Davies, you are way out of scope now, so we will go to the concluding remarks of this debate, because we are running out of time.