Finance Bill

Ian Blackford Excerpts

Tuesday 21st July 2015 Commons Chamber

[Shabana Mahmood]

As the Financial Secretary knows because we have already had such an exchange—I feel we are reliving our greatest hits—on a number of occasions in the past couple of years, our policy at the general election was our manifesto commitment not to go ahead with the corporation tax cut from 21% to 20%. We would not have gone ahead with that additional cut to 20%, but instead used all the money to pay for a cut to business rates this year and a freeze next year. It was a direct switch spend. We wanted to make a commitment to small and medium-sized businesses in our country to do something practical on business rates, but we needed to find a way to pay for that, and we chose to switch-spend in respect of the additional corporation tax cut. We of course lost the election, and the Government are proposing a further decrease of the corporation tax rate. We will support the corporation tax measures, but we will ask questions about what that means for the future direction of travel.

Following an intervention, the Financial Secretary mentioned the BEPS project. On corporation tax more generally, it is important—given how some companies seek to shift profits and game international taxation rules—to have international agreement. Concern has already been expressed in some quarters that some of the countries with which we need to do business and with which we need to agree international tax rules might start to see us as a tax haven. I disagree with such a characterisation, but there is such a risk in getting agreement within the OECD BEPS process. I would welcome it if Treasury Ministers could, in Committee, provide further details about what is happening and about how our friends in the BEPS process are reacting and responding to the Government’s proposal on the headline rate of corporation tax.

One measure we have already voted against relates to inheritance tax. Clause 9 introduces an additional residence nil-rate band for inheritance tax when a home is passed to the direct descendants of the deceased on or after 6 April 2017. The provision, which runs to more than 400 lines, is extremely technical, but it in effect allows parents to pass on a house worth £1 million to their children free of inheritance tax. We have made it clear that the focus of tax cuts should be to help people on middle and lower incomes and to tackle tax avoidance. The Treasury has admitted that 90% of households will not benefit from the Government’s inheritance tax policy. Their priority should be to help the majority of families and first-time buyers struggling to get a home of their own, rather than a further cut to the rate of inheritance tax at this stage.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

I must say that I am listening to the hon. Lady with a degree of sadness. Last night, we saw the Labour party abstain on welfare. Today, Labour Members are yet again failing to provide an effective opposition to this Government. Is it not time that they came across to our Benches and to SNP Members, who are providing the real opposition that Labour Members are failing to provide?

[Shabana Mahmood]

The hon. Gentleman rather forgets that the Scottish National party is not a national party; in fact, it is committed to breaking up our Union. If he and his colleagues aspire to be an official Opposition, they may wish to stop being a party of only national interest and stop trying to break up our country. We did not merely abstain on the welfare Bill. As he well knows, we voted for our reasoned amendment, which is exactly what his party plans to do today. If that approach was not good enough for us yesterday, why do he and his colleagues think that it is good enough for them today?

If the hon. Gentleman has been listening to my now very lengthy remarks, he will know that I have gone through the Finance Bill and the Budget in detail and made it very clear that the Bill does not contain many of the most contentious of the Chancellor’s Budget decisions. We will debate and oppose such measures when they are brought before the House as statutory instruments, but those measures are not in this Bill. I have laid out in depth our approach to all the different measures in the Bill, including those that we support and those on which we will ask further questions and to which we will table amendments, which we will vote on, as the Bill continues through its stages in this House.

The Government have published further changes to the direct recovery of debts from bank accounts and in relation to carried interest. That has excited some interest in the inboxes of Members’ email accounts with the campaign by 38 Degrees. We had a manifesto commitment in respect of carried interest. I am not sure that the Government’s proposals in the Finance Bill go as far as we were hoping to go, had we been elected. As I say, we will test the detail in Committee.

In short—sorry, I mean “in conclusion”, as I have been on my feet for a while—many of the most contentious elements of the Budget are not in the Finance Bill. It contains a mixture of measures that we support and measures that we will return to in great detail when we get to Committee of the whole House. I look forward to debating with Ministers as the Bill progresses through the House. I hope that in winding up, the Minister will deal with some of the questions that I have raised in respect of bank taxation, the climate change levy and insurance premium tax.

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[Roger Mullin]

Absolutely, and I am glad my hon. Friend raised a matter that I will come to shortly. Investment is critical for productivity in this country.

I am struck by how the detail of the Finance Bill suggests that, rather than addressing key issues in a positive manner, the Government present some highly counterproductive measures on productivity. I and my colleagues initially welcomed some of the changes to the banking levy and the introduction of a surcharge. However, whether through carelessness or incompetence—what I am about to say surely could not be planned—the scope of the changes now captures both challenger banks and many building societies whose practices are very different from those of the big banks. Challenger banks already face additional hurdles compared with the big banks, and as the British Bankers Association has pointed out:

“The surcharge’s disproportionate effect on smaller and challenger banks was evidenced by the resulting fall in their share prices following the announcement, in some instances of over 10%.”

Of more concern to me and my colleagues is that the BBA has estimated that:

“Our preliminary analysis based on modest growth projections across the sector suggests that the contraction in lending could be around £10 billion over five years”.

If there is anything we do not need when trying to boost productivity, it is a contraction in lending, particularly for SMEs. If that was to be the only drag on productivity it would be bad enough, but let me turn to another.

[Ian Blackford]

If we are to get sustainable economic growth in this country, we need sustainable growth in bank lending, but the Government’s actions will restrain what is necessary to deliver bank lending growth in this country. What has happened to the £375 billion of quantitative easing that was supposed to do exactly that and increase bank lending? It is another failure of this Government.

[Roger Mullin]

My hon. Friend answered his own remarks with his last four words. It has been a failure, and now the Government are also failing on productivity.

As I was saying, the potential contraction of £10 billion in lending is made worse because it is now paralleled by a further planned drop in public sector capital expenditure, as my estimable colleague, my hon. Friend the Member for Dundee East (Stewart Hosie), revealed earlier today in questions to the Chancellor.

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[Barbara Keeley (Worsley and Eccles South) (Lab)]

Thank you, Madam Deputy Speaker, for calling me to speak. It seems that it is third time lucky.

We have had a lively debate. We heard speeches from the hon. Members for Charnwood (Edward Argar), for Kirkcaldy and Cowdenbeath (Roger Mullin), for Dudley South (Mike Wood), for East Antrim (Sammy Wilson) and for Lewes (Maria Caulfield), my hon. Friend the Member for Hornsey and Wood Green (Catherine West), the hon. and learned Member for South East Cambridgeshire (Lucy Frazer), and the hon. Members for Brighton, Pavilion (Caroline Lucas), for East Lothian (George Kerevan), for Foyle (Mark Durkan) and for Edinburgh East (Tommy Sheppard).

Last week, the Labour Opposition voted against the Budget, which my hon. Friend the Member for Streatham (Mr Umunna), the shadow Business Secretary, described as “unfair” and “regressive” and

“not equal to the challenges that we face as a country.”—[Official Report, 14 July 2015; Vol. 598, c. 768.]

This is the context in which we start our scrutiny of the summer Finance Bill. There has been much rhetoric and spin from Ministers but little acknowledgment of the hardship that the Government’s measures will cause to more than 3 million people on low incomes. We heard much on that point today.

The hon. Member for Edinburgh East challenged my hon. Friend the shadow Chief Secretary on Labour’s stance on the general direction of the Finance Bill. I am not a Hansard writer, so I do not claim that this is absolutely verbatim, but it is worth repeating what my hon. Friend said, which was that Labour disputes the Government’s characterisation of the measures in the Budget and the Bill. We do not see them as they see them. They use these descriptions of national living wage, working people and so on, but we do not see it that way. However—this is an important point—the measures we oppose are not all in this Bill. Some will be in delegated legislation. I hope that explains our position to the hon. Gentleman.

Given the hardship that the Budget’s measures will cause to 3 million families on low incomes and that we debated yesterday, the tax lock is of course welcome. However, there were giveaways in this Budget, which are detailed in the Finance Bill, such as the cut to inheritance tax. That featured a number of times in the debate. I want to question the priorities that are behind the choices made by this Government. Whenever we talk about increases to the national minimum wage, we must bear in mind, as many Members have done, that the cuts to tax credits more than outweigh those wage increases. My hon. Friends have taken the opportunity to outline our opposition to these regressive measures that will hit more than 3 million working people. Despite the gimmick of the tax lock on VAT and income tax, the Government’s other tax increases will also have an impact on families over and above the impact from cuts in tax credits.

[Ian Blackford]

I am pleased that the hon. Lady mentioned Labour’s opposition to the impact of the tax credits, but there is concern on the SNP Benches and elsewhere in the country—this goes to the heart of the matter—that people who will be affected by the Budget and what is happening in this Finance Bill need leadership. It is that failure to give leadership—to oppose, as the Opposition party in this House—and to stand up for people who are affected by these measures on which the Labour Opposition will be judged.

[Barbara Keeley]

I do not believe that is the case. We have been through the whole of the last Parliament being the official Opposition and we are still in that position again after the election, much to our chagrin. I know there are a lot of new Members in the House, but I must say that a Bill does not pass through the Commons in one sitting—it does not pass through the Commons in one day—because it goes to Committee. When we come back in September we will have a Committee of the whole House, and we have started to table amendments for debate on those days. There are also Public Bill Committee sittings, Report and Third Reading, so there are many occasions when speeches can be made.

Oral Answers to Questions

Ian Blackford Excerpts

Tuesday 21st July 2015 Commons Chamber

[Damian Hinds]

The Budget contained measures that will boost skills and support high-tech businesses across the north, including in my hon. Friend’s constituency. Greater Manchester local enterprise partnership is invited to bid in the new round of enterprise zones, there will be new regius professorships to support universities and there is an ambitious transport package that will provide much needed infrastructure for the north of England.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

T1. If he will make a statement on his departmental responsibilities.

[The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne)]

The core purpose of the Treasury is to ensure the stability and prosperity of the economy.

[Ian Blackford]

We hear from the Institute for Fiscal Studies that the gross impact of the higher minimum wage will be about £4 billion, but that the cuts to tax credits represent about £6 billion. The proportion of children in poverty who are from families in work rose from 54% to 63%, and that statistic can only get worse. It is little surprise that the Government want to redefine child poverty. To change a definition is to change the truth—

[Mr Speaker]

Order. I thought the hon. Gentleman had a background in the financial world. He cannot have been allowed to prate on at that length when he was busy making important decisions with commercial substance involved. He will really have to practise.

Rent-to-own Sector

Ian Blackford Excerpts

Tuesday 14th July 2015 Westminster Hall

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for Blackpool North and Cleveleys (Paul Maynard) for securing the debate. He spoke with passion about this important matter, as did the hon. Member for Makerfield (Yvonne Fovargue).

The hon. Member for Blackpool North and Cleveleys said that non-transparent markets cannot be regulated, but our discussion this morning has highlighted the need for effective regulation. The fact that so much of it is not transparent—we are talking about protecting the most vulnerable, the poorest and the most disadvantaged in our society—means that the Financial Conduct Authority has got to take proper responsibility for this growing market, for all the reasons that have been set out.

We all recognise that the FCA is in its infancy, and that it has had a number of major tasks over the past few years. In our opinion, the FCA has got to take far greater responsibly for ensuring that the sector is effectively regulated. One of the issues is what has been described as the bundling of services. As we have seen in other areas of the market, there has to be an unbundling of services. It has to be made explicitly clear why the consumer is charged for each part of the service provided in the rent-to-own sector.

The Government must look at what legislation is required to force the FCA to take effective action to protect the consumer in this important area. We all accept that there is a need for the rent-to-own sector in our society. There are people who will be tempted by the desire to pay weekly for products. The sector has existed for a long time, but it is important that it is effectively regulated. I will confine my comments to that.

Tax Credits (Working Families)

Ian Blackford Excerpts

Tuesday 7th July 2015 Commons Chamber

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

Thank you, Madam Deputy Speaker.

I congratulate the Labour party on bringing this most important debate to the House. Having listened to the Minister over the past 25 minutes, I think that we on the SNP Benches must live in a different world from the one that he lives in. When we revisit what has been happening over the past couple of weeks, with the scandal of the Secretary of State for Work and Pensions coming to this Chamber and wanting to redefine how we measure child poverty, we can see that that indicates the scale of the problem we face. But the cat is now well and truly out of the bag. We listened to the Minister taunting the Labour party and accusing it of being the party of welfare. On these Benches, we see the importance of what we call social security in Scotland. We believe that society is as strong as its weakest link. The battle that we are facing in this Parliament is an ideological one with a Government who want to demonise the poor of this country.

Let this House take the opportunity to say to the Chancellor of the Exchequer, before he rises to deliver his emergency Budget tomorrow, that he should not use the failure of the Government to fix the deficit as an opportunity to attack the poor and the disadvantaged in our society. In particular, the Government should pause and reflect on the importance of tax credits to those who rely on the contribution that they make to the household budgets of many of our citizens. Tax credits have a significant impact in raising the income of low-income households, particularly those with children. The tax credits system was designed as a key mechanism for tackling poverty and inequality, and the SNP firmly opposes any moves to gut it, as the Tories have hinted at doing.

Tax credits require a significant amount of expenditure, which largely goes to supporting children in lower income families. In 2013-14, tax credit expenditure in Scotland was £2 billion, supporting thousands of people on low incomes. The SNP recognises the vital role that tax credits play in providing such support, and that is why our manifesto proposed to protect their value by increasing tax credits annually in line with inflation.

We need to go much further, however, and do more to raise wages, including raising the minimum wage, promoting the living wage and increasing the work allowance in universal credit. It is the delivery of real wage growth that will lead to a natural reduction in tax credits. These benefits cannot be removed at a time when many are on low pay.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

My hon. Friend is right to talk about the moral case and the position in which the poorest in our society are being put. The Conservative party also talks about productivity. Does my hon. Friend agree that cutting tax credits will harm the possibility of raising productivity in the economy?

[Ian Blackford]

My hon. Friend is absolutely right. We hear much in this Chamber about productivity, but the reality is that over the past seven years productivity has fallen by 0.7%. Rather than attacking the poor, which is what the Government are doing, their Budget tomorrow should introduce a programme for investment in this country that will lead to a rise in real wages, improve productivity and negate the need for tax credits. Removing tax credits will not fix the problems this country is suffering.

The failure to drive sustainable economic growth means that many people who are in work are in poverty. As a result, many of them rely on tax credits in order to put food on the table to give thousands of young people a decent start in life. There has to be dignity in work, and much has to be done to drive investment in our economy, enhance productivity and see a sustained rise in real wages.

Tax credits are an investment in our people and, as a consequence, the future prosperity of our country. Tax credits have made an important contribution to tackling poverty and inequality. In 2013-14, 90% of tax credit expenditure went to families with an income of less than £20,000. Families with children received an average of £6,900, and families without children an average of £2,200, from tax credits. That represents a very clear contribution to boosting incomes and tackling poverty and inequality. Tax credits help tackle in-work poverty and child poverty.

It is worth noting that about 70% of tax credits go to families where somebody is in work, predominantly supporting low-income working families. Given that a majority of people in poverty are already in work, tax credits are thus a crucial tool to support working people.

The Child Poverty Action Group estimates that the UK Government’s welfare cuts will push an additional 100,000 children in Scotland into poverty by 2020—and that does not take into account the additional £12 billion-worth of cuts that this Government want to push through. Given that 500,000 children benefit from the tax credit system in Scotland, cuts to tax credits would certainly have a further detrimental impact on the wellbeing of children in Scotland and on child poverty figures.

Figures due to be published tomorrow by the Scottish Government show that if the Chancellor cuts child tax credit back to 2003 levels in real terms, as has been reported, the poorest 20% of Scottish families with children will lose an average of nearly 8% of their income. That will have the impact of taking a total of £425 million out of the Scottish economy. How are we to deliver sustainable growth when we take £425 million out of the pockets of the poorest in our society? It beggars belief. We want a caring, compassionate society; that is not what we are getting from this Government.

[Dawn Butler (Brent Central) (Lab)]

Not from those nasty Tories.

[Ian Blackford]

That comment from a sedentary position is correct. We used to talk about the nasty party when Thatcher was in power; it seems to have returned.

SNP Members will reflect on the choices made by the previous Government and this one. Some £375 billion of new money has been created through the quantitative easing programme. We recognise that some of that was necessary, but it created circumstances in which those in the financial markets benefited massively. A 90% increase in the value of the FTSE 100 since 2009, a huge increase in the value of financial assets, and banker’s bonuses that continue to reach eye-watering figures are the impact of this Government’s political choices. They have created the circumstances that have delivered increased value in financial markets; they have not created the circumstances in which wages could rise and the country as a whole could benefit. “All in this together”? You’ve got to be kidding!

[Chris Philp]

Will the hon. Gentleman join me in welcoming the fact that inequality actually fell during the past five years?

[Ian Blackford]

I must tell the hon. Gentleman that according to the figures released two weeks ago, child poverty in Scotland is up by 20,000. That is the reality of what his Government have done to people in my country.

[Sammy Wilson]

The hon. Gentleman made a point about quantitative easing. Does he accept that one of the problems identified was the lack of bank lending to industry, and that banks needed liquidity to increase lending to businesses?

[Ian Blackford]

I thank the hon. Gentleman for his question, because we need a debate about that in the House. The real reason behind quantitative easing was exactly that—to produce an increase in bank lending—but if we look at what has happened over the past five or six years, we can see that there has hardly been a significant increase in bank lending. The money has gone into the financial markets and benefited the banks and the bankers, but we as a country have not seen the benefits that we should have had. That is the reality of what has happened. The previous Government had the choice between investing in the real economy and sticking cash into the back pockets of the bankers, which is what they achieved.

Why do the Government not invest in growing the economy and supporting low-paid workers, rather than punishing them for the Government’s failure to deliver sustainable economic growth?

[Imran Hussain (Bradford East) (Lab)]

Does the hon. Gentleman agree that this Government need to stop persecuting the poorest in society, and instead put pressure on big business to provide a proper living wage?

[Ian Blackford]

Absolutely. I concur 100% with the hon. Gentleman. When we come to vote on the emergency Budget, I appeal to Conservative Members to examine their own consciences, look at the pain that will be caused if they go ahead with cutting tax credits, and recognise that we need to invest.

[Kwasi Kwarteng]

Why in such debates do Opposition Members never mention the deficit or the country’s financial and fiscal situation? I am curious as to why they make no attempt to address that matter.

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[Ian Blackford]

I must say that I find it remarkable that the hon. Gentleman has asked such a question. I have spent much of the past 10 minutes talking about the need for sustainable economic growth, because that is how we can reduce the deficit, not by punishing the poor in this country. That is what he fails to accept.

[Rob Marris]

Will the hon. Gentleman give way?

[Ian Blackford]

I will make some progress and then I will give way.

The SNP firmly believes that we need to do far more to tackle poverty, and addressing inequalities is at the heart of the Scottish Government’s programme for Scotland. We challenge the UK Government to commit to a more ambitious rise in the minimum wage, and to follow the Scottish Government’s lead in paying all staff the living wage.

The UK Government have already cut tax credits. In 2012, the eligibility threshold for child tax credit changed from a family income of £41,000 to £26,000 for lone parents and to £32,000 for families with two children. The number of hours that couples with children had to work in order to be eligible for working tax credit went up from 16 hours a week to 24, with one parent having to work at least 16 hours. As a result of those changes, 11,370 Scottish families lost working tax credits worth up to £3,870 per year and 73,300 Scottish families lost child tax credits worth about £545 per year.

More than 500,000 children in Scotland benefit from tax credits. Two thirds of the £2 billion expenditure on tax credits in 2013-14 went to low-income families with children; only 5% went to households without children. That is why we are alarmed. Any removal of tax credits will clearly lead to an increase in child poverty. It is simply inhumane to consider such a move.

In a speech last week, which was widely interpreted as a statement of intent to gut tax credits, the Prime Minister said:

“There is what I would call a merry-go-round. People working on the minimum wage having that money taxed by the government and then the government giving them that money back—and more—in welfare. Again, it’s dealing with the symptoms of the problem: topping up low pay rather than extending the drivers of opportunity—helping to create well paid jobs in the first place.”

Those comments suggest that the Tories are planning to target child tax credits and working tax credits, which provide support to low-income working people.

Although we agree that we need to take urgent action to tackle low pay and raise wages, removing the vital support that tax credits give cannot be the answer. The SNP has set out a range of policies that aim to boost low incomes and drive wage growth. We have proposed raising the minimum wage to £8.70 by 2020, raising the incomes of the lowest-paid in our society and reducing dependence on tax credits.

The Scottish Government are the first living wage-accredited Government in the UK, and we are actively promoting the living wage by encouraging companies to sign up to our Scottish business pledge. We challenge the UK Government to follow suit and guarantee that all their staff will be paid the living wage.

We want to see a £600 increase in the work allowance of universal credit, which determines when people entering work begin to have their benefits reduced. That would support people on low incomes and boost the income of a worker who receives universal credit by £390.

Removing much need financial support for those on low incomes, in the form of tax credits, simply cannot help make work pay. The SNP wants to make work pay, but we must do so by raising incomes and tackling low pay.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

The problem with the Government’s suggestion that cutting tax credits will lead to higher pay is that the labour market is weighted in favour of the employer, rather than the worker. The only way to restore wage growth across the board, especially in the private sector, is through the expansion of collective bargaining. We simply cannot have wage growth in a country where the erosion of trade union rights is right at the top of the Tory agenda. The Government are doing the exact opposite of what they intend, which is to get people back to work and on decent pay—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Order! Honestly, we must have short interventions. I want everybody to get to speak. Interventions are not meant to be speeches. We have to help each other today because a lot of people wish to speak. The shorter the interventions, the more people we will get through.

[Ian Blackford]

I agree with the gist of what the hon. Lady said. We need to ensure that there is proper protection for trade union rights throughout the UK.

The Resolution Foundation, which has been much commented on, has assessed the proposed plans. It found that more than two thirds of the families affected—2.7 million of them—would be in work. Working families with two children would lose up to £1,690 a year. Almost two thirds of the cut would be borne by the poorest 30% of households; almost none of the cut would fall on the richest 40% of households.

A poll by YouGov and The Sunday Times the other week found that there was opposition across the UK to cuts in tax credits, and that the opposition was highest in Scotland: 56% of Scots are opposed to the cuts and only 37% are in favour. Clearly, there is public opposition to any attempt to target tax credits, and that opposition is strongest in Scotland.

The Tory assault on the welfare system is already pushing more and more people, particularly thousands of children, into poverty. There are worrying links between welfare reform and food bank use. The Trussell Trust has reported that 117,689 people picked up a three-day supply of groceries from Scottish food banks in 2014-15, including 36,114 children. That is eight times the number of people who were helped just two years ago. Given the social harm that is already being done by Tory welfare cuts, the future damage that could be caused by gutting tax credits is unthinkable. The Tories’ plans, and the high degree of uncertainty about the future of that lifeline support, demonstrate the need for full powers over Scotland’s welfare system to be in Scottish hands, not those of the Chancellor and the Secretary of State for Work and Pensions.

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[Chris Philp]

I look forward to hearing the point after the debate, perhaps.

Let me turn now to the topic before us. When Gordon Brown introduced these measures in the early 2000s, he told us that tax credits would cost perhaps a couple of billion pounds a year. The truth is that today they cost £30 billion a year, an astronomic burden on the Exchequer.

Let us think for a moment about what tax credits mean. They are a subsidy paid to top up wages because employers are not paying their staff properly. I deplore the fact that some employers are not paying their staff properly and are effectively abusing the generosity of the Government by underpaying their staff. Any reforms in tomorrow’s Budget that end that abuse will be extremely welcome.

Tax credits provide disincentives to work, as some of my colleagues have pointed out already. They are withdrawn at the same time as income tax and national insurance kick in. Effectively we have marginal tax rates at around the 75% to 80% mark, so it is no surprise that employees in the companies run by my hon. Friend the Member for South Suffolk (James Cartlidge) were reluctant to take pay rises when marginal tax rates were so high. One Member mentioned the 16-hour-a-week limit, now raised to 24 hours a week. I know people who have employed part-time staff who refused, understandably given the system, to work extra hours for fear of losing those extra tax credits. That is all wrong. The fundamental fact is that people are helped out of poverty not through Government handouts but through hard work and earning more money.

[Ian Blackford]

The hon. Gentleman was asked about food banks in Yorkshire and we have heard a lot about facts, so perhaps I can give him a fact. Between the end of 2012 and September 2014, nearly 150,000 sanctions were applied in Scotland, affecting 85,000 individuals. That is what is driving people towards food banks. Does he think that that is right?

[Chris Philp]

It is right that wages are now rising, that people on low incomes have been helped with tax cuts and that the Government are directing assistance to people on low incomes. That is what is right. Over time, as the cost of living issues that have been mentioned are eroded by rising wages combined with zero inflation, the problem that the hon. Gentleman has referred to will without a doubt be alleviated.

There are other issues with tax credits. Employers who abuse tax credits by underpaying their staff have no incentive to invest in education, training and technology and, unfortunately, that contributes to our productivity problems. I believe that tax credits, introduced by the previous Labour Government, are a symptom of failure. They encourage companies to underpay their staff and place the burden of that underpayment on the general taxpayer. Any move in tomorrow’s Budget to reduce the burden of tax credits on the Exchequer while improving the earnings power of people on low pay will be very welcome. I join many colleagues on the Government and Opposition Benches in supporting moves towards a higher minimum wage. I have publicly called for that in London and I think that it would be a good move for the country as a whole.

We have heard about another cost of living issue: housing. There will be a housing Bill in the autumn that will promote house building and therefore affordability, but I point out to Opposition Members that the number of housing starts last year was about 50% higher than the number of starts in 2009-10. The Government have already made fantastic progress.

The foundations of prosperity and the way out of poverty lie in work, not benefits, and I endorse the Government’s approach.

Scotland Bill

Ian Blackford Excerpts

Monday 29th June 2015 Commons Chamber

[Mr Gauke]

As I said, a decision was made by the Scottish Government, believing that the efficiency savings were more than sufficient to outweigh the costs incurred by losing the section 33 refund. That was the basis for the decision, and the position in respect of section 33 was clear.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

We keep hearing about respect. We all know why the Scottish Government introduced the change—it creates efficiency in the delivery of police and fire services in Scotland. A clear case has been made by many of my hon. Friends and by those on the Labour Benches as well. If there is a genuine feeling of mutual respect between the Government in Scotland and the Government in Westminster, all the Treasury has to do is make sure that we get the VAT back and we will invest it in front-line services to benefit the people of Scotland.

[Mr Gauke]

We respected the Scottish Government’s decision, because they were perfectly entitled to decide to reform the police and fire services in the way they did, but they knew what the consequences of the law of the land would be with regard to VAT. That decision was taken and it would be unreasonable for us to maintain the existing legislation, given that there are many demands on section 33.

Let me turn to clause 15. The hon. Member for Dundee East (Stewart Hosie) asked why we are simply assigning half of the VAT revenue, rather than all of it. That reflects the agreement reached by the five main political parties under the auspices of Lord Smith. It represents a balance between providing a sufficient incentive for Scotland to grow its economy, relative to the rest of the United Kingdom, in order to increase its revenue from VAT and exposing the Scottish Government’s budget to potential fluctuations in VAT receipts.

Productivity

Ian Blackford Excerpts

Wednesday 17th June 2015 Commons Chamber

[Greg Hands]

Yes, my hon. Friend is here, unlike half the shadow Treasury team who went into the election and were wiped out by either the Conservatives or the Scottish National party—and that includes the hon. Gentleman’s former leader.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

rose—

[Greg Hands]

I shall give way shortly. I think I have awakened the hon. Gentleman’s interest with my reference to the SNP.

I thought that it would be helpful to start by setting out the productivity question in relation to the UK’s general economic competitiveness, setting the scene for the problems we face. Hon. Members will of course be aware that, thanks to our long-term economic plan, we can be proud of having the highest growth of the major advanced economies in 2014, and we are predicted to repeat that in 2015. We are highly competitive, and that is linked to productivity. We are ranked ninth of 144 countries globally for competitiveness, we enjoy the lowest corporation tax in the G7, and we are seen as being well governed, as we are in the top 20 of 102 countries on all eight factors of the World Justice Project’s Rule of Law index for 2015. London remains a world-leading international financial centre. British universities are by far the best in the world outside the US. For those who complain that we no longer make things, within two years we expect the UK to match its all-time car production record, which was set back in the 1970s. The city of Sunderland now produces more cars than the whole of Italy put together. We are extremely competitive.

--- Later in debate ---

[Greg Hands]

Let me make a bit of progress.

The high productivity that I have mentioned is very good, but we need to be equally honest about the areas where we can do better. We need to improve our literacy and numeracy skills, and our OECD position for intermediate skills needs to rise. To match the highest rate of female participation in the workforce in the G7, which is in Canada, or in the OECD, which is in Iceland, we would need over 500,000 or 2.5 million more women to enter the labour force respectively. Our gross value added growth is still too reliant on London and the south-east. We are not building enough housing, and our investment in roads and rail has not yet undone the effects of the decades in which we under-invested. All that means that our economy needs to find an extra gear.

We should view this debate in the context of the broad decreases in productivity growth across the OECD over the past few years. We are not unique in this regard. Other G7 countries, including Germany and Italy, have seen their measured productivity per worker fall since 2007. We have to accept that productivity is a major challenge, but it is not a new challenge—it has been around for decades. To meet that challenge, we must look calmly and seriously at the variety of factors that affect productivity, and put in place wide and ambitious long-term reforms.

Importantly—the hon. Member for Nottingham East needs to engage with this point—those reforms must not jeopardise other elements of our economic growth. That is the approach that the Government will take in our productivity plan, because productivity is not an end in itself, but a means to an end. It is all about prosperity. When we publish our productivity plan, I hope that the Labour party will see fit to support it, because we agree that improved productivity will be good for living standards across the country and help us to meet our fiscal commitments, which is a point that he raised.

[Ian Blackford]

What the Chief Secretary is saying does not meet the reality of what has been happening for the past seven years. Productivity in the UK has fallen and the Government have failed to deliver prosperity. The root of that has been the failure of macroeconomic policy. Your big idea was quantitative easing, with £375 billion of new assets being created, but none of that has fed through to bank lending. That is why we have not seen the underlying investment in our economy that is required. You need to address that and make sure that we see investment in infrastructure, industrial investment and a plan for growth, not some meaningless productivity, which is just hot air and words, but no reality.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Several people this afternoon, not just the hon. Gentleman who has just spoken, have used the word “you”. When one uses the word “you” in this Chamber, it refers to the Chair. I have not done any of the things I have been accused of this afternoon. I do not want to pick on individual Members at this early stage of the Parliament, but please let us use the correct language.

[Greg Hands]

I dispute the premise of the hon. Gentleman’s question. Productivity in this country is rising, albeit at a relatively low level. We would like it to be higher. It has risen by 0.9% this year. The OBR’s projection is that productivity will increase by between 2.1% and 2.5% per annum in the coming years. We need it to increase by even more than that, but it is certainly not the case that productivity has collapsed over the past couple of years.

[Ian Blackford]

Over the past seven years, it has declined.

[Greg Hands]

Okay, I hear the hon. Gentleman.

To answer the point raised by hon. Member for Nottingham East about the OBR, the OBR already produces forecasts and commentary on productivity, and will continue to do so independently and impartially as it always has done.

--- Later in debate ---

[Michelle Thomson]

I am going to address that point.

The much-vaunted recent growth has brought us back only to a certain point. When judged against nations smaller in population size—those with between 3 million and 10 million people—the sluggishness of UK plc is laid bare for all to see. Sweden’s productivity is 18% higher than that of the UK; Denmark’s is 26% higher and Norway’s an incredible 77% higher. Even poor Finland, which has no oil, no fisheries and no substantive premium food and drink industry—in fact, it has none of the inherent advantages and natural resources that Scotland enjoys—delivers a productivity performance some 8% higher than that of the UK. The phenomenon is not limited to Scandinavia. In central Europe, Austria’s productivity is 13% higher, and Switzerland’s 23% higher, than that of the UK.

[Ian Blackford]

The picture that my hon. Friend is painting of many small, successful countries is one with which we are all familiar. I am delighted to see that our friends in the Scottish Government have an aggressive agenda of investing in innovation and skills. If Scotland had powers over taxation, however, would not that allow us to deliver higher rates of productivity similar to those of the small, successful European countries?

[Michelle Thomson]

I am inclined to agree with my hon. Friend, and I shall address that point further in a moment.

The Economy

Ian Blackford Excerpts

Thursday 4th June 2015 Commons Chamber

[Mr Clarke]

My hon. Friend anticipates some of the points I wish to make. I agree with everything he has just said. Tackling the deficit and debt, together with what he has just described and the other measures that we have committed ourselves to, is a genuinely one nation Conservative approach. Ever since I became active in politics, I have declared myself a one nation Conservative. The phrase has moved in and out of fashion a little in my time, but I have remained boringly consistent. In my view, it means free market economics combined with a social conscience, as well as a forceful internationalism that looks after Britain’s interests in the world and helps to spread our values.

On the economic front, the combination of fiscal discipline and economic competence, with measures such as taking the very lowest-paid out of tax altogether, easing the tax burden on the lower-paid, not taking people on ordinary incomes into higher rates of tax that should affect only the very wealthy, and the right to buy from those giant landlords the housing associations, which should be unlocking their resources to invest in more new social housing, gives the right one nation balance to the proposals we have put forward. As I have said, it is important that we get on with it, because this Session of Parliament is probably the best time to get some of the most formidable challenges out of the way and under our belt.

If I am sounding a little foreboding about what could go wrong, I should say that I do not foresee anything going wrong, but we will be lucky if no global shocks hit us. We have had five years of growth since 2010, with only a minor blip—not a recession—in 2012, and 10 years of uninterrupted growth would be pretty well a post-war miracle. It does not happen in the real world. We are doing better than any other western European nation, but that is based on the fact that we devalued by 25% when we had the crash—that has done us a bit of good, but not a great deal—and on a US recovery that is now looking rather feeble, as it was stimulated by quantitative easing, which is a dangerous thing. Our own recovery is not forcefully strong, and it was based on quantitative easing when that was necessary. Of course, we rely on interest rates, and they are the lowest they have been for 300 years, which is good for indebted countries.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

Will the right hon. and learned Gentleman give way?

[Mr Clarke]

I will not, because other Members want to speak. I enjoyed what the hon. Gentleman said yesterday, and I would like to give way to him, but not at the moment.

It will be surprising if we do not face difficult times. My right hon. Friend the Chancellor has taken the deficit down to a little under 5% of GDP—far too high, and quite unsustainable, but practically half what we inherited. He paced it pragmatically, because five-year forecasts of where we will be are a complete waste of time, although people always produce them. So long as we have growth, we should press on with taking the deficit down now, because if we ever have a slowdown we will have no weapons to do anything about it. If the Chinese turn out not to have a soft landing, or if America goes wrong, we will not be able to help ourselves by having a fiscal stimulus when we have a 5% deficit. We will not be able to ease monetary policy with interest rates at practically zero. Now is the time to get on the with the task.

There is much more that I would like to say along the lines of the intervention by my hon. Friend the Member for Stroud (Neil Carmichael), because cutting the debt and deficit is not in itself a complete economic policy. It is the essential precondition for all the structural reforms that we still have to make so that we can make our economy modern and competitive. We have a long way to go, because as Members have said, our productivity performance is dreadful, our investment performance is recovering but remains rather poor, our trade and export performance is pretty dismal and we have an appalling current account deficit. In this modern, balanced economy, we have a long way to go.

We therefore require the right kind of European reform. The European Union has been the essential basis on which we have established our voice in the world and our current economic base. In my lifetime, it has had the most beneficial effect on both those things, which were in a pretty dreadful state until we joined, but it does require changes.

When the Prime Minister announced his referendum, in a very pro-European speech at Bloomberg, he set out an economic agenda for change. That remains the most essential reform that we require and desire, and it would benefit the rest of Europe, as well as us. That means completing the single market, which we have talked about and never done. It means an EU-US trade treaty, which we have an opportunity to get and which would boost investment, trade, jobs and activity on both sides of the Atlantic.

It means deregulation. The Barroso Commission talked about deregulation and got no support whatever from member states. The Governments of all member states, including Britain, tend to send people to Councils from various Departments who advocate more regulation—on transport, road safety, food safety, environmental standards, pollution and all the rest of it. Vice-President Timmermans wants to deregulate. We should compete with deregulating there by deregulating here to stimulate our economy.

Of course we can stop people coming here just to claim benefit—we have always been able to do so. There are other things we can do. The economic reforms, however, were the basis on which we started the negotiations and they remain the most important to us.

Beyond that, skills training and education reforms are still required. We have immigrants because we have to go Romania to recruit nurses—we do not train enough nurses of our own. Our construction industry would come to an end if Poles did not come here in the numbers they do. Skills training, education and higher education—every innovative business I know complains they cannot recruit people with the necessary skills to expand their business. It is one of their major constraints. We do not train and produce enough engineers. We need to get somewhere with giving STEM subjects a higher priority and so on.

I could go on. [Hon. Members: “Go on.”] No, no. This is an agenda for a Parliament. It is tough agenda. Now that we have been re-elected, we have the ability to deliver it. The precondition is that we start well, and we start with getting rid of the deficit and debt restraints while we can. In July, we need an iron Chancellor. We need a bold and radical Government. We need a Government who are going to repeat the success of the past five years, measuring up to these enormous international challenges, to show that the United Kingdom can again have one of the strongest global economies in a totally changed globalised economy and a new world.