Amendment of the Law

Jack Straw Excerpts

Monday 23rd March 2015 Commons Chamber

[Mr Clarke]

I think that it would. Blatantly going around telling people that their pay will go up and that expenditure will be increased in a number of instantly popular ways, along with Labour’s earlier promises to start ordering companies to reduce the prices of sensitive products in highly volatile markets, is totally irresponsible. I hope that, were the population so foolish as to return a Labour Government in six weeks’ time, their policies would be hastily abandoned when they found themselves confronted with the realities of power.

In basic terms, this is a fiscally neutral Budget, which is plainly what was required. During Budget debates, we used to spend more time discussing the Budget judgment, and on this occasion that judgment was “fiscally neutral”, which I think has been widely applauded. That does not mean that the Budget is devoid of significant measures, including measures that will have a considerable impact on the rest of the human race—the ordinary men and women out there who have ordinary, moderate incomes. I am rather surprised that so little attention has been paid to the wider impact of another rise in personal allowances, which will not only have the welcome effect of taking the very low paid out of tax altogether, but will have a big impact on the great bulk of the population who are receiving perfectly ordinary pay. Some 27 million people will benefit, and average taxpayers will be better off by £900 million a year.

However, so that the Budget could remain fiscally neutral, that easing of the problems of the ordinary population has been balanced and financed by a rather eye-watering increase in the bank levy—which I think is a perfectly sensible way of raising money now that the banks are on their way to recovery—and a further reduction in tax relief on the pension contributions of not the very wealthy, but the better off. They can build up a pension pot of £1 million, which is not to be sneezed at; they have secure jobs, are making contributions, and have plans for their retirement. How that measure can be characterised—as the activities of this Government often are—as helping the rich at the expense of the poor and ignoring the demands of the ordinary man, I cannot imagine. It is the banks and the better off whose taxation has been raised, and the ordinary man and woman whose income tax has been lowered. That shows that free-market economics can be combined with a social conscience, which I have always believed is the best guiding principle for the Conservative party when it is running the macro-economic affairs of the country.

There are also further measures—which, again, will not create pleasure among all the rich—to deal with tax avoidance, of which a great deal has been made. On this occasion, they mostly involve corporate tax avoidance. My right hon. Friend the Chancellor has set a very ambitious target for the future—he is aiming to get another £5 billion out of tax avoidance—but he has already introduced a general tax avoidance measure in the Finance Act 2012, which has had an enormous impact on what we can do. We have agreements in the G20 and with Switzerland and Liechtenstein, and it is now impossible to hide money in the way that caused a scandal recently, when it was discovered that in 2007, under the last Government, thousands of British taxpayers were finding it easy to evade tax abroad. That is not favouring the rich. The present Government have done far more to tackle tax avoidance and evasion, and to make the raising of revenue more efficient, than any of their predecessors for 20 years or more, including the Government in which I served. Looking back, I have to concede that.

I do not have time to go into all the other measures that have been introduced, but ending the annuities racket and giving more flexibility to those who are saving for their retirement and their old age, so that they can make more use of their own resources, is a major social reform, on which I congratulate the Government and the Pensions Minister in particular. All that has been taken further in the Budget, together with our drive to help business. That is very important: we have to be pro-business. We are trying to revive the economy through lower corporate taxation and more extension of investment allowances, and by easing the tax burden on North sea oil. This Budget is an extremely responsible package, and it bodes well for the future if we are returned to office.

The debate has been dominated by extraordinary arguments about deficits: the size of deficits in the past, the size of deficits now, and where the deficit will go in future. Most of those arguments are based on strange interpretations of statistics or wild over-reliance on forecasts that are at least five years out, which has reduced the debate to a rather simplistic level. I agree—indeed, it is absolutely fundamental—that tackling the problems of debt and deficit is an essential pre-condition of putting the disasters of 10 years ago, and since, behind us, and paving the way for a modern, competitive economy in future.

[Mr Jack Straw (Blackburn) (Ind)]

Will the right hon. and learned Gentleman give way?

[Mr Clarke]

No, I will not, because, with great respect to the right hon. Gentleman, it would not be fair to the 30-odd other Members who wish to speak.

The hon. Member for Leeds West keeps criticising the Chancellor for not succeeding in eliminating the deficit entirely in the last five years. I am very glad that he did not do so. It is the same with all forecasts—[Interruption.] It is not possible to find a Chancellor who has produced forecasts that are three, four or five years out and which resemble what actually happened. It is necessary to take account of what is happening in the real world. Macro-economic policy has to be pragmatic.

I cannot tell what will happen over the next five years, and nor can any Opposition Member. Will China actually have a soft landing? What will happen to the oil market? Is the recovery in the United States really sustainable? Will the eurozone begin to achieve a bit more growth this year and beyond? What about difficult emerging markets like Brazil? The fact is that we are part of a globalised economy—quite apart from the impossibility of forecasting with exactitude what will happen here.

The Chancellor has cut the deficit substantially, and has moved nearer to getting it under control. Had he moved at a faster pace, heaven knows where we would be now, but we would be in a very difficult situation. Actually, I do not know whether the Labour party thinks that he should have moved faster or more slowly, but I am sure that it is not capable of maintaining progress. I hope that we can achieve a surplus in the next Parliament—and so, obviously, does the Chancellor—but that will depend, again, on whether circumstances permit us to do so. In five years’ time, we shall find out where we are.

Meanwhile, having that kind of responsibility is an essential precondition to raising our educational standards and continuing to tackle the skills shortages which always slow up the British economy—we are making great progress with apprenticeships, and we have much further to go. At last we are beginning to see business investment come through, with more confidence and, I hope, improved credit for businesses. That should pave the way for the productivity growth that we desperately require. We need infrastructure investment, which the Government are pressing on with. We need the EU reforms, which the Prime Minister was talking about earlier. If we can complete the single market—if we can extend it to services, if we can have a common energy market, if we can have a common market for the digital economy, if we can have an EU-US trade agreement—all that will reinforce the efforts of the Government to put this country in a much better position than any other to look optimistically to the future.

If we were in the world of traditional politics of 30 or 40 years ago, this Government would be on a walkover in this election, producing figures to die for after taking over a disaster. We still have to rise above the cynical comedy of today’s protest politics. This Budget shows that a competent Conservative Government can finish the job.

--- Later in debate ---

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I continue to admire the humour and chutzpah of the right hon. and learned Member for Rushcliffe (Mr Clarke) in delivering that speech.

Thank you, Mr Deputy Speaker, for allowing me to make what I am pretty certain will be my last speech in this House; I am very grateful to you for that. I will not follow on from the comments of the right hon. and learned Gentleman, although I will return to some of the points he made, and nor will I follow on from what the Secretary of State for Work and Pensions said, except by saying this: I agree very much with what my hon. Friend the Member for Leeds West (Rachel Reeves) said in relation to annuities. Here we are, days away from people being able to choose what they do with their annuities, yet we hear that we are still to recruit the people who are going to be giving the advice—let alone training them and let alone members of the public being able to access that advice. The only thing the Secretary of State did was lay off some of the blame on to his Liberal Democrat colleague—so when the inevitable inquiry starts as to why these things were mis-sold, we know where the blame will be apportioned.

I draw the House’s attention to my entry in the Register of Members’ Financial Interests, but I want to focus on the Budget as a whole. The most notable thing in the report by the OBR—it has done a very good job over the last five years—is in the second paragraph, where it says that the Budget is not expected to have any material impact on the economy. Call me old-fashioned, but I thought that was what Budgets were for.

The economy was growing in 2010—and it was growing in 2010—because of the measures we put in place in 2008 and 2009 to stop a recession becoming a depression. The Chancellor last week and the Secretary of State today implied that nothing particular had happened at that time, but we came within hours of the banking system collapsing. That is why we were facing such a difficult set of economic circumstances by 2008-09, and it took a Government committed to doing something about it—our Government—to make sure our economy was growing again in 2010. Sadly, what happened after that was that the economy slowed down, to a large extent because of the rhetoric and the fact that the current Government chose to trash what was happening and mendaciously claim we were like Greece, and as a result the Chancellor’s public spending figures are now way off what he planned in 2010.

[Mr Straw]

Does my right hon. Friend agree that, contrary to the myths peddled on the Government Benches, up until the financial collapse the Conservatives backed our spending plan and our debt levels were significantly lower than those of most other countries, including the US?

[Mr Darling]

My right hon. Friend is right. Our debt levels were the second highest of the G7 group of economies in 1997, but 10 years later they were the second lowest. On public spending, last week the Chancellor blamed all our woes on our alleged overspending. How was it that the Conservatives were supporting our public spending plans right up until December 2008? As for the Liberal Democrats, they were in a different stratosphere from the rest of us when it came to calling for more public spending.

At the last election five years ago the essential argument between us was whether we could halve the deficit in a five-year period, which was my judgment of what we could safely and realistically do. The Chancellor—the shadow Chancellor at that time—said that that was woefully inadequate. But what was woefully inadequate five years ago was announced as a personal triumph last week. He has managed to do what I said we could do, but he somehow says it is a great triumph on his part and something we should be grateful to him for.

Let us look at what the Chancellor has actually done in relation to borrowing. He announced last week that at long last borrowing was on a downward curve. Every Budget he has ever presented shows borrowing on a downward curve. The difference between this Budget in 2015 and the Budget in 2010 is that it is on a downward curve all right, but he is borrowing three times more than he expected to borrow in 2010 because the economy slowed down so badly in 2011-12.

As for debt, we all expected that it would be shown that we were not going to hit the Chancellor’s original target of debt reducing as a share of national income by 2015, and that was what was expected from his autumn statement in December, yet, lo and behold, last week suddenly he was meeting his target, by a minuscule amount—coming from 80.4% to 80.2% of GDP. Why was that? It was not because of some economic miracle. It was because he looked around the Treasury cellars and found assets he could sell, one of them being a thing called Granite, which is an absolute monster of financial alchemy. Northern Rock produced it, into which it fed sub-prime mortgages, and the more sub-prime they became, the more mortgages had to be fed into this thing to keep it going. After five years it is, of course, possible to manage these things and get them to come right, and that is why the debt is coming down—because he is selling off this asset—yet even the OBR says it is highly uncertain whether or not this target will actually be met. So when we look at what the Chancellor said on the causes of where we are now and what he has done over the last five years, I have to say his credibility and track record are not as great as he would have us believe.

On the public expenditure figures of last week, the OBR has described the Chancellor’s spending profile as a rollercoaster. If we want to go on a rollercoaster, we go to Disneyland, not the British economy. Anybody else whose plans had been described as a rollercoaster would have hung their head in shame. What sort of planning can people put in place when they have no idea what is going to be spent? We have the absurd situation where the Ministry of Defence may have to lay off armed services personnel in 2016-17 because of the steep decline in public spending, only to say, “It’s all right. We’ll be able to re-engage you in two years’ time.” How can universities plan for research and development when we have such a steep decrease in public spending now, with the promise of perhaps something in the next few years?

The former Chancellor the right hon. and learned Member for Rushcliffe knows as well as I do that when we look at spending profiles for four or five years, the last two years are pretty doubtful.