Finance Bill

Grahame Morris Excerpts

Tuesday 6th July 2010 Commons Chamber

[Clive Efford]

rose—

[Grahame M. Morris (Easington) (Lab)]

rose—

[Mr Redwood]

I should like to finish my point.

At the moment, there are worries, reflected in the comments made by the shadow Chief Secretary to the Treasury, that the clouds may be gathering again in the international community, and we need to watch that. I suggest to those on the Treasury Bench that we need to do more work on ensuring that our banks are capable of lending in sufficient quantities so that all the private sector projects we need and all the private capital we need for the public projects as well can go forward as rapidly as possible.

We can encourage that to happen in many ways. An important part of the policy is that when we get some control over public spending and the public deficit, to instil confidence in the markets, we use those markets for a well financed private sector-led recovery, so that we can surprise on the upside in comparison with the fairly cautious figures given by the OBR. I am certainly not challenging the OBR figures, which are the best available at the moment. I would like to think that we could improve on them over the five years. If we do more about how the banks work and are regulated, so that we can accept that they have enough cash and capital for this stage of the cycle, and if we allow them to get on with the job of lending more money to businesses and worthwhile public projects, we can make progress.

We can also make a lot more progress in the public sector in respect of the public spending plans published in the Budget. Those public sector spending plans show public spending going up every year in cash terms over the five years to which the Finance Bill relates and is trying to finance. The increases are not very big, so if there were lots of wage increases and a lot of price inflation for the things bought by the public sector, and if there were the explosion in benefit claims that Labour is wrongly forecasting, there would of course be a big squeeze on much valued public services. We Government Members do not wish to see that any more than Labour Members do, and I wish that they would not keep pretending that somehow we want to cut the services, because we do not.

[Grahame M. Morris]

Two simple decisions arose from the Budget: the new £464 million hospital north of the Tees and the £500 million Building Schools for the Future projects in County Durham were cancelled. All would have been built by the private sector. How will those cancellations assist the growth in the private sector, particularly in respect of jobs in my constituency?

[Mr Redwood]

As the hon. Gentleman should be aware, the outgoing Government’s capital spending plans have not been changed by this Government. We have to accept the previous Government’s plans for a modest increase in the capital stock of the state over a period of great stress in the budgets. But the cancellation of the Building Schools for the Future programme and its replacement with a programme that gives better value for money is exactly what we want. The trouble with Building Schools for the Future was that there were three years of delay and £10 million of consultancy costs before bricks and mortar or steel and glass could even start to be laid.

What my right hon. and hon. Friends rightly want to do is cut out all that nonsense, stop wasting all the money on the documentation, delays, consultancies and all the rest of it, and have a more straightforward approach, so that a bigger proportion of the inherited capital expenditure budget can be spent on bricks and mortar and bricklayers’ wages, as the hon. Gentleman wants.

--- Later in debate ---

[Grahame M. Morris]

If that is the case, why did the Conservatives support the Labour Government’s spending plans until 2008? In fact, my recollection is that there were demands for more spending—more police numbers, more support for carers, and so on.

[Jacob Rees-Mogg]

There were political reasons, I think it might be said, for supporting those spending plans. I was not a Member of the House at that time, and it is a bit harsh for me to be expected to take responsibility. I think a lot of people, not only in this House, held to the mistaken idea that the economy was going to carry on growing for ever. I have always thought that boom and bust is a fact of life. We always have booms and we always have busts, and we will have them again. One can look at studies of financial cycles going back to biblical times, so the thought that there would always be growth was simply wrong, and to try to match Labour’s spending programme was a mistake. However, even Homer nods. The point is that spending was out of control and had to be cut, and taxation is at its limit.

--- Later in debate ---

[Mr Jones]

Yes, they will, and there is something else that they will do. Interestingly, the hon. Member for Ipswich, who made an excellent maiden speech, talked about prison reform, saying things that he really meant, on an issue to which he is committed. However, he will soon be disabused of that, when he finds that the prison reforms being put through the Ministry of Justice have nothing at all to do with the penal system, and everything to do with budget restraint.

As for the other measures , the VAT increase will have a disproportionate effect on my constituents and those in regions such as mine, because it is, in part, one of the poorest communities. As for the Liberal Democrats—we saw a half-hearted attempt earlier to defend the increase in VAT—the measure will indeed affect the poorest.

[Grahame M. Morris]

On the point raised by Government Members about the impact assessment, will my hon. Friend comment on the impact of the VAT increase on the third sector? I had meetings at the weekend, and I know that many in the voluntary and community sector rely on trading activity and are concerned about what the increase will do to their income levels.

[Mr Jones]

The increase is going to affect every single organisation that provides public services, including local councils––the increase will cost them a lot of money. As we saw earlier, certain commitments were given on VAT, and I have here the Liberal Democrat poster from 8 April—and I must say that it is very good. I am sorry if I am going to pour more scorn on to the Liberal Democrats, but I enjoy doing it, and I am sure that some of their Tory colleagues will enjoy it as well. The poster says:

“Tory VAT bombshell.

You’d pay £389 more a year in VAT under the Conservatives”.

The Deputy Prime Minister, the right hon. Member for Sheffield, Hallam (Mr Clegg) made quite a few comments on VAT before the election. He referred to it on the “Today” programme on 7 April 2010, saying that VAT

“let’s remember, is a regressive tax”.

What has changed since then? What is being proposed will affect the poorest in our society.

The Deputy Prime Minister is not the only one who has form in this area. When the then Leader of the Opposition appeared in Exeter in something called Cameron Direct on 8 May 2009, he said:

“You could try as you say put it on VAT, sales tax, but again if you look at the effect of sales tax, it’s very regressive, it hits the poorest the hardest. It does, I absolutely promise you.”

So what is different now? What has actually changed, apart from the fact that the Government now have their posteriors on the Treasury Bench and in their ministerial limousines?

--- Later in debate ---

[Mr Jones]

There will indeed be a double effect on those families. It is all very well saying that people can shop around, but in my constituency—a rural constituency but, as I said in my maiden speech, one with urban problems—they cannot do that when they have no access to a car and the only option is public transport. Those are the communities who will be hit hardest, and I am sure that they exist in all constituencies. The new hon. Member for North East Cambridgeshire, for instance, spoke of the pockets of deprivation in his own constituency. Those rural poor families will be hit harder than most.

[Grahame M. Morris]

The VAT increase will have an impact not only on small businesses and enterprises, but on working men’s clubs. Tonight there was a meeting of the all-party parliamentary group on non-profit making clubs, which is very concerned about the increase. Many clubs in our area are operating on the margins, and it will have an immediate impact on their costs because the transport costs are all passed on to them. Has my hon. Friend any thoughts about the impact on such clubs, which provide a real social centre for many people?

[Mr Jones]

As a member of the Sacriston workmen's club, I have to concur with my hon. Friend. As he knows, following the smoking ban, the change in the way people access alcohol and supermarket price cutting, many such clubs in the north-east of England have been struggling. Many have closed, sadly, in my constituency. We hear a lot about rural pubs, but we hear very little about the Club and Institute Union movement. In many places, including his constituency and mine, those clubs are the centre of the community. Once they have gone, they will not be replaced. The VAT increase will be a severe blow for them at this difficult time, when they are struggling already.