Finance (No. 3) Bill
Justine Greening Excerpts(13 years ago)
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Mr Kevan Jones
Does my hon. Friend agree that if we had listened to those on the Conservative Front Bench, including the Chancellor of the Exchequer, who did not want to intervene in Northern Rock and wanted to let banks go bust, the banking crisis in this country would have—[Interruption.] The Economic Secretary chunters from a sedentary position, but what I am saying was said by the—[Interruption.] She can keep chuntering, but the truth hurts. The fact of the matter is that if we had listened to the Chancellor—
Kerry McCarthy
My hon. Friend makes a valid point, which I will come on to in a moment. [Interruption.] Ministers are peddling the line that it would take six years to achieve such a derogation from the EU. I ask them, have they even tried? I suspect that the answer is no. It is a fairly defeatist attitude to say that we will not even ask because we know what the answer will be. That is not fighting for Britain’s corner in the European Union.
As I was saying, there was an alternative for the Government. We called on the Chancellor to scrap the hike in VAT on fuel, which would have been of genuine help to families and businesses. It could have been paid for from the £800 million more than expected that was raised from the bank levy. Unlike the stabiliser proposed by the Conservatives in the run-up to the general election, that would not have been “unbelievably complicated and unpredictable”, to use the words of the Secretary of State for Business, Innovation and Skills.
The stabiliser is based on the idea that taxation will vary according to fluctuations in petrol prices, so that
“when fuel prices go up, fuel duty would fall. And when fuel prices go down, fuel duty would rise”,
to use a direct quotation from the Conservative party consultation document on the issue. The stabiliser was a flagship policy for the Conservatives in the general election campaign. The present Prime Minister made an issue of it when he visited a Coca-Cola plant in Morley just a week before polling day, where he said that
“it would give you certainty as you go about your lives, knowing what your salary is, knowing what your mortgage is, we’d be helping with the cost of living by trying to give you a flatter and more constant rate for filling up your car”.
When the Conservative party got into government, it soon realised that that was an empty promise, made glibly without doing the homework required, as we have seen with so many of its policies in its year in government. In the Budget, the Chancellor resorted to a different so-called stabiliser by increasing the supplementary charge on North sea oil. We will discuss that issue later tonight when we come on to the next group of amendments.
It is true, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) mentioned, that asking for a special rate of VAT would require our asking for a derogation from the European Commission. The Chief Secretary to the Treasury said that the Government could not afford to “sacrifice income willy-nilly”. However, he was willing to go to the EU to ask for a derogation for remote islands, although not for the rest of Scotland or the UK. Even members of the Conservative party agree that the solution should apply to the rest of the UK.
Justine Greening
I just want to check that the hon. Lady is aware that she is talking about two entirely different taxes. The tax that relates to rural areas is fuel duty, and the other derogation that her party is unwilling to accept is illegal to pursue relates to the EU VAT directive.
Kerry McCarthy
I am making the point that there are precedents for applying to the EU for a derogation, and I will come on to examples of other Governments who have done so.
I was about to quote the hon. Member for Brigg and Goole (Andrew Percy), who said from the Conservative Benches when we were debating the rural derogation:
“The pressures that affect the islands of Scotland and the Scilly Isles affect our constituents too.”
He went on to say that
“if any solution is applied to one part of the United Kingdom, it must be applied to other parts of it as well.”—[Official Report, 16 March 2011; Vol. 525, c. 352.]
Incidentally, we have heard reports that the Chief Secretary’s derogation on that issue may be approved by this summer, after he applied only on Budget day. That is rather quicker than the six to seven years that the Government have claimed would be needed for a broader derogation on VAT for fuel.
The French Government were willing to go to the EU to ask for special dispensation for French restaurants, and several member states have asked for other derogations in the past. Derogations have been granted for goods as diverse as fertilisers, pesticides and works of art, and for services from amusement parks and hotels to cleaning and cable television. In 1994, the British Government secured a derogation for domestic fuel, and in the past derogations have been granted to some member states for reduced VAT on goods such as heating oil.
Justine Greening
Since the hon. Lady gives a whole list of derogations, perhaps she will also be prepared to tell the Committee how long they took their respective Governments to achieve.
Kerry McCarthy
As I said before, the Economic Secretary invents a mythical time frame which she says it would take for her to achieve a derogation from the EU on VAT on fuel. I have asked her several times now in various debates whether efforts have even been made to raise the subject with the European Commission, and answer has come there none.
Justine Greening
The hon. Lady obviously does not know the answer, but I do—it took more than six years. Does she think motorists should have to wait six years before her party’s policy can come into effect? It is unlikely ever to be accepted.
Kerry McCarthy
The hon. Lady invents a mythical obstacle to achieving a derogation, without even having tried. Many of her Back Benchers who are constantly urging Ministers to stand up to the European Commission will be very disappointed that they are using the Commission as an excuse. They could have avoided this situation by not introducing the rise in VAT on fuel earlier this year. They should have considered the consequences before entering into such a policy.
The UK has not applied for as many derogations as other member states. We have only one reduced rate, which is used largely for energy and energy-saving materials and a number of health products, as well as the zero rate. France, Italy and Poland have each secured three different reduced rates of VAT, in addition to a zero rate, so there is clearly scope for the UK to ask for a little more.
While Labour was in government, we never applied for a special rate of VAT on fuel, but the reason for that is simple: we never raised VAT on fuel in the first place. This is a problem that the Government have created, so rather than simply telling the Committee that a derogation would be illegal, perhaps the Economic Secretary can once and for all tell us whether the Government have made any serious attempt to start negotiations with the European Commission on the matter, or whether they are simply capitulating to the Commission without putting up a fight.
We have tabled the amendment so that the Government’s fuel duty cut will be shown for what it really is—a 1p cut that is wiped out by the 3p a litre increase resulting from their VAT rise on fuel. It comes at a time when petrol prices are already rising rapidly and reaching record highs, when families are already squeezed and when the economy is struggling to grow. It comes after the Government refused to take the alternative approach that we put forward, which would have been a genuine help to families. The amendment means that the Government will have to face up to the fact that they have made the wrong choice at the wrong time and are harming, not helping, working people.
Justine Greening
The hon. Lady mentioned VAT. Given her concerns regarding the increase that she says the Government introduced, did she vote against it?
Alison McGovern
The VAT increase that the Government have introduced is clearly highly regrettable. I might just take the opportunity of the Minister’s intervention to correct a common way of phrasing what happened under the previous Government when my right hon. Friend the Member for Edinburgh South West (Mr Darling), the former Chancellor of the Exchequer, temporarily lowered VAT. Government Members often say that Labour increased VAT, as though the decrease was not intended to be a temporary measure to help the economy. There is a difference: the Labour Government helped people through with a cut in prices, but this Conservative-led Government think that the future of taxation in this country should be higher prices in the shops.
Hugh Bayley
First, I want to compare the records on fuel taxation of the most recent Labour Government and the previous Conservative Government. My view is that the Labour Government were a great deal kinder to the motorist, and the following figures are provided by the current Government. Figures from the Department of Energy and Climate Change show that in 1990, when the Conservatives were in power, 59% of the price paid at the pump by the motorist and road haulier for unleaded petrol was taken by the Government in fuel taxation, and that it rose to 75% during the following seven years of Conservative rule; the Government therefore took more and more and more in taxation. When Labour was in power, however, the proportion of the price of unleaded petrol taken in fuel taxation fell to 65%. The figures for diesel are almost the same. Under the Conservatives, the tax take rose from 57% to 74%, whereas Labour brought it down to 64%.
I would like the Economic Secretary to the Treasury to answer one question in her response, on the following subject. Since the general election, Government policy—not just Conservative policy, but Conservative and Liberal Democrat policy—has been to increase the tax on fuel by about 3p a litre through the increase in VAT and to give back roughly a third of that, 1p a litre, through the reduction in duty. That policy will slightly help road hauliers, because the duty element will reduce. The VAT element increases, but hauliers are able to recover the VAT, or at least pass it on in the VAT they charge their customers. So the effect of the Government’s policy will be to clobber the private motorist to the tune of 2p a litre, because they will have to pay the VAT increase out of their own pockets, while providing slight relief to businesses, particularly hauliers. I say “slight” because the price of fuel has increased as a result of a number of factors, including the increase in the cost of oil and the fall in the value of the pound on the international exchanges. So motorists and hauliers have been clobbered by the market and by the Government, but hauliers are being hit slightly less hard than the private motorist because they are able to recover the VAT increase.
My question to the Economic Secretary is as follows: is it a deliberate act of Government policy to make life slightly easier for businesses but to clobber the private citizen, or is it just an accident that that has happened? This is one of the things that ought to be studied in the review that the Opposition amendment proposes. We should examine the relative merits of taxing fuel for vehicles through VAT as opposed to through fuel duty, and who the gainers and losers are.
My hon. Friend the Member for Wirral South (Alison McGovern) made a very powerful speech about the impact that the increase in VAT on fuel has had on family budgets, and the impact that inflation generally, and fuel inflation in particular, is having on families who are having their earnings squeezed. My Front-Bench colleagues’ amendment proposes that the review ought to consider that matter.
I would like such a review also to consider one other issue, because I do not believe that the Government have yet done so—although I would be delighted to be corrected if they have carried out the sort of analysis that I propose. The review should also examine the impact that taxation has on the demand for fuel. The previous Conservative Government, one and a half decades ago, introduced a fuel price escalator. I understand that their reason for doing so was environmental: they wanted to increase the price of fuel to depress the demand for it, and so reduce carbon emissions. That was the policy intention, and it is one of the reasons why Conservative policies cost taxpayers and consumers so much. I mentioned that the fuel tax take rose from 59% to 75% in their last seven years in office. I wonder whether the Minister can tell me whether that sharp increase in fuel taxation under the previous Conservative Government actually did depress the demand for fuel, because that is an important consideration. If we change the marginal rate of fuel taxation, economics suggest that there should be some elasticity in demand.
The Government say that they want to be the greenest ever, so they ought to consider the carbon emission consequences of changes to fuel duty and VAT on fuel. I hope that Treasury Ministers have taken advice on that from both the Department of Energy and Climate Change and the Department for Transport. They ought to have done, if they really are—[Interruption.] Does the Financial Secretary to the Treasury want to intervene? No, he is back in his seat. The Government ought to take advice before they make such proposals, so that they can assess the environmental impact of a fiscal measure. I am waiting to hear from a Minister, but it sounds as though that has not happened. It ought to if the Government are serious about the environmental consequences of their fiscal policy.
Hugh Bayley
The Economic Secretary wants to intervene, and I hope she can tell me that the analysis has been done and what its outcome is.
Justine Greening
I direct the hon. Gentleman to the tax note that we issued at the Budget. The answers to his questions are there; clearly he has not read it yet.
Hugh Bayley
I have not read it—[Interruption.] That is why I ask the question. If the hon. Lady would care to read it to the Committee, I would be pleased to listen.
Justine Greening
As the hon. Gentleman could not read the note himself in advance of the debate, I shall read it to him now:
“Removing the fuel duty escalator and cutting duty by 1ppl could result in a small increase in CO2 emissions in 2011-12 of 0.4Mt. However, emissions from road transport are forecast to be approximately 1 per cent lower than current levels by 2015-16 owing to underlying trends in”
fuel efficiency.
Hugh Bayley
Is it the Government’s policy, then, to use fiscal measures to reduce carbon emissions? Is that what brought about the carbon variation of 1.4 megatonnes—is that what the hon. Lady said? [Interruption.] It is 0.4 megatonnes; I am grateful to stand corrected. Has the reduction that she mentioned come about as a result of the Government’s proposed fiscal changes, or as a result of the economic downturn that is a result of their policies? There is an important difference. One would expect the fall in economic activity that we have seen as a result of the Budget—the Office for Budget Responsibility has revised down its forecast for growth as a result of the Government’s fiscal measures so far—to lead to a decline in carbon emissions from both road transport and other sources. I am not clear from what the hon. Lady has read out whether the reduction in carbon emissions will be a result of the fiscal measure or of a reduction in demand because of a contraction of the economy.
Mr Kevan Jones
I support the amendment, which asks for a review. In the previous debate, we asked for a review of the implications of the bank levy. Similarly, the amendment calls for an assessment of the impact of taxation on fuel prices. It would be disingenuous to suggest that all Governments have perfect relationships when it comes to dealing with fuel duty. Clearly, the previous Government had problems with the cost of fuel and difficulties over taxation, but my hon. Friend the Member for York Central (Hugh Bayley) exploded one of the myths about the tax-take from fuel duty. Under the Conservative Government from 1990 to 1997 the tax-take on unleaded petrol rose by 16%, and under the Labour Government between 1997 and 2010 the tax-take fell from 75% to 65%.
The Government delayed the planned fuel duty rise, as Labour Governments did previously, as oil prices rose. Was that the right decision? Yes. At a time when many hard-working families are affected not only by higher inflation and increased taxation, but by wages being driven down and in some cases by family members facing unemployment, the Chancellor’s VAT increase puts about £1.30 on the cost of filling up a 50 litre tank of petrol.
Justine Greening
Will the hon. Gentleman tell the Committee whether he voted against the VAT increase? I suspect he did not.
Mr Jones
I am becoming concerned. The hon. Lady’s blood pressure does not seem stable tonight. She seems to be turning red and getting rather excited in tonight’s debate, which I am not sure is good for her health. Why did she argue for and push through an increase in VAT when she and her Prime Minister stood on a manifesto saying that they would not put VAT up? That is not being honest with the British people. What she has to explain to hard-working families in my constituency, North Durham, and in Putney is why she reneged on that promise.
There has been much talk in recent weeks about trust in politicians, and a lot of nonsense talked by the yes to AV campaign about whether MPs are hard working and trustworthy. When the Prime Minister and the hon. Lady say clearly that they will not increase VAT, and then that is the first thing she does, I understand why my constituents and hers are rather cynical about certain promises.
In the Budget the Chancellor used the gimmick of cutting the price of petrol by 1p. We will shortly debate how he will pay for it. It has had disastrous consequences for the economies of parts of Scotland and north-east England. He also increased VAT by 3p. He took it off with one hand and put in on with the other. Paying for that will have consequences for oil exploration in the North sea not only in the next year or so, but for a generation.
Justine Greening
Clause 19 cuts fuel duty by 1p per litre. In fact, it has already happened—at 6 pm on Budget day. That was the first step in removing the Labour party’s planned fuel duty escalator and, instead, putting in place a fair fuel stabiliser, which will ease the burden on motorists.
The hon. Members for Gateshead (Ian Mearns) and for North Durham (Mr Jones) talked about the burden that the planned tax rises would have placed on their own region, and I can tell the hon. Member for York Central (Hugh Bayley) that, in fact, under the previous Government fuel duty rose by 55%, so it is simply wrong to focus totally on the previous Conservative Government. His Government increased the burden on motorists substantially.
The amendment calls for the Chancellor to publish an assessment of the impact of taxation on fuel prices within three months of the Act being passed, and it aims to determine the extent to which the cut in fuel duty has been passed on. By introducing such a measure, Opposition Members clearly intend to distract the public from their policy, which would have seen pump prices rise yet further as they introduced their planned escalator. In addition, the Opposition appear keen to suggest that the cut in fuel duty and the cancellation of their fuel duty escalator has not offset the effect of the VAT increase at the start of the year—a VAT increase that as a party they did not vote against.
I will go on to set out the Government’s assessment of the impact of this measure, as Members have requested, and to address the points raised in the debate, but perhaps I should start by explaining to the Committee why the Government took the action they did in the Budget to support motorists at this time of record pump prices. It is true that motoring is an essential part of everyday life for many households and businesses, as mentioned by the hon. Member for Wirral South (Alison McGovern). The Government also recognise that the rising price of petrol has become an increasingly significant part of day-to-day spending, and we know that high oil prices are causing real difficulties in ensuring that motoring remains affordable. It is important that when shocks such as the steep rise in the oil price occur a responsible Government are able to listen and respond.
The previous Government would have introduced a fuel duty escalator, which involved seven fuel duty increases, three of which have been implemented, adding 3p to pump prices, and they had planned another above-inflation increase for the start of last month.
Andrew Gwynne
Is the Minister not even slightly embarrassed that her Government did not seek the powers to get a derogation from the European Commission? Her party has gone from being the party of “No, no, no” on Europe to the Putney shrug.
Justine Greening
The hon. Gentleman’s party does not even have a position on that because Labour Members abstained on it. If the policy in clause 19 is so bad, I expect them to vote against it, but I suspect that it will be another case of abstention making the heart grow fonder. I do not think that that will work with taxpayers, who remember exactly who was planning to bring in the fuel duty escalator had they remained in power.
This Government listened to hard-pressed motorists and businesses. We declined to increase the escalator and to introduce the 1p per litre fuel duty increase, which would collectively have added 6p to pump prices compared with what they are now. Instead, we responded with a £1.9 billion package to ease the burden on motorists at this time of record pump prices. We acted by cutting fuel duty by 1p per litre from 6 pm on Budget day. We cancelled the previous Government’s fuel duty escalator for the rest of the Parliament. We introduced a fair fuel stabiliser that will better share the burden of high oil prices between motorists and oil companies, and so fuel duty will increase by inflation only when oil prices are high.
Hugh Bayley
I read from a Library briefing:
“In its Budget in March 1993 the Conservative Government introduced a ‘road fuel escalator’—a commitment to increase duty rates on these fuels in real terms by a specified percentage each year”.
I accept that that was continued for a number of years by the Labour Government before being abandoned, but the Minister should not say that the public do not forget things and then gloss over the fact that it was a Conservative Government who brought in the fuel price escalator.
Justine Greening
I will tell the hon. Gentleman one thing we did not do, and that is hand over a huge fiscal deficit to the incoming Labour Government.
Justine Greening
No, we have heard enough from Labour Members.
We had to take decisions to support motorists in spite of the catastrophic state of public finances that Labour handed over. We have made sure that there are no fuel duty increases this year by deferring the inflation-only increase that was planned for April to 1 January 2012. This is real help for families and for businesses. As of 1 April, average pump prices are approximately 6p per litre lower than if we had continued with the previous Government’s escalator.
Penny Mordaunt (Portsmouth North) (Con)
I have listened to this debate with great interest, because I was previously spokesman for the Freight Transport Association and I remember that one year into the Labour Government’s stewardship of the fuel duty escalator hauliers were on the streets of London on a go-slow programme because of the way that they approached taxation.
Justine Greening
My hon. Friend is right to refer to the response of hauliers to the previous Government’s policy.
The hon. Member for York Central called the action that the Government have taken for hauliers in the Budget “slight”. Actually, the average haulier will benefit by approximately £1,700 in 2010-11 as a result of those measures compared with what they would otherwise have faced. I also draw his attention to the remaining part of the package for motorists, which includes freezing vehicle excise duty on HGVs, providing further help to hauliers. The package is even broader than that, because for motorists who are required to use their own vehicle for work, the approved mileage allowance payments rate, which had not been increased by the previous Government since 2002, was increased from 40p to 45p per mile for the first 10,000 miles. An average AMAPs user claiming for 2,500 miles a year will benefit by £125 a year.
John McDonnell
In the Budget statement, the Government informed us that they were submitting a derogation request to the European Union for the rural fuel duty rebate pilot scheme. The Chief Secretary to the Treasury told us that permission would be received over the next few months. Will the Economic Secretary inform us of whether permission has been received? Given the representations that have been made today for an expansion to other regions, is that not something that should be considered as part of a review as a matter of urgency?
Justine Greening
The hon. Gentleman will be aware that the derogation is to carry out a pilot to look at how we can support rural areas with a fuel duty discount. He is right to point out that we have submitted a formal request to the European Commission, and we wait to hear its response. I assure him that we got on with that derogation request, just as we said we would.
If I may, I will make progress on the issues that have been raised by hon. Members.
Hugh Bayley
The Economic Secretary has been extremely generous. A few minutes ago she referred to the deficit and the debt inherited by the incoming Government. Has she forgotten that during John Major’s premiership, the national debt almost doubled, and that during the first 10 years that Labour was in power, the Government reduced the national debt by 40% through good stewardship of the economy?
Justine Greening
The hon. Gentleman is obviously one of the Labour party’s structural deficit refuseniks. He simply refuses to accept that the deficit exists. I am sure that he would also refuse to accept that his party left unemployment 400,000 higher by the end of its term in office. We understand the problems that our economy faces and the Budget was all about tackling them.
I will turn to the substance of the amendment. For motorists to realise the benefits of the cut in fuel duty, retailers need to pass it on at the forecourt. If the cut in fuel duty had been fully passed on to average pump prices, including VAT, they would have been 1.2p per litre lower. The amendment seeks a published assessment of the degree to which the cut fed through to pump prices. As I said, we have already published a tax information and impact note that sets out our analysis of the impact of the cut. Following the Budget, the website petrolprices.com, which gives independent average daily prices and which the previous Government used to track prices, showed that average pump prices fell by approximately 0.8p per litre between 23 and 28 March. It can be clearly seen that the reduction in fuel duty largely fed through to prices at the pump. Therefore, prices are lower due to our actions and motorists are benefiting from the cut in duty. Let us not forget that average pump prices are approximately 6p per litre lower as a result of the cut in duty and our scrapping of the previous Government’s planned escalator, which they would have gone ahead with.
Julie Hilling
I am a little bit confused, because the Economic Secretary is talking about how wonderful the Government’s actions on fuel prices have been, but it seems to me that in the past 12 months, fuel has gone up by something like 25%. I do not see why the Government are saying how brilliant their actions have been when people are paying something like £1.40 a litre instead of £1.10 a litre. A penny off, 3p on, 40p on—it does not make sense to me.
Justine Greening
As the hon. Member for Wallasey (Ms Eagle) said back in May 2009,
“there are very few even socialist theorists who would suggest that commodity prices were somehow controllable”.—[Official Report, 13 May 2009; Vol. 492, c. 918.]
I do not think the hon. Member for Bolton West (Julie Hilling) can expect the Government to control commodity prices, but what we can do is take action to lessen the effects of swings in the oil price as they feed through to the pump. That is precisely what we are doing in clause 19 on fuel duty, and we will shortly debate the mechanism by which we can pay for that, which is the fair fuel stabiliser.
Of course, the Labour party has suggested that we should create a separate VAT rate for petrol. As has been pointed out even by Labour Members, that would have provided no help for hauliers, and I remind the Committee of why the Chancellor rejected the proposal. It would take six years, and it would not even be able to come into effect then, because the current EU VAT directive means that it is illegal. I do not think motorists should have to wait for six years, and the Government are not going to wait six years. We listened, and we responded as of 6 pm on Budget day.
Finally, I shall address the issue of VAT. I know that it is not strictly within the scope of the debate, Mr Hoyle, but it is important. The Opposition have been quick to point out that although the Government cut fuel duty by 1p in the Budget, pump prices have increased by about 3p following the VAT increase. They appear to be implying that motorists would be better off under their plans for an escalator and a VAT rate of 17.5%, although of course we know that the right hon. Member for Edinburgh South West (Mr Darling) was planning to increase VAT himself. I suspect that they wish to use the amendment to prove their point.
It is simply not true that motorists would be better off under the previous Government’s tax plans, and let me be absolutely clear that even comparing the changes that we announced in the Budget with the previous Government’s fuel duty and 17.5% VAT plans, it is likely that on 1 April pump prices were 3p a litre lower than they would have been. Even after the two increases in fuel duty next year, average pump prices could still be about 1p a litre lower than they would have been under the previous Government’s plans. Cutting fuel duty and scrapping their escalator more than offsets the impact of the VAT increase, and I should not need to explain to Opposition Members that an increase in VAT was needed to cut the deficit that they left behind. They did not even have the political courage to vote against that measure, which they were so upset about—absolutely shameless.
In government, Labour Members ran our country’s public finances into the ground, and now, in opposition, they bring forward this feeble and unnecessary amendment. Dare they even push it to a vote? We will find out. I suspect that in the case of clause 19, it will be a case of another day, another abstention. The Government are providing motorists with a fair deal. Where the previous Government left tax rises, we have taken action, and I ask the House to reject the amendment.
Kerry McCarthy
We have had an interesting debate over the past couple of hours. It is notable that although we have had some significant and thoughtful contributions from my hon. Friends, not a single member of the Conservative party, apart from the Minister, or a single Liberal Democrat has felt the need to speak up for their constituents and talk about rising fuel prices. I am sure their constituents have lobbied them about it, but their silence in the Chamber today speaks volumes.
My hon. Friends the Members for Wirral South (Alison McGovern), for Gateshead (Ian Mearns), for Ilford South (Mike Gapes), for York Central (Hugh Bayley) and for North Durham (Mr Jones) have all highlighted the impact of the rise in fuel prices and of the Government’s decision—and it was the Government’s choice—to raise VAT from 17.5% to 20%. They described the impact on families’ living standards, on businesses in their constituencies, on the haulage industry and across the board.
The point is that the Minister’s view of the impact is short-sighted. She cited the impact of the measures in the Budget from 23 March to 28 March, which must be the smallest, most selective economic data ever cited in the Chamber. It would be interesting to know what happened after 28 March, to which she did not refer. She also tried to lead us down the garden path by talking once more about the fuel duty escalator, but she knows full well that the Opposition called for the Government to reconsider that in the Budget and welcomed the fact that they did so.
The debate is on the VAT increase, which the Government chose to introduce. We are asking simply that they publish an assessment, within three months of the Bill becoming law, of the impact of taxation on fuel prices. I do not think that that is too much to ask. I was surprised to hear the Minister say that we would not press the amendment to a Division, because I can inform you, Mr Hoyle, that we do indeed intend to do so. With that, I rest my case.
Question put, That the amendment be made.
Kerry McCarthy
The Economic Secretary said that it had led to a drop of 0.8p at the pumps between 23 March and 28 March, which seems very selective. It is clear now that petrol prices at the pumps have gone up and that the Government have gained very little from their approach.
In the run-up to the general election, both the current Chancellor and the current Prime Minister were clear that they would deliver on a fuel duty stabiliser. Voters were led to believe that the Government could and would act on that. However, in March, as we approached the Government’s second Budget, the Opposition pointed out that the fair fuel stabiliser was still nowhere to be seen. Even with fuel prices rising above £6 a gallon, due to the rising price of oil—the very situation that a stabiliser was meant to help with—the Government had still been unable or unwilling to act. That was because their original plans would never have worked.
The Conservative party had believed that rising oil prices led to higher tax revenues for the Government, which could then be shared with motorists. It turned out that, just like the proposals we see in the Bill, they had been poorly thought through. They were told that they were wrong not only by Labour Members, but by the Institute for Fiscal Studies, which stated that
“the claim that the Treasury receives a windfall gain when oil prices rise that it can “share” with motorists is incorrect.”
They were told that they were wrong by the chair of the Office for Budget Responsibility, Robert Chote, who said it
“would be likely to make the public finances less stable rather than more stable.”
They were even told that they were wrong by the current Secretary of State for Business, Innovation and Skills, who said before the election that the fair fuel stabiliser would be
“unbelievably complicated and unpredictable.”
Justine Greening
The hon. Lady is providing a critique of our policy, but her party has just decided not to oppose our fuel duty reduction, which, compared with what they proposed for the public finances, represents a difference of approximately 6p per litre. How does she propose to pay for the change in fuel duty that she has just not voted against?
Kerry McCarthy
The Minister is trying to return to the topic we debated in the previous group, so perhaps she should have been a little quicker and thought up her intervention then. I am talking now about stability in fuel prices and the empty promises the Government made to the electorate in the run-up to the election that they would be able to do something to stabilise fuel prices at the petrol pumps.
Representatives of the oil and gas industry tell us that as recently as February the Government were giving assurances that they wanted to keep the North sea tax regime stable, as they had said in their previous Budget, but between February and April they very swiftly changed their mind. Perhaps the Minister can tell us why? What caused the Government to have such an urgent rethink on the fair fuel stabiliser? Many of us suspect that the increased scrutiny that the Opposition brought to bear on the Government’s policy might have prompted them belatedly into action—action they would have realised much sooner was needed if they had only done their homework and listened to what people were trying to tell them.
Inevitably, given the panicked way in which it was put together, the Government’s new version of the fair fuel stabiliser is equally as half-baked as the proposal put forward before the election. As a result, potentially tens of thousands of jobs, as well as billions of pounds worth of investment, are at risk, and the Government have broken their commitment to stable, consultative tax policy making.
Justine Greening
I will start by explaining why we introduced the increase in the supplementary charge rate. I will then cover the Opposition amendment and respond to the amendments tabled by my right hon. Friend the Member for Gordon (Malcolm Bruce) and my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) before explaining the two technical Government amendments.
I appreciate the constructive amendments tabled by my right hon. and hon. Friends. They have put a lot more thought into finding a way through the challenges than the Opposition, and I appreciate the points that they raised. I reassure them that we are working closely with the industry. We have met with its representatives on a number of occasions: I have met with them, as has the Chancellor of the Exchequer, and officials recently went to Centrica’s office to look through its calculations on field allowances and profitability. We are discussing with Oil & Gas UK and individual companies precisely the issues that have been raised in this debate.
The broad rationale for the increase is that the Government are abolishing the fuel duty escalator and replacing it with the fair fuel stabiliser. Clause 7 forms the second part of the stabiliser, which ensures that when oil prices are high, as they are now, and oil and gas production is more profitable, the companies that benefit more from that are asked to pay more. The hon. Member for Blaydon (Mr Anderson) fairly acknowledged that, and we are seeking to ensure that we do it in the right way, as he said we should.
Mr Anderson
Is not the point that this debate should have happened before the Chancellor made the decision, not afterwards?
Justine Greening
Realistically, it is not always possible to discuss rate changes with the industries concerned. It is not done as a matter of course, but the point about working with the industry to ensure that we understand the impact on more marginal investments is valid, and that is precisely what we are doing.
The clause increases the rate of the supplementary charge, which is a tax on the profits of oil and gas production, from 20% to 32% from 24 March this year. It is fair to point out that oil prices have increased from $77 a barrel at the time of the June 2010 Budget to about $125 a barrel today.
Dame Anne Begg
Plenty of other companies and industries deal in commodities whose prices go up, and plenty of other companies and industries make huge profits, but can the Economic Secretary name one other industry where the marginal rate of tax is 81%?
Justine Greening
The point is that we faced an increase in oil prices that had fed through pretty directly to pump prices. The increase in the cost of fuel was not just impacting on motorists, but having a huge impact on hauliers, on the cost of living and on businesses. We had to decide what was the right thing to do. I think that the right and fair thing to do was to share the burden by taking some of the additional profits that oil companies were making—profits at a level that far exceeded the projections of the companies when they made those investments. I will come on to answer the question from the hon. Member for Bishop Auckland (Helen Goodman) about projected future investment. I will give a telling statistic that makes my point very well.
We expect pre-tax profits from oil and gas production in the UK to be £24 billion in the current tax year, which is a 50% increase in just two years, primarily as a result of the increased oil price. Oil companies can afford to pay a bit more, but hard-pressed motorists, hauliers and businesses deserve to pay less.
Dr Whiteford
I am pleased that the Economic Secretary recognises the impact that fuel prices have been having on business and hauliers, particularly those in more remote and rural areas. It is precisely those areas, including the parts of north-east Scotland represented by myself and by the right hon. Member for Gordon (Malcolm Bruce) and the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), who tabled the amendment, that face a hugely disproportionate impact on jobs and investment in the oil and gas sector.
Justine Greening
We have just agreed to clause 19 without either the Scottish National party or the Labour party having divided the House. If we are willing to accept the cost of the motoring package in clause 19, which I think we all accept was badly needed to support motorists, hauliers and businesses, we also have to accept some responsibility for putting in place a way of funding it. Clause 7 is how we will do that.
Justine Greening
Let me make a bit more progress, because Members have raised some real concerns and I want to ensure that I respond.
The Government recognise that we need to act as a good custodian of the UK’s natural mineral wealth; at the same time, we need to manage a tax regime that tailors the level of tax to the level of profits available from the UK continental shelf. The UK’s oil and gas reserves are a finite resource that belongs to the nation. Current oil production was not sanctioned on the basis of the high prices from which the industry benefits today. Those unexpectedly high prices and profits have arisen due to geopolitical events in the middle east and north Africa, as we have heard, and the Government must ensure that they secure a fair return for the UK taxpayer, particularly given the impact that oil prices are having on the broader economy outside the oil and gas exploration industry.
Stewart Hosie
But the tax rate was 50% before. Although clause 19 has been agreed to, it ought to have been paid for by the windfall that the Government got because of last year’s rise in the barrel price and by the windfall over and above the 2010 forecast that the Government are going to get this year. The problem is that what the Government have done with this tax grab, this 60% hike in the supplementary charge, is likely to damage investment and jobs and weaken economic recovery. It is not necessary to pay for clause 19—the money was already banked.
Justine Greening
I only wish that the hon. Gentleman’s assertion was correct. The previous Parliament debated this very issue, and I think it was responsible of the new Government to get the independent Office for Budget Responsibility to examine it, given that there had been conflicting assessments from different industry watchers and think-tanks. The OBR was very clear that although we received some extra revenue from the North sea as a result of higher prices, the impact of higher oil prices is far more wide-ranging. We can see that from the debate that we have had over a number of weeks, which continues tonight, about the impact of oil prices as they feed through to high pump prices.
I remind the hon. Gentleman of his own words about how to pay for the stabiliser back in 2009. He said:
“That amount could come from the VAT windfall or the North sea windfall, because it would be directly related to the price of oil.”—[Official Report, 13 May 2009; Vol. 492, c. 908.]
I know that he was talking about the direct revenues that he has just mentioned, but I think he was also making the broader point that a more general windfall accrues to the North sea industry when oil prices are high. I will talk briefly about some of the steps that we want to take to ensure that we mitigate the risks involved in the more marginal investments, so that we manage the concerns that have been raised, particularly by Liberal Democrat Members.
Amendment 10, which was proposed by the Labour party and spoken to by the hon. Member for Bristol East (Kerry McCarthy), would require the Chancellor to
“produce, before 30 September 2011, an assessment of the impact of taxation of ring fence profits on business investment and growth including an assessment of the long-term sustainability of oil and gas exploration in the North sea”.
As I have said, I want to reassure hon. Members that we are engaged closely with the industry. In fact, we explicitly mention in the Budget document that we want to work with the industry on field allowances, particularly those on marginal gas fields. Since coming to power, we have engaged closely with the industry, as my hon. Friends are aware. We have introduced a change to the ultra-high-pressure, high-temperature field allowance to ensure that the fiscal regime was appropriate to those prevailing circumstances.
The Government are keen to continue working with the industry. I have personally met representatives of Statoil and Centrica and spoken directly with them about their individual concerns. As I am sure the right hon. Member for Gordon is aware, Wood Mackenzie explicitly pointed to the Mariner and Bressay oil fields as two of the few fields where there would be an uneconomical impact, but for a variety of reasons, a number of technical challenges associated with those fields already made them a challenging investment. Nevertheless, we are working directly with Statoil to look at whether field allowances can be developed to help to unlock that investment.
The Government published our assessment of the impact of the measure in a tax information and impact note at the time of the Budget. Although we do not expect the measure to have a significant impact on investment or production in the forecast period, as I have said, we are working closely with the industry. First, we want to look at field allowances to see how we can unlock those more marginal fields, and secondly, we want to look at the longer-term issues that the industry is keen to address, including, for example, achieving more certainty on decommissioning.
Of course, the Government expect that the average post-tax profits per barrel will be higher over the next five years than it was over the past five years because of the higher oil price. In its analysis of the Budget, industry analyst Wood Mackenzie stated:
“At current high oil prices, few new projects will become uneconomic as a result of the change”,
However, we want to do what we can to ensure that investment is unlocked for those projects that remain at risk, so that they go ahead.
Helen Goodman
I am just a little concerned about how the Minister expressed herself in her most recent remarks. My understanding is that Ministers are not supposed to be privy to the individual tax bills faced by individual taxpayers. From what she is saying, it sounds as if a line has been stepped over when it perhaps should not have been.
Justine Greening
I do not think that that is true. It is perfectly normal and reasonable for the Treasury to work with industry and individual companies to look at the particular problems that they face. That is exactly what the previous Government did, and they introduced field allowances. There is no substance at all to the hon. Lady’s claim. In fact, she would have more justification for complaint if we were not taking such action.
As I have said, the recent very high sterling oil price has resulted in unexpectedly high profits for oil and gas companies, although at the same time it has resulted in financial pain for motorists and the wider economy. The Government therefore decided that it was appropriate to increase the rate of supplementary charge, to redress that imbalance. The fact that we have acted in that way does not mean that we do not appreciate the impact of taxation. However, we believe that investment in an exploration of the UK continental shelf will continue, driven by the record high oil price.
The hon. Member for Bishop Auckland (Helen Goodman) asked about forecasting. Of course, there is a range of industry forecasts on future oil prices, but the Government use the OBR, which is entirely independent of us. The OBR forecasts an oil price for the forthcoming years of this Parliament in excess of $100 a barrel for every year of that period.
Mr Kevan Jones
In response to my hon. Friend the Member for Bishop Auckland (Helen Goodman), the Minister talked about negotiations she is having with individual oil companies. Is the revenue from fields going down? If so, from where is she providing compensation to fill the gap, or is she not giving any money away at all in these negotiations?
Justine Greening
The hon. Gentleman is missing the point that because of the high oil price there is continued investment in the North sea. Interestingly, Professor Kemp’s optimistic scenario is $90 a barrel and 70p per therm, but as I just said, the OBR has projected independently that oil prices over the next five years could be more than $100. That is $10 higher than the most optimistic scenario in Professor Kemp’s analysis.
Stewart Hosie
It is worth pointing out the Professor Kemp states that his projections are all in real terms, so they increase yearly with general inflation, and he gives three different scenarios for a barrel-of-oil price plus the therm price. In each instance—I will be very accurate here—field investment is reduced by £19.2 billion, by £19.5 billion or by £29.1 billion. Those are 30-year forecasts. For the sake of accuracy and completeness, therefore, I am sure that the Minister will agree that Professor Kemp and Linda Stephen’s work points to reduced investment over all the scenarios investigated.
Justine Greening
I just said that we accept that there will be a marginal impact; however, Wood Mackenzie has said that it does not expect that marginal impact to be high. If we look at Professor Kemp’s optimistic scenario of $90, which is less optimistic than what the OBR is projecting, and then use the hurdle rate most commonly used by most companies, we see that in the high-price scenario, total future projects are expected to fall from 1,099 to 1,074—a 2% reduction. We are saying that we recognise that. We therefore believe that the challenge is now for us to work with the industry to ensure that we can mitigate the risk to that 2% of investment.
I turn briefly to the amendments in the names of my right hon. Friend the Member for Gordon and my hon. Friend the Member for West Aberdeenshire and Kincardine. Clearly, the amendments enabled them to make the points they wanted to make, but I think they would accept that the way in which their proposals would operate could mean that the supplementary charge rise started later and lasted potentially for a finite time. It might also have a staged approach. All those things would mean that the funding would not be in place to fund the package we want to introduce for motorists. I stress, however, that as my right hon. Friend the Member for Gordon said at the end of this comments, the way through this is to ensure that we work with the industry. I am pleased with the engagement we have now had with the industry. We have got through our first meeting with industry representatives after the Budget, which was a chance for them to set out their reaction to a tax rise we did not anticipate they would welcome.
The Government amendments demonstrate that we are engaged with the industry and are listening to its concerns. In fact, as a result of that engagement we wanted to address a technical issue that had arisen involving the basis proposed for the apportionment of profits. The Government’s amendments seek to address that. The legislation provides for how profits in an accounting period that straddles the date of the rate increase are to be split, so that the two tax rates can be applied to the appropriate amounts of profits. Government amendment 11 provides that a company may elect for a just and reasonable basis to be used where a time apportionment would give an unjust or unreasonable result.
We have proposed amendment 11 to take account of the concerns of industry. The amendment has an Exchequer cost of £40 million in 2011-12 only. We feel that the change is worth while because it ensures, for example, that the tax change does not affect the tax liability due in respect of transactions that were wholly completed before the Budget and that should not, therefore, have been affected by the rate change. The change follows an approach that the industry has suggested and shows that the Government are willing to change the detail of the delivery of their stated policy aims where evidence of unforeseen effects is presented by the industry. I urge hon. Members to accept the change.
This Government will carry on working with the industry on providing certainty in respect of decommissioning tax relief. Industry and officials will be engaging closely on that important piece of work in the coming months, and as previously mentioned, officials and Ministers are closely engaging with the industry in relation to the marginal field developments. We explicitly said that we would do that in the Budget, and we are now following up on that desire to ensure that investment continues to be unlocked. The concerns of gas producers are also being discussed with them. As I have mentioned, the Government are also seeking the views of oil companies and motoring groups about the level of the trigger price for the supplementary charge, and how the oil price for that purpose is to be determined. That informal consultation will be take place shortly, and we expect to be able to clarify the policy mechanism in the autumn.
We want to ensure that the Exchequer obtains a fair share of the value of our natural resource wealth while ensuring that the tax regime does not impede the development of the basin’s potential. The impacts of the measure are understood, so no further assessment is required, and I urge the Opposition not to press the amendment. It is impossible not to note that they voted—[Interruption.] I was actually referring to amendment 10, which I would have thought Labour Members would recognise, having proposed it—although I suppose that anyone who has voted for a tax cut on fuel duty, even though they have no way of paying for it because they have set out their stall against getting the funding mechanism from the oil companies, might be expected not to have followed the arguments that I have set out.
The amendments proposed by my right hon. Friend the Member for Gordon are well intentioned. Let me reassure him once again that we are listening to representations from the industry and acting to ameliorate unforeseen effects. I therefore urge hon. Members to accept the Government amendments. The clause puts in place a fair fuel stabiliser, ensuring that we can pay for much needed help for motorists up and down the country. The clause also ensures that motorists and businesses suffer less pain from high prices at the petrol pump as a result of higher oil prices that would otherwise simply increase the profits of oil companies.
Malcolm Bruce
We have had a very useful debate, in which Members from all parts of the Committee have had the opportunity to express some pretty forceful points of view about the industry, as well as present facts from well informed sources. It is perhaps unfortunate that it is so late, but this still stands on the record as a valuable debate.
I thank the Minister for her constructive response and for the information about the Government’s detailed engagement. It would be fair to say that the immediate situation after the Budget was that the Government mounted a robust defence of their line against an industry that was shocked at what it heard. Perhaps the first meeting was less than constructive, although it is clear that things are now moving in the right direction. The amendments in my name and that of my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) suggest how we might have liked the Government to proceed. We recognise that the die has been cast, although it is important that the Government should continue to engage with the industry to understand the issues of competitiveness, because the oil price is worldwide and the UK has to compete for that investment.
It is also important to take on board the fact that although the losses in production and investment might be considered marginal, we are talking about margins on huge sums of money and huge resources. In other words, we are talking about 1 billion to 2 billion barrels of oil-equivalent, which is worth £70 billion to £100 billion, and £20 billion-plus of potential lost investment. It is important that the engagement between the industry and the Government finds solutions that can deliver the revenue that the Government need and are entitled to accept, given the very high prices, as well as delivering to the country the investment in long-term production that it needs. I believe that this debate has made a substantial and useful contribution. I welcome the Minister’s response to it, and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendments made: 11, page 3, line 13, at end insert:
“(4A) But if the basis of apportionment in subsection (4)(b) would work unjustly or unreasonably in the company’s case, the company may elect for its profits to be apportioned on another basis that is just and reasonable and specified in the election.”
Amendment 12, page 3, line 16, leave out “subsection (4)” and insert “subsections (4) and (4A)”.
Amendment proposed: 10, page 4, line 7, at end add:
“ (11) The Chancellor shall produce, before 30 September 2011, an assessment of the impact of taxation of ring fence profits on business investment and growth including an assessment of the long-term sustainability of oil and gas exploration in the North Sea.”—(Kerry McCarthy.)
Question put, That the amendment be made.
Budget (Coventry)
Justine Greening Excerpts(13 years ago)
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The Economic Secretary to the Treasury (Justine Greening)
It is a pleasure to serve under your chairmanship for what must be the first time Mr Dorries.
I congratulate the hon. Member for Coventry South (Mr Cunningham) on tabling and securing an important debate. It is important not only for Coventry itself but more broadly. I also pay tribute to the hon. Member for Coventry North West (Mr Robinson) who spoke, as did the hon. Member for Coventry South, with great passion about the challenges facing Coventry. In the time available to me, I will try to address a number of wide-ranging points that the hon. Members made.
The hon. Member for Coventry South is right to make the points that he did, in the sense that there is not going to be one thing that helps to regenerate and grow the Coventry economy, and create jobs. We need a broader strategy in place to ensure that we are successful in helping Coventry. As the hon. Gentleman will be aware, the main backdrop to the policies that the Government are pursuing is the huge budget deficit that we inherited, which we must tackle. In his speech, he talked about young people; the worst thing that we could do for young people is to pass on to them that debt of the money that our generation has spent, so that they can pay it off. We have an obligation to get our finances back in order so that young people do not face that additional challenge as they enter the economy.
We need to tackle the deficit. However, as the hon. Gentleman pointed out, we have also got to increase economic growth and rebalance the economy across all regions of the UK. I think that he would recognise, as many of us do, that too much of the last economic boom, which took place roughly between 2000 and 2007, was enjoyed by London and the south-east, and not enough of it was enjoyed by cities and regions outside the south-east. We must ensure that, as we generate and create the right ingredients for the next period of growth in our economy, that growth is enjoyed by precisely those communities that can benefit most from it, in terms of jobs, skills and opportunities.
The key aspect at the last Budget was not only economic growth itself but ensuring that we had some plans to stimulate that growth. The hon. Gentleman will be aware that we made a series of proposals at the last Budget to create a model for more sustainable and more balanced growth, including in Coventry and more broadly in the west midlands.
As hon. Members have made clear, Coventry faces some difficult challenges, but it remains a significant contributor to the regional economy in the west midlands. As has also been mentioned, during the last 20 years Coventry has rebalanced its economy somewhat by moving towards more high-tech manufacturing and business services. The reforms set out in the plan for growth, and indeed in the broader Budget, will give businesses and individuals in the region, including in Coventry, a real boost. Those reforms include cutting corporation tax from this month, so that it will be 23% by 2014; increasing the personal allowance by £630 next year, following the increase of £1,000 last month, which will take 25,000 people in the west midlands out of tax altogether; and, of course, building on the success of the manufacturing technology centre in Coventry and in other cities, by creating high-value manufacturing technology innovation centres. They will be the first of an elite network of centres that will enable businesses to access state-of-the-art equipment and technical skills.
The hon. Gentleman will be aware that a further opportunity for Coventry—one that I am sure is already being investigated in the city—is the enterprise zones policy. The west midlands already has two of the enterprise zones that were announced at the Budget. He will be aware of the zone in Birmingham and Solihull, created by the local enterprise partnership, and of the zone in the black country. During the coming months, I hope that Coventry itself will submit a proposal to become part of an enterprise zone.
Mr Jim Cunningham
Can the Minister talk to her colleagues in other Departments about one issue that I do not think her Department—the Treasury—actually handles? That issue is the future of Ansty. A list of sites has been published. In particular, we are talking about Advantage West Midlands, which is the regional development agency. On that list of sites, Ansty is not mentioned, so we do not know what is happening with it. That is one of the points that I made in my speech. A lot of taxpayers’ money has been invested in the site and a lot of effort has been put in by myself and my colleagues to get it developed. We and the public want to know what exactly will happen to it. I do not expect the Minister to answer me directly today, but perhaps she could go away and consider that matter.
Justine Greening
One of the things that the hon. Gentleman has been able to do very effectively in his speech is to raise a number of issues—such as transport and infrastructure, which I will come on to shortly—that are not necessarily a concern of the Treasury, but that doubtless have been recognised by the Departments concerned. I will ensure that I pass back his specific comments about the Ansty site to my colleagues in the Department for Business, Innovation and Skills and I will write to him in more detail about that specific site.
As I was saying, enterprise zones are another opportunity to bring some genuine benefits to the hon. Gentleman’s area. In his speech on the Budget debate and again today, he has expressed the hope that Coventry will benefit from inclusion in an enterprise zone in the future. I welcome his enthusiasm for the enterprise zone policy. Of course, the Coventry and Warwickshire local enterprise partnership is welcome to bid to be part of the second tranche of 10 enterprise zones. Regarding timelines, I have no doubt that his local LEP will be working on its proposal already. We expect to take some decisions within Government in the summer about where the next tranche of enterprise zones will be. We do not intend to spend a long time making those decisions. We are aware of the urgent need to get on with this policy, because we believe that it can make a real difference.
The Government have also established the regional growth fund, which is worth £1.4 billion overall, to help to grow a private sector-led economy in England. Of course, Coventry will benefit directly from the first round of awards from that fund, with Jaguar Land Rover having won support for a project to undertake design engineering for a new small common vehicle platform that will be developed in part in its Whitley centre.
There have been other signals that the private sector sees Coventry as being “open for business” and that it has real confidence in the future of the city. Only last week, it was announced that the overhaul of Coventry airport will go ahead, creating new infrastructure and business opportunities in a £250 million development.
The second round of the regional growth fund, in which we are aiming to allocate the remaining £950 million of funding available, is now open for bidding. The second round closes on 1 July and I look forward to seeing many more exciting proposals, including from businesses in Coventry.
Hon. Members have raised concerns about local government funding. As I have already made clear, the last Government left an appalling financial mess behind them and we have a moral obligation to ensure that we pay down our debts as quickly as possible. Tough decisions have been necessary across all areas of public spending. Local government, which makes up a quarter of all public expenditure, has its part to play in that process.
The Government have delivered a challenging but fair settlement for local government to ensure that the most vulnerable communities are protected. Although financial settlements have been tight, local authorities will still receive £29 billion in grant next year. It is also worth noting that formula grant in Coventry will be nearly £500 in 2011-12, which is more than twice what it will be in west Oxfordshire, precisely reflecting the higher levels of need in Coventry. I know that Coventry council is getting on with calculating how it will make the savings that it needs to make. In fact, its deputy leader, Councillor George Duggins, has said that the council was in a “good position” compared with other councils, because it has taken early action.
There is no doubt that these are difficult decisions to make and of course they should be made at the local level by local authorities, to ensure that the priorities of local people, including those of people in Coventry, are reflected in those decisions. Ultimately, however, there is no doubt that the worst thing that we could do is to ignore the huge deficit that our country faces and the need to tackle it.
The hon. Gentleman rightly mentioned the issue of infrastructure in his speech and I want to refer to it briefly. During the spending review period, the Government will actually spend slightly more on infrastructure than the last Government had planned to spend. Of course, investment across the board has already been announced by my right hon. Friend the Secretary of State for Transport, but I have no doubt that the points that have been made today about the regional transport infrastructure in the west midlands, including rail, will also be taken on board by him. Hon. Members are right to point out that high-speed rail is a strategic project that can bring benefits not only to the west midlands but nationally. However, there is still the need to ensure that we get investment in the existing track. Of course, that existing track has a clear role to play in the coming months and years, by helping Coventry and other areas to regenerate their economy.
Finally, I will mention the Building Schools for the Future programme. I recognise the concerns that the hon. Gentleman set out about that programme—they are concerns that I face in my own constituency. It says everything about the BSF programme that a Government who were in power for 13 years could come to the end of their term and still have existing schools in the sort of state that the hon. Gentleman and his colleague, the hon. Member for Coventry North West, described.
However, I have no doubt that such considerations are being taken into account by the James review and I assure both hon. Gentlemen that, as we go through the coming years, we want to ensure that parts of the country outside the south-east, such as Coventry, benefit to the maximum from the next period of economic growth.
Costing Parliamentary Questions
Justine Greening Excerpts(13 years ago)
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The Economic Secretary to the Treasury (Justine Greening)
The Treasury has conducted its annual indexation exercise of the cost of oral and written parliamentary questions so as to ensure that these costs are increased in line with increases in underlying costs. The revised costs, which will apply from today, are:
Oral Questions £437
Written Questions £159
The disproportionate cost threshold (DCT) will remain at £800.
Office for Budget Responsibility
Justine Greening Excerpts(13 years, 1 month ago)
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The Economic Secretary to the Treasury (Justine Greening)
The provisions of the Budget Responsibility and National Audit Act 2011 which establish the Office for Budget Responsibility (OBR) have been brought into force today. The OBR is now established on a permanent, statutory footing.
The Treasury has also published and laid before Parliament the charter for budget responsibility. This charter addresses the comments made by Members during the passage of the Act. The charter must be approved by the House of Commons before it is brought into force. A debate will be scheduled shortly.
Alongside the charter, the Treasury and the OBR are publishing the OBR’s framework document and memorandum of understanding. The framework document sets out the broad governance and management framework within which the OBR will operate. The memorandum of understanding establishes a transparent framework for co-operation between the OBR, the Treasury and other parts of Government which the OBR will need to work closely with to perform its forecasting and analytical duties.
Each document has been deposited in the Libraries of both Houses. They are also available on both the Treasury’s and OBR’s websites. Copies of the charter are available in the Vote Office.
Coinage (Measurement) Bill
Justine Greening Excerpts(13 years, 1 month ago)
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The Economic Secretary to the Treasury (Justine Greening)
I congratulate my hon. Friend the Member for Milton Keynes North (Mark Lancaster) on bringing the Bill successfully to this stage. As we have heard, the Bill is wholly supported by the Government and, I think, by Members across the House.
I am pleased that, as my hon. Friend observed, the Bill will allow the Royal Mint to provide an Olympic coin programme that will surpass its predecessors and ensure the Royal Mint’s place as a leading international provider of commemorative coins. As my right hon. Friend the Prime Minister said in an endorsement letter to the Royal Mint:
“As we move towards the Games it is wonderful to see British companies, such as the Royal Mint, commemorating the journey in a way that brings British skill and craftsmanship to the attention of the world.”
In doing so, the Royal Mint will also generate a revenue stream for the Exchequer, as my hon. Friend the Member for Bury North (Mr Nuttall) noted. Under the UK coin contract, the Royal Mint pays a royalty to Her Majesty’s Treasury for commemorative coins. It is estimated that the Olympic coin programme, including the kilogram coins, will generate a royalty payment of approximately £1.8 million, although the exact amount will depend on sales volumes, retail price and metal prices. However, the mint will no doubt receive additional profits, which it can invest in developing the Royal Mint and its business over the coming years, which will be welcome. The Royal Mint has similar royalty arrangements with the London Organising Committee of the Olympic Games, and the International Olympic Committee. As this Bill is not limited to the Olympic coin programme, future events celebrated with kilogram coins would generate similar revenue.
As my hon. Friend the Member for Milton Keynes North noted, today is indeed April fools’ day. This debate brings to mind a 2008 April fool, when a Canadian radio station interviewed a Royal Canadian Mint spokesman who revealed plans to replace the Canadian $5 bill with a $3 coin. The coin was dubbed a “threenie”, in line with the nicknames of Canada’s $1 coin—which is commonly called a “loonie”, as it depicts a common loon on the reverse—and the $2 coin, which is affectionately known as the “toonie”.
Justine Greening
It may well end up with that nickname, which would be appropriate for a coin that, as we heard, will not just be minted to commemorate the Olympics but could be used to commemorate a whole range of special events in this country where we think that coin collectors might be interested in adding to their collections.
With their large size, the kilogram coins will be an exciting, artistic and eye-catching piece of numismatic art that will no doubt be treasured and passed on to future generations. At almost 1,100 years old, the Royal Mint is a tradition in itself. The production processes—from design and modelling, to the blast furnaces, and the striking of blanks and ultimately coins—are the epitome of a successful manufacturing company. As my right hon. Friend the Chancellor of the Exchequer said in last week’s Budget speech, manufacturing is crucial to the rebalancing of our economy. Under this Government manufacturing is now growing at a record rate, with 14,000 more jobs created in the sector in the last three months alone.
As the House will be aware, the Budget announced several measures to help promote and further develop British manufacturing, over and above the efforts that the sector is already making. I have no doubt that the Royal Mint will continue to pioneer new processes and develop as a pivotal part of British manufacturing. The Royal Mint has been based in south Wales since the 1960s and employs 850 people. I had the chance to meet them last year when I went down there to look at their production process and learn more about the practicalities of minting coins. I had a fascinating trip, but also learned an awful lot about the skill that the employees have to use to ensure that the coins that are minted—the coins that end up in our pockets and that we spend in shops every day—are ones that we can rely on.
Mr Hanson
Does the Minister recall that the establishment of the Royal Mint in south Wales was the result of a decision by the then Chancellor of the Exchequer, James Callaghan, to decentralise government activity from London to the regions? I would like to impress on the Minister the advantages of considering such moves again in the future.
Justine Greening
The right hon. Gentleman makes a valid point. It struck me how important the Mint was to the local economy when I visited it. The broader point that he rightly makes is that, as the economy grows in the coming years, we need to ensure that more growth is in manufacturing, and that more of that manufacturing growth takes place outside London and the south-east, so that we end up with a more balanced economy.
It is also worth pointing out that the Royal Mint produces not only coins but all our British military medals except the Victoria cross, and, as we have heard, it has won competitive tender procedures to produce medals for sporting events such as the 2005 Ashes series and the 2012 London Olympic and Paralympic games.
My hon. Friend the Member for Milton Keynes North also mentioned the 50p sports series, and the House should note that the 29 designs are not only available as collectors’ items but featured on circulating coins currently being issued to the general public. Fourteen of the 29 designs have already been issued in line with natural demand for coin, with the remainder entering our pockets in the lead-up to next summer’s games. The 50p sports series also helped the Royal Mint to enter the record books when, last October, 1,697 newly minted Olympic 50p coins were flipped simultaneously, setting a new world record. I doubt that that record will be surpassed using kilogram coins, but that shows that the Royal Mint is part of the fabric of our British culture in a broader way than many of us realise.
The London 2012 Olympic games will be an event of huge importance for the whole country, and this legislation is important in ensuring that it can be appropriately celebrated. I believe that my right hon. Friend the Prime Minister was right in saying:
“I know that everyone in the UK is eager to make London 2012 the best Olympic and Paralympic Games ever seen, and I believe that the London 2012 Coin Programme will be one of the greatest and most successful in the history of the Games”.
I would like to thank my hon. Friend the Member for Milton Keynes North for introducing the Bill, which will help the Royal Mint to achieve such an ambition. We all wish it a safe and swift passage through the other place.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Carbon Price Floor (Government Response)
Justine Greening Excerpts(13 years, 1 month ago)
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The Economic Secretary to the Treasury (Justine Greening)
The Government have today published the Government’s response to the consultation document on the carbon price floor.
The consultation document “Carbon price floor: support and certainty for low-carbon investment” set out the Government’s proposal to provide greater support and certainty to the price of carbon in the power sector to encourage investment in low-carbon electricity generation.
Budget 2011 announced the introduction of a carbon price floor from 1 April 2013. The floor will start at around £16 per tonne of carbon dioxide (tCO2) and follow a linear path to target £30/tCO2 in 2020 (both in 2009 prices). The carbon price support rates in 2013-14 will be equivalent to £4.94/tCO2.
The consultation sought views on how best to implement the proposal. A number of issues were raised by respondents throughout the consultation. These are addressed in the Government’s response.
The Government intend to introduce legislation for the proposals in the 2011 Finance Bill (and subsequent secondary legislation) and to bring the proposals into effect from 1 April 2013.
Copies of the document have been deposited in the Libraries of both Houses and are available on the Treasury website at www.hm-treasury.gov.uk.
Amendment of the Law
Justine Greening Excerpts(13 years, 1 month ago)
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Chris Williamson
No, I will not give way any more.
This Budget does little or nothing to ameliorate the public service cuts. The cuts to local council budgets in particular are vindictive, gratuitous and counter-productive. The Department for Communities and Local Government budget is set to experience a whopping real-terms reduction of 67.8% over the next four years.
The Chancellor needs to create demand in the economy. My hon. Friend the Member for Coventry North West (Mr Robinson) referred to the importance of the construction industry. Every pound invested in construction generates £2.84 in total economic activity, and 92p of every pound spent on construction is retained in the UK. Every pound invested by the public sector yields a return of 56p to the Exchequer, making it a net investment of just 44p. In spite of those facts, house building is at an all-time low, Building Schools for the Future was scrapped and housing targets have been abolished. The £250 million announced in yesterday’s Budget to support first-time buyers is not enough.
The proposed changes to the planning system, which as the Chancellor said will introduce a presumption in favour of sustainable development, contradict the proposals in the Government’s Localism Bill. What is going on? On the DCLG website, the Minister of State, the right hon. Member for Tunbridge Wells (Greg Clark), who has responsibility for decentralisation, is quoted as saying that the Localism Bill
“will enact new rights allowing local people to shape and influence the places where they live, revolutionising the planning process by passing power down to those who know best about their neighbourhoods.”
A Budget briefing from the UK Contractors Group states that
“it has been much harder to obtain definite information on investment intentions from a number of key public sector clients. Indeed, there appears to be some deliberate attempts to delay decisions and to obfuscate on forward plans. A prime example of this is the future of the school building programme. The Sebastian James review was originally scheduled to report to ministers before Christmas. In March, we are still waiting for the Department for Education to signal its intentions. Equally on energy supply, the industry stands ready to support the enormous amount of investment needed but to deliver this support effectively and efficiently we need a clear understanding of the future programme.”
It goes on to say how the health reforms have caused further confusion.
I turn to the Chancellor’s modest reduction in fuel duty. As other Members have said, it is more than offset by the imposition of the VAT rise. I have been lobbied heavily by small businesses and residents in my constituency, who say that the VAT rise on petrol is hurting and needs to be reversed. It is not acceptable for the Government to argue that they are prevented from doing so by the European Union—that simply will not wash.
The Economic Secretary to the Treasury (Justine Greening)
Will the hon. Gentleman give way?
Chris Williamson
I will not give way any further, I am afraid.
The Chancellor should have done more to support manufacturing. The growth fund is inadequate—nowhere near as much as the regional development agencies were spending—business confidence is falling and the enterprise zones will not generate growth either. It is simply a case of rearranging the deckchairs. Let us not forget that it was the Tories who decimated manufacturing industries when they came to power in 1979. They also put all their eggs in the financial services basket, and that is why this country was overexposed when the financial bubble burst.
There are also problems with the Government’s ambitions on welfare reform. A Financial Times survey of businesses showed that three quarters of them said that they could not absorb lost public sector jobs, and that 57% were not interested in doing so. What hope do long-term unemployed people have of being able to get employment, given the welfare reforms and the so-called private sector-led recovery, which is not happening? They will simply not be able to get employment, given the cuts that the Government are bringing about.
Further to that, an investigation by my local paper, the Derby Telegraph, has shown that unemployed workers are being discriminated against by the insurance industry, which is saying that landlords who let their properties to unemployed workers will not be able to obtain insurance. A lot more people will be facing that situation as a result of the cuts, with more and more people losing their jobs.
We are in an economic downward spiral, and we need a virtuous circle. We need public sector investment to create jobs and demand in the economy, which in turn would create more demand and then more jobs. Yesterday, the Chancellor claimed that his decisions had brought economic stability, but the reality is that they have created a toxic cocktail of falling growth, increasing poverty and rising unemployment.
The inconvenient truth for the Chancellor is that his decisions have left this country facing the spectre of stagflation. To add insult to injury, he is borrowing an extra £44.5 billion a year, and for what? It is to pay for unemployment and lower growth. It is clear that he has lost the plot, and that we need a plan B. He said that
“society should not just be judged by the strength of its economy alone, but also by the compassion of its people”.—[Official Report, 23 March 2011; Vol. 525, c. 961.]
He certainly fails on the first point, and he is making the second very difficult. I am afraid that unless we get a plan B, this country is doomed to further decline.
The Economic Secretary to the Treasury (Justine Greening)
We have had an important and, in many respects, illuminating debate this afternoon. I will try to refer to all the contributions that have been made, but time is short so it will be difficult for me to take interventions.
We have been talking about two halves of a solution to a problem that itself has two halves. The first half of the problem relates to the economy: the imbalance in jobs and a business model for UK plc that was simply unsustainable in relation to the sectors and its regional impact. The second half of the problem relates to what we can do to tackle the huge problem in the public finances and the structural deficit handed over by the previous Government.
The first point to consider is the broken business model that the previous Government created for UK plc, which was simply unsustainable. First, it was unsustainable in terms of sectors. An uncontrolled boom took place broadly in one sector—financial services—and in one region. During the mid noughties, for every 10 jobs created in the south-east and London, only one was in the private sector and outside financial services, which clearly shows that the previous Government’s model simply was not working. That had a huge cost, as my right hon. Friend the Secretary of State for Business, Innovation and Skills has said. Since 1997 manufacturing has been halved and lost two fifths of its work force, and exports from the UK fell behind the rate of growth seen in the rest of the world. Meanwhile, household debt ballooned. We had a huge property bubble that was worse than the USA’s. As the shadow Chancellor knows very well, he allowed the banking sector to get dramatically out of control. The sectors across the UK economy were totally unbalanced, and we need to change that.
Secondly, the imbalance was regional. There was huge job creation in the south-east, but what about the rest of the country? That shows why we are right to make proposals in the growth review for enterprise zones, and I very much hope that Opposition Members will not allow their political prejudices to get in the way of their local communities being able to ask to be part of the enterprise zones as they are developed.
On the public finances, I listened to the hon. Member for Hayes and Harlington (John McDonnell), with whom I have previously made common cause on other issues. I have great respect for him and for his consistency, but I must say that on this occasion I disagree with his analysis of what we need to do, which seems to be broadly in line with that of his party. What is their solution in a boom? It is to spend more. What is their solution in a bust? It is to spend more. That simply is not a sustainable way to run an economy. In fact, the previous Government left our country and our people weighed down with public debt after maxing out the nation’s credit card. They eventually decided that they did not support tackling the deficit now. Instead, we hear from the shadow Chancellor today that he wants to do that later. He wants to pass on Labour’s debt to our children and grandchildren, which is totally unacceptable.
The hon. Member for Derby North (Chris Williamson) talked about decline, but what does he think happened under the previous Government? He should go and talk to people in manufacturing who saw their own competitiveness decline dramatically.
My right hon. Friend the Secretary of State for Business, Innovation and Skills and my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) talked about the utter denial that still exists among the Opposition, about not just the deficit and the public finances, but their thoroughly broken approach to running the UK economy. There was no humility or apology for any of that, as my hon. Friend the Member for Sevenoaks (Michael Fallon) said, and the fact that there is no recognition of the problem surely means that there will never be any solution from the Opposition.
The right hon. Member for Wolverhampton South East (Mr McFadden) seemed to think that we could suddenly wish away those problems and get over them incredibly quickly, but the challenges that the Labour party left this Government—two parties that have come together to work in the national interest to sort out that huge mess—will take some time to be met. There will be no quick fix, but we have early, immediate and continuing steps to resolve the problems that have been left for the UK economy and for our people.
We took immediate steps in the spending review and in the emergency Budget to lift people out of income tax. The hon. Member for Washington and Sunderland West (Mrs Hodgson) seemed quite dismissive of them, but I hope that she will not vote against them when the time comes. We took steps in the spending review to bring public spending back under control, and yesterday we took the next step, which was a Budget for reform and recovery and a growth plan to rebalance our economy and put growth and sector issues back on a sustainable footing.
Opposition Members seemed to suggest that we have not talked to business, but we have actually had more than 1,000 meetings, and if they look through the growth review and “The Plan for Growth” they will see that we have taken well over 100 steps to help businesses throughout Britain. Our message to them is that Britain is open for business.
We will have the most competitive tax system in the G20; we will make sure that Britain is the best place in Europe to start, finance and grow a business, which, as my hon. Friends the Members for East Surrey (Mr Gyimah) and for Skipton and Ripon (Julian Smith) said, is absolutely critical; we will have a more balanced economy by encouraging exports and investment; and we will have a more educated work force, who are the most flexible in Europe. Those are the ingredients for a rebalanced economy that creates sustainable jobs.
The hon. Member for West Bromwich West (Mr Bailey) did talk about jobs, but if he is concerned he should read the OBR report to the end, because it clearly says that our plans are projected to create a net 1 million jobs over this Parliament. I hope that Members from all parts of the House will support that. By the time we have finished, we will have a corporation tax rate lower than America’s, France’s and Germany’s, giving us the lowest rate in the G7.
Our second ambition is to make sure that Britain is a great place to start, finance and grow a business. In the World Economic Forum global competitiveness index, we fell from fourth to 12th. The shadow Chancellor breathes out in frustration at me reading out that statistic, but it is absolutely true, and we have had to combat it by abolishing £300 million of regulations and by introducing a moratorium, exempting businesses employing fewer than 10 people from new domestic regulation for the next three years. But, we are going to go further than that. To stimulate growth, we will double entrepreneurs’ relief and help SMEs by extending the small companies business rate relief for an extra year. We are doing our bit to help business, and I wish the Opposition would support that.
We have a whole range of plans to support different sectors, but manufacturing is crucial to rebalancing our economy, as my hon. Friend the Member for Erewash (Jessica Lee) and the hon. Member for Solihull (Lorely Burt) said. One reason why our economy became so unbalanced, and so regionally unbalanced, was the skew towards financial services, and we have to encourage other parts of our economy to grow, so we will do what we can to help manufacturing in particular.
On enterprise zones, the boom left too many communities behind, and we are determined to ensure that as our economy grows, the communities that can benefit most from that will do so.
Our country should never again have to accept the economic decline that has taken place over the past decade —an irresponsible boom and bust, and an unbalanced economy that overheated and took our country to the brink of bankruptcy. The shadow Chancellor was at the heart of the decisions that were so catastrophic for our country: selling gold, PFI arrangements, structural deficit and catastrophic bank regulation. His utter denial of the role that his Government played in leading our country so near to ruin will leave the British public shocked and utterly bewildered as they watch this debate.
In conclusion, this Government are looking to right the wrongs of the past. Where others have failed, we will succeed.
Oral Answers to Questions
Justine Greening Excerpts(13 years, 1 month ago)
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The Economic Secretary to the Treasury (Justine Greening)
The VAT forecast is estimated on an aggregate basis, as registered traders are not required to record in their VAT return the type of goods or services on which VAT has been collected.
Albert Owen
I agree with the Prime Minister that VAT is a regressive tax that hits the poorest hardest. Today’s figures show that the rise has also pushed up inflation, hitting people in their pockets and at the pumps. Will the Treasury team look again at the VAT rise on fuel—which is hurting motorists, hauliers, businesses and families across the country—and reverse it?
Justine Greening
I welcome the hon. Gentleman’s concern for motorists. However, I note that when the VAT rise passed through Parliament on 13 July 2010, he did not vote against it. I assure him that the Government are looking at what we can do to support motorists, hauliers and businesses with the cost of fuel, but I have to say that his party’s proposal on VAT is illegal, unworkable and unfunded.
Vernon Coaker
Does the Minister agree with the Transport Secretary—who, on the “Daily Politics” show on 2 March, dismissed the rise in VAT as a spurious argument—or does she agree with my constituents that by adding £1.35 to the cost of filling up a 50-litre tank with fuel, the VAT rise is the wrong tax at the wrong time?
Justine Greening
Perhaps the hon. Gentleman should talk to his former Prime Minister, Tony Blair, or the right hon. Member for Edinburgh South West (Mr Darling), the former Chancellor, who both said that our decision to raise VAT was necessary to tackle the huge deficit that was left by his party. Again, if he is so concerned about the VAT rise, how come he did not vote against it last July?
Michael Fallon (Sevenoaks) (Con)
Will my hon. Friend confirm that the Government inherited plans for six increases in fuel duty from their predecessor, four of which have yet to come into effect? Of all the groups of people who are quite reasonably concerned about the increasing cost of fuel, surely the least qualified is the Labour party.
Justine Greening
My hon. Friend is absolutely right. In fact, the previous Government introduced 12 duty rises during their time in office. As he pointed out, they also legislated for a further six rises, bringing in the fuel duty escalator, and these would have been on top of inflation rises. It was absolutely amazing to see the Labour party table a motion last week bemoaning the amount of tax that motorists are paying, when they legislated for all—
Mr Speaker
Order. I am grateful to the Minister, but we must concentrate on the policy of the Government.
Stephen Williams (Bristol West) (LD)
I am sure that the Chancellor will respond to the concerns of the motorist tomorrow in a fiscally responsible and environmentally sustainable way, but does the Minister agree that road fuel duty is a blunt instrument for taxing motoring, and that what we need in the long run is a more flexible, market-oriented mechanism for taxing road use?
Justine Greening
Obviously, my hon. Friend has his ideas about how he would like to see motorists being taxed in relation to the environment. He will be aware that the way in which vehicle excise duty is structured encourages motorists to purchase and use cars with lower emissions.
Ms Angela Eagle (Wallasey) (Lab)
On the day that diesel prices have hit a new high and inflation has jumped higher still, making the squeeze on living standards even worse, why do not the Government admit that they got it wrong on VAT and give struggling working people some much-needed support by reversing the Tory VAT rise on petrol, which would take 3p off the price of a litre? Just do it!
Justine Greening
The hon. Lady says, “Just do it!”, but she should know that that is simply not legally possible. She fully understands that. The reason that the Opposition are talking about that is that the fuel duty rises that are coming through were legislated for by Labour, so they are desperately looking for something to say about an issue that they themselves created. She knows that her policy on the VAT rise is illegal, totally unworkable and completely unfunded. Labour wants to take seven years to support motorists; we want to see what we can do to support them now.
Charlie Elphicke (Dover) (Con)
Will the Minister tell us by how much duty has risen in recent years, and whether the person who put the duty up is in the House today?
Justine Greening
When the Labour Government came to power in 1997, fuel duty was 36.86p per litre. By the time they left office, it had risen to 57.19p per litre. As I am sure my hon. Friend is aware, one of the architects of those tax rises was then the chief economic adviser to the Treasury; he is now the shadow Chancellor.
Lindsay Roy (Glenrothes) (Lab)
4. What assessment he has made of the effect on levels of employment of the increase in the standard rate of value added tax.
The Economic Secretary to the Treasury (Justine Greening)
The independent Office for Budget Responsibility’s November economic and fiscal outlook takes into account the spending plans set out in the 2010 spending review. The hon. Gentlemen ask about a recent assessment, and I can tell them that the OBR will publish an updated forecast alongside tomorrow’s Budget.
Mr Jones
Durham university’s economic model shows that between 45,000 and 50,000 individuals will lose their jobs in the north-east of England as a direct result of public expenditure cuts, including 20,000 in the private sector. What message does the Minister have for those individuals and also for the 10.2% of the north-east population who find themselves unemployed?
Justine Greening
Coming from a Labour Member, given that unemployment rose during his party’s time in government, people will find that pretty hypocritical. The only way in which we will get sustainable jobs and a sustainable economy that is not as reliant on the public sector will be to carry out our deficit reduction plan. The hon. Gentleman will hear more about our growth review tomorrow.
Mr Robinson
Is not the Minister aware that all the independent indicators and forecasters suggest that there will be a sustained period of low growth below forecast, and that almost every single economic indicator is going in the wrong direction? Can she not therefore see that the Chancellor’s plan is simply not working? Why are the Government in denial about that?
Justine Greening
I simply do not agree. As we have heard, every independent forecaster is backing our fiscal consolidation plan. The hon. Gentleman talks about evidence, but the retail sales volume grew strongly in January. The Chartered Institute of Purchasing and Supply purchasing managers index grew faster in January than analysts expected, while manufacturing reached a record high. Only today, the CBI industrial sector survey says that orders are going up. Our economy is rebalancing over time, and although the hon. Gentleman says that there is no evidence for that, there is such evidence. There is job creation, and that is what we will need if we are to turn our public finances around.
Jacob Rees-Mogg (North East Somerset) (Con)
Is it not the case that the Government’s debt reduction plan is absolutely right, as we see in the gilt market and the country’s credit rating? Is it not also true that, throughout history, coalition and Conservative Governments clean up the economic mess left by socialists?
Justine Greening
My hon. Friend is right. The consequence of that economic mess is that Labour Governments always leave unemployment higher than when they came into office. It is always that that we seek to tackle. He is right that there is no alternative plan. We have heard about a defunct plan for VAT and petrol, but we have not heard from the Opposition any plan to tackle the deficit. They said they would have some thoughts. Clearly, they are totally thoughtless.
Sajid Javid (Bromsgrove) (Con)
The Government inherited the largest budget deficit of any major country, yet today the UK enjoys one of the lowest interest rates of any major country. Does the Minister have an explanation for that?
Justine Greening
My hon. Friend is right to point out that the previous Government maxed out the country’s credit card. Worse still, they want us to hand on those debts—their debts—to our children and grandchildren. The reason that we have been able to enjoy lower interest rates for our borrowing than countries such as Ireland is that the markets know that we have a plan to get our public finances back into shape. That is benefiting this country every day.
Tom Brake (Carshalton and Wallington) (LD)
T1. If he will make a statement on his departmental responsibilities.
Greg Mulholland (Leeds North West) (LD)
The previous Government’s beer duty escalator was damaging to pubs, ill-considered and did not raise the revenue that it should have done. Considering that the Prime Minister has said that he wants this to be a pro-pub Government, will we get some good news for pubs tomorrow?
The Economic Secretary to the Treasury (Justine Greening)
The hon. Gentleman will have to wait until tomorrow’s Budget, but he will recognise that in the emergency Budget last year we left beer duty frozen.
Stewart Hosie (Dundee East) (SNP)
The Chancellor knows that the long-term solution to the spikes in fuel prices is a stabiliser or a regulator, and hopefully we will hear about that tomorrow. However, is he aware that the price rises in fuel over the past four of five weeks equate to an additional £1,000 a year for running every truck in the country? Does he not agree that that is hugely inflationary and utterly unsustainable?
Budget Responsibility and National Audit Bill [Lords]
Justine Greening Excerpts(13 years, 1 month ago)
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Chris Leslie
I will not, if my hon. Friend will allow me, because I want to focus on what the OBR needs to take account of.
The Economic Secretary to the Treasury (Justine Greening)
I have been listening to the hon. Gentleman for a while, but I want to draw his attention to the OBR’s economic and fiscal outlook, which was published in November last year. I do not know whether he has looked at that, because it contains 50 pages that consider the forecasting issues about which Opposition Members are raising concerns. I thought I would mention that because I get the impression from what he is saying that he has not read it.
Chris Leslie
Quite the contrary. Perhaps that was published in the free phase when the OBR, untrammelled by legislation and existing in the ether, as it currently does—we are post-hoc legislating now—had its moment of freedom when it could comment on such things. If the Bill locks the OBR into a narrow band of responsibilities and duties, it is reasonable to worry that it will be limited to commenting on a certain number of aspects. I accept absolutely that, as the Minister says, fiscal policy is affected by growth, and that therefore the OBR has an implicit right to comment, but that has not been made clear enough, which is a sign that she still does not understand the centrality of growth and employment policy to what the Treasury should be pursuing.
Ian Murray
It is a pleasure to follow the hon. Member for Stone (Mr Cash). At the end of his contribution he referred to wishful thinking. Labour Members certainly think the Chancellor’s gamble with the UK economy is wishful thinking. The recent reduction in GDP came as a shock to everyone, and serves to highlight some of the wishful thinking indulged in by those on the Treasury Bench.
I think that everyone supports the establishment of the Office for Budget Responsibility. One of the best measures taken by the Labour Government was the courageous step of making the Bank of England independent. We have all seen the benefits of that, in good times as well as bad, as it can now make decisions for the benefit of the economy, rather than the benefit of the Government.
In the establishment in law of the OBR, the Bill should focus on more than just deficit and debt issues. Clause 1(1) states that the Treasury must look at
“the formulation and implementation of fiscal policy and policy for the management of the National Debt.”
That narrow focus takes us away from what we need most, which is economic growth. It does not even give the OBR the ability to take account of various specific objectives the Government may want to achieve, such as on child poverty or unemployment, or in terms of the impact on the economy of decisions made by the Chancellor and his team.
Justine Greening
To reassure the hon. Gentleman, may I point out that the OBR is free to consider the impact of any Government policy on the sustainability of the public finances? It therefore does have the discretion to conduct analysis that it may think necessary to assess whether the public finances are in a sustainable state.
Justine Greening
Clause 5(1) states:
“The Office has complete discretion in the performance of its duty under section 4”.
Does the hon. Gentleman think that that is somehow insufficient to provide the OBR with the absolute discretion it needs to do any analysis it wants to fulfil the main duty he mentioned?
Geraint Davies
Having complete discretion is useful, but the word discretion means that something remains a matter of discretion—these things do not have to be done. The OBR has the discretion to go around looking at whatever it likes, but the amendment is saying something different—that the centrepiece of our economic future is economic growth. That has belatedly been recognised by the Chancellor, as we will see in tomorrow’s Budget, when he will say, “I have done all the tax and spend, but, oh no, everything is going wrong because growth is going down the chute, so I had better belatedly do something about it.” The previous Government had sent us on a trajectory of positive growth, albeit that it was a fragile recovery after a financial crisis. The Chancellor has seen that we are going into negativity, so he has scratched his head and realised that growth has something to do with the public finances.
We have been lambasted by Conservative Members who say that the deficit is terrible and Labour left the cupboard bare. They conveniently forget that, as reported by all the economic forecasters, including the Institute for Fiscal Studies, two thirds of the £84 billion deficit came from the international financial crisis. That was not Labour’s fault. When Conservative Members suggest, “Oh, well, we should have had more regulation”, they seem to forget that when we created the Financial Services Authority to introduce more regulation, they said they wanted self-regulation and complained about red tape. In fact, it would have been much worse had it not been for the Labour Government. Furthermore, that regulatory hole in the armoury was commonplace across the globe. That is why Governments in Greece, America, Spain and elsewhere have had problems dealing with the financial deficits they inherited. Obviously, we were more vulnerable to sub-prime debt, as we know because the financial sector is larger in Britain.
Let us get away from the myths about why we have the deficit and deal with the challenge of how to get rid of it. We get rid of it by striking a proper balance between growth, making savings over time and ensuring that the bankers pay their fair share. It is convenient for the Conservatives to say that there is only one way of achieving the task. Instead of having a balanced approach to maximising growth, making the bankers pay their fair share and making credible savings that are realistic over time and would halve the deficit in four years, Conservative Members say, “No. We don’t want to halve the deficit in four years; we want to get rid of it in four years, and we do not want to use growth or involve the bankers. The bankers are our mates after all, so they can have some more money. What we will do is make the cuts twice as fast in just one way—through savaging public sector jobs and services.”
Then, remarkably, growth starts to recede so that the sums no longer add up, as there is obviously an interrelationship between private sector growth and public sector funding. Thus they suddenly realise that they have to do something about growth. The amendment is about recognising that the centrepiece of macro-economic planning and fiscal responsibility is growth. It is all very well for the Minister to say, “Oh well, the OBR will have absolute discretion; it can look at growth if it likes, but if it doesn’t want to, it doesn’t have to.” That is the problem; its eye is off the ball. We need to get the finances in proper balance without destroying communities, which is what Labour Members stand for.
Geraint Davies
I will try and speak more slowly. My point was that the international financial crisis affected all countries’ debt, not least that of Greece. Obviously, it has its own banking system, underneath the European Central Bank. There was a common cause for many of the deficit problems around the globe. It was not uniquely Labour’s fault, as the Government make out. The amendment seeks to clarify the factors that are generating the fiscal future, including growth.
Justine Greening
The hon. Gentleman keeps talking about the deficit as though it was something that descended upon us. The bottom line is that the UK had a structural deficit. That means that his Government were spending more money on public services than was being generated in taxation, even in the good years, so we were never going to be in a position to start paying off any of our debts, which is why the markets got so concerned about continuing to lend to us. That is a structural deficit, and it is a fact, even if the shadow Chancellor will not accept it, and that is why we have to have a deficit reduction plan in place.
Mr Deputy Speaker (Mr Nigel Evans)
Order. This is a fascinating debate, but not for today. If we could get back to the specifics of the amendments before us, perhaps we could make some progress.
Geraint Davies
I am grateful for your advice, Mr Deputy Speaker, and for the Minister’s intervention. In a way, her intervention makes the case for having growth at the centre of the OBR. I am sure that when she reads her words, which I appreciate were spoken with some emotion and anger, she will wish that she had picked them more carefully.
When we look at the facts and strip out the impact of the international financial crisis, which is about £84 billion in terms of our structural deficit, there was a residual deficit, to which the hon. Lady refers. There was an excess of expenditure over income, but that was taken into account in future planning. There was a savings plan from the previous Chancellor, as she knows, to cut the deficit in half in four years. That was not exclusively reliant on cutting public services and jobs. Rather, it relied on stimulating growth.
The OBR’s estimates of growth have been downgraded. Those higher levels—2.6%—would have provided more fuel to get the deficit down. I recall that the projected deficit in the pre-Budget report was £30 billion less than had been predicted previously. In other words, growth had been occurring faster than was thought. Now it is growing less fast—in fact, it is growing negatively.
Justine Greening
Just on the off-chance, I wonder whether the hon. Gentleman would be able to set out what the £14 billion of cuts were that his party was planning to start in April.
Mr Deputy Speaker (Mr Nigel Evans)
Order. We are going much wider than the amendments. Could we please confine our comments from now on to the amendments before us?
Chris Evans
I totally agree. If I may digress a little from the amendment, it is all very well paying off the deficit, but if there is no economy at the end of it we can forget about it all and worry about all our futures. I have tried to keep my comments brief and say in closing that I support the amendment because we need to know how the Government arrive at their decisions so that this House can properly scrutinise them.
Justine Greening
I am pleased to have the opportunity finally to respond to some of the points that have been made and to the amendments that have been tabled. It is important to say first that I very much welcome the contribution that Members not only in this House but in the other place have made to get the Bill to its current stage. Despite the debate we have had on growth, which of course is important, I think that there is broad support across the Chamber, as there was in the other place, for what the OBR is intended to do and for setting up such an office that can work effectively.
All the amendments relate to growth, so perhaps we have stared the debate that will no doubt continue tomorrow after the Budget. We believe that economic growth and job creation are absolutely vital, and Members will see tomorrow that that is a core part of the Budget. I agree with many of the comments that have been made about why we need to see growth as part of the Budget. I want to take the time to clarify some points that have been raised.
The debate so far has been about policy and strategy, but the OBR is not a policy-making body; it is there is look at the forecasting and produce the official forecast for the UK Government. It is precisely not intended to make policy. One of the things we have been very careful to do in setting out how the clauses and the charter work is ensure that the OBR’s independence, impartiality and transparency, which are also vital, are not compromised.
Geraint Davies
Having said that, will the hon. Lady accept that some of the OBR’s responsibility should be to forecast what it regards as the impact of policy changes from the Chancellor? For example, if he was to announce suddenly that he will let the private sector deliver public services so that entrepreneurial capacity will be taken out of export-driven growth and put into making easy money out of monopoly-provided public services, would it not be right for the OBR to say, “Hold on, that capacity has gone over there so our growth will go down”?
Justine Greening
I hope I can provide some clarification. The OBR has the freedom to consider the impact of policies on sustainable public finances, including employment policies. If the hon. Gentleman looks at some of the forecasts the OBR has already made, he will see forecasts for employment, average earnings, ILO unemployment, the percentage of the claimant count and, of course, growth. Hon. Members talked about the OBR’s assessment of growth and what it will show over the coming years. The OBR is already producing an awful lot of the analysis that hon. Members want to see, but it is fair to say that today’s debate will—I hope—be of interest to the OBR in understanding what information and analysis it might feel it needs to provide to convey what it wants to, which is some assessment of the economic growth forecast for this country.
Let us be clear that the duty of the OBR is very clear and is set out in clause 4. It should examine and report on the sustainability of public finances but, as hon. Members have said, Government policy clearly impacts on that. By definition, the OBR will consider how policy impacts on the sustainability of public finances.
John Mann
From what the Minister is saying, I presume that if the OBR—or even the Treasury Committee, but the OBR in particular—were to say that it was unable to provide the analysis that it would like to because it was not sufficiently resourced, that would be seen as a serious question for the Government to address.
Justine Greening
The hon. Gentleman will be aware through his role as a member of the Treasury Committee that when the chair of the OBR, Robert Chote, was asked whether he felt it was sufficiently resourced he said he felt it was. The hon. Gentleman will also be aware that one reason we have carved out sufficient money not just for this year but for the whole spending review period, which will be reported on separately, is to ensure that the OBR understands that it is sufficiently resourced not just for this year but for the years ahead, so that it has that certainty about its resource base to do the work it needs to do.
John Mann
That is a vital point, because Robert Chote was speaking as the first permanent employee. Others are now employed by the OBR who might have different perspectives and priorities. There is a critical question: if the OBR feels restrained by resources, will that become a politically contentious issue as regards objective statistics? Presumably, in such a case, if the OBR was kicking up about being unable to provide the detail in independent statistics, the Government would regard it as vital to address that resource need.
Justine Greening
I can go back to the reply I just gave the hon. Gentleman. The charter and the Bill clearly set out the OBR’s duties and Sir Alan Budd, as the interim chair, produced his report and talked about what he thought that the duties of the OBR should be, about its resourcing and about how it should be run. Of course, we reflected many of those comments as we introduced this Bill to set up the OBR. If we take that together with the fact that the permanent chair, Robert Chote, has said that he does not feel that there will be an issue with resourcing, we can be relatively confident that the OBR will be adequately resourced to fulfil the duties clearly set out in the Bill.
Let me turn briefly to the amendments. They all concern growth and the problem is that they start to stray into the OBR’s becoming bound up in policy rather than analysis. Amendment 1 would require the charter to include the Government’s economic policy objectives and the means by which that objective would be attained—what has been called a growth mandate. The charter, however, is a fiscal policy document that transparently sets out the fiscal policy framework. The purpose of the charter, the OBR and the Bill is to create the fiscal policy framework that supports the Government’s delivery of our fiscal policy objectives. Rightly, the charter focuses on fiscal policy issues, as was the case with the previous Government’s code for fiscal stability.
Geraint Davies
In conversation with the Institute for Fiscal Studies, I asked various questions about growth and its calculations and it was pointed out to me that the IFS was in essence made up of micro-economists who were aggregating up to deliver predictions about Government fiscal outputs. I respect what the hon. Lady is saying, but it seems to me that she is basically saying that the OBR will be doing something very similar. It is very easy to make such predictions if we say, “Assuming that everybody is still employed, that we have taxed them this and that they spend that, this will happen.” What is more difficult is to model the impact of individual policies in a Budget on growth and hence on the public finances. The hon. Lady is giving us some reassurances, but I think the point of our amendment was to push her to say that this would become a priority for the OBR so that we could have a richer understanding of the growth scenarios in the future. I appreciate that some of that is done, but we want more.
Justine Greening
Ultimately, a key clause—I think clause 5—sets out that it is at the OBR’s discretion to decide how to carry out its duty. A fundamental building block of the OBR’s credibility is its independence. I assure the hon. Gentleman that the risks he mentions, such as the concern that the OBR might not carry out robust analysis, are mitigated by other safeguards in the Bill. For example, one duty of the OBR will be to produce a report on the accuracy and robustness of its forecasting. As he will be aware, there are also non-executive directors who will be there on a day-to-day basis to challenge how effectively the OBR works and every five years, at a minimum, there will have to be a completely external peer review of the OBR’s workings.
I think we have managed to strike a balance by setting up the OBR in the way I have described—on the one hand by giving it independence, so it has that key element of credibility, and on the other by including some safeguards, in terms of its structure, its management and the review, so that, if for some reason it does not produce the quality of forecast that we need, those safeguards will be in place to ensure that we tackle the issue. Let us not forget that the OBR is accountable not just to Parliament, but to the Chancellor, because it produces the official forecasts.
Finally, amendment 4 suggests another new related role for the OBR, which as we have heard would be to assess the Government’s growth mandate. As I said in response to amendment 1, the Government seek to achieve their economic policy objectives through a range of policy tools and frameworks, not just through fiscal policy, but the OBR has been established to increase the credibility of the Government’s economic and fiscal forecasts and to hold the Government to account for their economic and fiscal policies.
That highly valuable role is recognised by a wide range of domestic and international commentators. The hon. Member for Swansea West mentioned the Institute for Fiscal Studies, and it warmly welcomed the establishment of the OBR, which, through its role, has already provided forecasts of key economic variables. In its November report, the OBR set out forecasts for the next five years, covering a range of key macro-economic variables, such as GDP and its forecast growth, inflation, employment, average earnings, unemployment and the output gap. In addition, the OBR will have the freedom to consider the impact of Government policy on economic growth and employment within our regions and nations, and in line with its main duty. I therefore consider all the amendments to be unnecessary, and I hope I have addressed the issues that hon. Members have raised.
Mr Cash
I do not want to put my hon. Friend on the spot, but I am troubled by a motion that the Government tabled in relation to a European document. I have an idea that they did not really mean to do so, but I just want to make the situation completely clear. The motion said that the Government and the House of Commons were only primarily responsible for fiscal matters and direct taxation. Will the Minister be kind enough to get that out of the way, so that we might now know that they are exclusively and solely, not merely primarily, responsible?
Justine Greening
I do remember the motion to which my hon. Friend refers. We were trying to be very clear, as he will be aware, and no doubt deeply unhappy, that some aspects of our fiscal and taxation system—for example, VAT—are set in relation to a broader pan-European directive. As we have discovered, that is one reason why the Opposition’s policy on reducing VAT on fuel alone is simply illegal, and I hope I can reassure him that we were trying to be very clear that it is primarily the UK Parliament that takes those decisions.
Perhaps I can reassure the rest of the House that growth is already an integral part of this Government’s approach to turning around our country’s public finances and economic fortunes. I understand why the amendments have been tabled, but they are unnecessary.
Chris Leslie
I am grateful to the Minister for her generosity in at least admitting that our debate and amendments will be of interest to the Office for Budget Responsibility. Indeed, I hope that is the case. We have tried our best on many occasions, and my hon. Friends the Members for Bassetlaw (John Mann), for Swansea West (Geraint Davies), for Edinburgh South (Ian Murray) and for Islwyn (Chris Evans) in particular have in plain terms tried to impress upon the Treasury Minister our anxiety that the Chancellor, in his blinkered obsession with hasty deficit reduction, risks harming the wider society and economy, particularly when it comes to jobs and economic growth. We have said that on several occasions, and it was important to reiterate the point today.
I understand, however, that the Minister has explained that the implied terms of the Bill do, indeed, allow for the OBR to focus on economic growth and employment matters. The Opposition hope that the OBR, at least, will do so, even if there is a deficiency in the Government’s strategy on the matter. We will no doubt debate those questions more, in terms of substantive policies, over the coming days.
The Opposition feel that fiscal policy cannot be looked at in isolation from economic growth, because the two are inextricably linked, and we will continue to make that point, even if Ministers seek to separate them. For the time being, however, I do not feel it appropriate to push the amendment to a vote, so I am happy to withdraw it. I think the Minister has heard the point. My hon. Friend the Member for Bassetlaw has accused me of tabling pro-Government amendments, and for that reason alone I should take them off the Table, given that we have other matters that the House will want to consider on Report. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2
Annual Budget documents
Stewart Hosie
Amendment 2 calls for the OBR’s reports to be published. The Treasury Committee said:
“The OBR should have discretion in the models it uses in drawing up its forecasts. It is a matter for the organisation itself as to whether it is content to use is the Treasury models, or wishes to make changes. Whatever course the OBR takes, there would be benefits in it being as transparent as possible about the models it uses.”
I assume that that would also include the assumptions that underpin those models. The Government’s response was positive. They said that they would
“provide the OBR with full access to Treasury and other forecasting models, as well as support to scrutinise and develop these models.”
Again, I assume that that means the assumptions that underpin the Treasury models and whatever other modelling it wishes to undertake. The hon. Member for Nottingham East (Chris Leslie) said that the OBR could take those models and assumptions from the Treasury, and he is absolutely right about that.
The OBR currently publishes a number of assumptions. For example, the impact multipliers were included in the June 2010 report, showing the one-for-one impact of capital expenditure cuts. Reports at the time of the Labour Government published assumptions about oil prices, and North sea corporation tax and petroleum revenue tax was used to calculate those yields. Given that several such assumptions are already published, and that the OBR can take all those assumptions, models and changes and create new ones, does it have the discretion to publish what it sees fit? Would it not be better to have a guarantee from the Minister that it will not unnecessarily withhold assumptions where it is important for us all to have transparency? Instead of the Treasury putting the material in the Library, we should ensure that the OBR has the ability to do that, so that we have the information and can come to a proper, reasoned view on whether we believe its figures.
That is a simple question, and I am sure that the answer is yes; I certainly hope so. There is no reason why we should not have that transparency so that we can all guarantee the efficacy of the reports that the OBR produces.
Justine Greening
On amendment 2, the Government are committed to increasing transparency in public life. That transparency is essential to good fiscal policy, as the hon. Member for Dundee East (Stewart Hosie) said. In fact, the Government already provide the costing methods and assumptions for policy proposals. Those were made available in policy costings documents at the last Budget and spending review, and copies were made available to the House. That is a step change in transparency in fiscal policy making. Specifically in relation to the OBR, the additional transparency referred to in the amendment is already required by the statutory charter for budget responsibility, which says at paragraph 3.9:
“The Budget Report shall provide, at a minimum: an explanation and costing of the impact of all significant fiscal policy measures introduced by the Government since the last Budget and an explanation of the methodology used to cost the fiscal impact of each of those measures”.
In relation to the Bill, I draw the hon. Gentleman’s attention to clause 4(6), which explicitly refers to the OBR’s reports being clear in explaining the factors that it took into account when preparing the report—not only the assumptions that he mentioned but the main risks that it considered to be relevant. So there is a safeguard not only in the charter but in the Bill to ensure that there is transparency about how the official forecasts have been arrived at.
On amendment 6, the OBR is accountable to Parliament in order to enhance Parliament’s ability to hold the Government to account for fiscal policy. The OBR’s forecasts and analysis will be laid directly before the House. The budget responsibility committee will be appointed with the consent of the Treasury Committee, and will be available for scrutiny. There will be separate reporting to Parliament of the OBR’s expenditure, and, as many Members have already discovered, relevant written questions will be answered by the OBR. The OBR is also accountable to the Chancellor, reflecting its role in producing the official forecast, which will form the basis of the Chancellor’s Budget decisions.
Herein lies the challenge to Labour Members. The OBR will provide the Government with timely access to the information necessary to reach policy decisions ahead of fiscal policy events. The Treasury Committee recognised that in its report last year, when it said:
“Involvement In the Budget process necessarily involves close contact between the Treasury and the OBR”.
Close working also means that the OBR has access to all Government information to ensure that its conclusions reflect the most accurate and up-to-date information. It is therefore right that the OBR provides the Government with pre-release access to its forecast in order to ensure the accuracy of both it and the Budget documents, which are published simultaneously.
It is also right that there is transparency in the approach to the sharing of information. The OBR has chosen to follow the well-established pre-release practices put in place by the Office for National Statistics. I can assure the House that this arrangement does not compromise the OBR’s independence. It is an approach that has worked well for the ONS. The OBR has been transparent about when reports have been shared. It confirmed in its November “Economic and fiscal outlook”:
“We have come under no pressure from ministers, advisers or officials to change any of our conclusions.”
The OBR’s access to Government information distinguishes it from other UK forecasting organisations, and ensures that the Chancellor and Parliament are provided with the most up-to-date information regarding the latest UK economy and public finance figures.
I understand the rationale behind amendment 6. However, given the practicalities of the OBR’s accountability to the Chancellor and its role in producing the official forecasts, we feel that it is better for it to act on its own decision to follow the ONS pre-release guidelines. I will resist both amendments.
Chris Leslie
I am getting used to the hon. Lady’s resistance to our amendments. One day we will persuade her to accept even the smallest, most generous Opposition amendment, but perhaps not to this Bill.
I understand the points that the hon. Lady made about amendment 2 and costings. I know that there have been attempts to broaden access. If and when we hit obstacles or refusal to publish, we will come back to her to try to get more information into the public domain. However, I accept that she is committed to a particular direction of travel, so we shall not press the amendment.
On amendment 6, the Minister seems to understand that several members of the Public Bill Committee might have hoped for an Office for Budget Responsibility that looked more akin to the Congressional Budget Office or a parliamentary budget office, and was a little bit closer to the legislature and less cosy with the Executive. She knows why we want that. If the OBR places absolute primacy on its independence and impartiality, we must surely move away from any perceived suspicion that it is too close to or cosy with the Executive of the day.
We know that there is due to be a review of the OBR within a number of years. How that review will take place is a bit of a moot point, but we will come to that in due course. The Economic Secretary understands that we will be watching carefully for circumstances in which the OBR is too close to the Chancellor of the Exchequer. It is vital for it to remain distant from, and impartial between, the political parties. It must also have a good dialogue with Parliament.
Those are the important points that we wanted to make, and we know that the OBR will be listening to this debate. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Third Reading
Queen’s consent signified.
Justine Greening
I beg to move, That the Bill be now read the Third time.
As we have heard, this is an important Bill. It puts the new Office for Budget Responsibility on a statutory footing, and puts in place reforms to the corporate governance of the National Audit Office.
As part of a new and enhanced fiscal framework, the OBR is being established to make independent assessments of the public finances and the economy. For the first time the judgments underpinning the official forecast will be determined by independent experts, not Treasury Ministers. Since the coalition was formed last year, every official forecast for the economy and the public finances has been produced by the independent OBR. When the Chancellor presents his Budget tomorrow, it will be accompanied by the OBR’s official forecast. The establishment of the OBR has been welcomed by the International Monetary Fund and the OECD.
The main duty of the OBR, as we have heard, is to examine and report on the sustainability of the public finances. The Bill makes it explicit that the OBR has complete discretion over how it carries out its statutory duties. That is a broad remit. It is not limited to forecasting, but the OBR will be required, as a minimum, to produce economic and fiscal forecasts at least twice a year; make an assessment of the likelihood of the Government meeting their fiscal mandate alongside those forecasts; publish a sustainability report at least once a year; and publish a report on the accuracy of its forecasts at least once a year.
The OBR must perform its duty objectively, transparently, impartially and on the basis of Government policy. Those principles will protect independence and ensure that there is a clear separation between analysis and policy making. Analysis is rightly the domain of the OBR, but policy making is the responsibility of publicly elected Ministers.
The charter for budget responsibility will set out further details on the OBR’s remit. A full draft was published in November, and a final version will be laid before Parliament once the Bill has come into force. The OBR will report directly to Parliament on the public finances. The budget responsibility committee will be available for Select Committee scrutiny. The OBR’s forecasts and analysis will be laid before the House. On funding, there will be separate reporting of the OBR’s expenditure in the estimate that the Treasury presents to Parliament. In addition, the OBR will be able to submit an additional memorandum, alongside that of the Treasury. As we have heard, written questions will be passed to the OBR to be responded to. All those measures will enhance the ability of Parliament and the public to hold the Government to account for their fiscal policy.
The OBR will have its own legal identity, and will be a civil service employer, to allow appropriately skilled staff to move easily to and from the OBR. The OBR’s executive responsibilities will be led by the three-person budget responsibility committee. Its members will be appointed by the Chancellor, and the Bill provides the Treasury Committee with a veto over their appointment and dismissal. The Chancellor has said that he is giving the Treasury Committee that veto to ensure that there is no doubt that the individuals leading the OBR are independent and have the support and approval of the Treasury Committee. All staff will report to the chair of the OBR, and that person will control the hiring and firing of staff. To provide support and constructive challenge, there will be at least two non-executive members. Advertisements for those members will be issued shortly, so that they can be in place before the summer recess.
Part 2 of the Bill modernises the governance of the National Audit Office. It will strengthen the resilience and integrity of that body, which is best placed to assess the Government’s use of public funds at this time of fiscal constraint. It builds on the recommendations of the all-party Public Accounts Commission’s 15th report and has commanded support on all sides of this House. The provisions passed through the House in substantially the same form in the previous Parliament, when they were considered as part of the previous Government’s Constitutional Reform and Governance Act 2010, just before the election.
The Bill has benefited from much parliamentary scrutiny. Before it was introduced, the Treasury Committee produced a detailed inquiry into these matters. I am pleased to say that the Bill is very much in line with the recommendations made in that report. I thank the Committee for the interest it has taken. When the Bill was introduced in the other place it received extensive debate. The Government tabled a number of amendments to bolster the OBR’s remit and to enhance the arrangements for the scrutiny of its work, which were welcomed.
Finally, the Bill has been debated at length in this House. I thank all hon. Members who have spoken and participated, in particular the Opposition spokesmen, the hon. Members for Bristol East (Kerry McCarthy) and for Nottingham East (Chris Leslie). I hope that hon. Members will agree that even though we have not reached a meeting of minds on some of the detail, there is much more on which we agree in principle.
The Bill is a key part of the Government’s fiscal reforms. It will provide an independent assessment of the public finances and the economy, with official forecasts from independent experts, not Treasury Ministers. The Bill will provide a strong institutional foundation for the future through the OBR, and I commend it to the House.
Fuel Prices and the Cost of Living
Justine Greening Excerpts(13 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Ms Eagle
I will not give way to the hon. Gentleman.
As we all know, VAT applies to petrol. The Library calculated that the Conservative Government’s 2.5% increase in VAT has added nearly 3p to the cost of a litre of petrol when people are least able to absorb that extra cost.
The Economic Secretary to the Treasury (Justine Greening)
Perhaps the hon. Lady will confirm and clarify her party’s position on—I think—fuel duty. I am not sure because on ITV’s “Daybreak” the shadow Chancellor said: “We’re saying today, as well as the duty thing, which I’ll think you’ll freeze”—I presume that he was not saying that explicitly to Christine Bleakley—“I think you should reverse the VAT rise.” Specifically on the “duty thing”, is the shadow Chancellor talking about freezing the 1p rise, the RIP rise—[Hon. Members: “RIP?”] Sorry, I mean the RPI plus one rise. Which is it? [Interruption.] I might have made a slip, but I was thinking about the Opposition and their policy.
Mr Speaker
Order. Before we continue, may I appeal to Members, including Ministers and other Front Benchers who are intervening, to do that economically? I remind the House that the Chair’s responsibility is to seek to protect the rights of Back-Bench Members who wish to speak. I put it to Front Benchers that Back Benchers will be not inconsiderably irritated if long speeches from the Front Bench stop them getting in.
The Economic Secretary to the Treasury (Justine Greening)
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“notes that the Government inherited the largest deficit in UK peacetime history and that the previous Government and current Opposition has no credible plan to deal with the deficit; further notes that this Government has already taken steps to support families and that those on low and middle incomes will benefit from April 2011 from a £1,000 increase in the income tax personal allowance, above-indexation increases in Child Tax Credit and that pensioners will receive new ‘triple-lock’ increases in the basic State Pension; further notes the significant impact on fuel prices in the UK of the dramatic increase in the world oil price to over $100 per barrel and the impact on households and business; notes that the previous Government increased fuel duty no less than four times between December 2008 and April 2010, proposed introducing a fuel escalator from 2011 and planned for a further series of six consecutive fuel duty rises up to 2014; nonetheless recognises the significant impact of high fuel prices on motorists, hauliers and businesses and that the Government is considering a fair fuel stabiliser that could support motorists and businesses when oil prices are high; and in addition notes that a reduction in VAT on fuel would be deemed illegal under EU law and that the Chancellor will update the House on this issue at the time of the Budget.”.
There we have it, from the party that came into government with fuel duty at 36.86p a litre and left it at 57.19p a litre—a whole load of moaning and insubstantial comments about what it cannot do to help motorists. The Government, unlike the Opposition, understand the seriousness of the issues that we are debating today. We know that the increase in the world’s oil price, as it feeds though to all other goods, is leaving many people out of pocket, and that families up and down the country are finding it hard to make ends meet. The Opposition clearly have no grasp of the issues at hand, as we have just heard; to them, it is just politics. They are simply not interested in how people on the ground actually feel about things, and they have no credible policies to back up their claims.
Andrew George
The Labour motion mentions
“securing the appropriate EU derogation”.
I hoped that the shadow Minister would give way to me, so that I could ask her what European derogation that is, and how many times in the past 13 years Labour attempted to seek it. Has the Economic Secretary seen anything in the records of the Treasury suggesting an answer to those questions?
Justine Greening
Officials are not aware that the last Government sought any derogation in relation to VAT on fuel at any point in the past 13 years. In fact, if the shadow Chancellor had gone off to Europe with his influencing strategy, which was clearly so unsuccessful when he was running for the leadership, I doubt that there would have been any prospect whatever of his making any progress. The Labour party seems to have about as much understanding today of the economic situation that it has left our country in as it did of the situation two years ago, when it ran this country into the deepest and longest recession in living memory.
Rehman Chishti
Will my hon. Friend confirm that the shadow Chancellor was wrong in law when he said that there should a reversal of the VAT rise on fuel? Under EU directive 112 of 2006, that cannot legally be done.
Justine Greening
My hon. Friend is absolutely right. In fact, the EU directive on VAT states:
“Member States may apply either one or two reduced rates…The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III.”
That annex does not include road fuel, and other amending articles do not permit a reduced rate or exemption to be applied to transport fuel. That in is European Council directive 2006/112/EC of 28 November 2006 on the common system of value added tax, at article 98 and annex III.
Charlie Elphicke
In the light of what my hon. Friend has just said, is not the motion before the House a shamelessly opportunistic preying on the justly held fears of the British people about the cost of fuel?
Justine Greening
That is absolutely what it is, and it is something else as well—it is a smokescreen. The Labour party has no plan whatever to tackle the deficit, and this Opposition day debate is all about trying to divert attention from that. It had no plans when it was in government, and it has no plans now it is in opposition.
Sajid Javid
One of the most important components of the cost of living is the interest rate, which in turn determines mortgage rates. Does my hon. Friend agree that, because of the action this Government have taken, Britain today has a lower interest rate than countries in Europe that have far higher deficits? That is the very action that the shadow Minister sought to criticise.
Justine Greening
One of the problems is that the Labour party and the shadow Chancellor do not even accept that there is a structural deficit. My hon. Friend is absolutely right to point out that the steps we are taking to tackle the deficit and bring our public finances back under control and into a sustainable shape, so that we can fund public services affordably for the long term, will give us a much better chance of keeping interest rates and inflation low. That is critical to ensuring that we can support our economy more broadly.
John Mann (Bassetlaw) (Lab)
It would help the debate and the Economic Secretary’s own Back Benchers if she could tell us which party is responsible for the majority of the taxation on fuel today.
Justine Greening
I am sure the hon. Gentleman was quite happy trotting through the Aye Lobby when his party brought forward its 12 fuel duty rises and the Budget in which it announced a further six. His question is particularly disingenuous because at that time the Conservative party was campaigning against unreasonable and unfair rises in such things as road tax. The Labour party paid no attention and continued to hammer motorists again and again.
Justine Greening
Perhaps I will make a bit of progress, because I know that many Members want to take part in the debate.
Justine Greening
I shall answer the hon. Gentleman, who is hectoring from a sedentary position. When his party was in government, it knew all about raising taxes. In fact, it formed the ultimate tax-and-spend Government, who got us into such a situation that their final Chief Secretary wrote a note saying that there was no money left. I really do think that if the Labour party wants to be taken seriously on the economy, it must start living in the real world instead of the fantasy world that it currently finds itself in, particularly in relation to EU VAT directives.
Mr Speaker
Order. I apologise for interrupting the Minister. I said to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) a few minutes ago that he was making an excessive noise—[Interruption.] That was my best effort at the pronunciation of his important constituency. However, my remonstrance extends more widely. The debate has been notably scratchy, and it needs to calm down a bit from now on.
Justine Greening
Thank you, Mr Speaker.
The Government are taking steps to help the poorest and most vulnerable in our society. From April this year, we are raising the income tax personal threshold by £1,000, taking nearly 900,000 of the lowest-income workers in our country out of tax altogether.
Justine Greening
I shall make a bit more progress, because I want to talk about the Labour party’s so-called fuel duty proposals, which are of course VAT proposals.
We are increasing child tax credits above the rate of inflation, giving lower-earning families an extra £210 over the next two years. Of course, poorer families will still receive more in child credits than they received under the previous Government, and, as I said, lower earners will be better off as a result of this Government’s changes to the personal allowance.
Caroline Lucas
Will the Minister explain how it is compatible for a Government who claim to be the greenest ever to duck this opportunity to introduce a shift to green taxation—in other words, to keep the fuel duty escalator but to reduce other taxes accordingly?
Justine Greening
The hon. Lady’s point is about how to strike the balance between achieving environmental change and managing to raise revenues for the Exchequer to fund public services, which I am sure she agrees need the right level of funding. I think we have got the balance right in our approach to fuel duty and VAT on fuel. The challenge is that if we do not go ahead with the previous Government’s increases, we could fundamentally damage our ability to tackle the deficit. This Government are constrained purely because of the terrible financial situation that the previous Labour Government handed over to us.
Justine Greening
If I may I shall make a little progress, mindful of what Mr Speaker said about ensuring that hon. Members get a chance to have their say after the opening speeches.
One of the many things that this Government are doing to help people in Britain—it is the last one I will mention—is changing the state pension. The shadow Chancellor knows all about that, because he was chief economic adviser to the Chancellor who later became Prime Minister in the previous Government when he proposed increasing pensions by 75p. Many thought at the time that that was a real slap in the face for pensioners.
This Government have gone further than the previous one ever did. We have already introduced proposals to re-establish the earnings link, and introduced the triple-lock guarantee, so that each and every year the basic state pension will increase by the greater: earnings, prices or 2.5%. Of course, when things improve—when inflation comes back down below 2%, which is the Bank of England’s aim, and when the economy recovers from the years of Labour’s irresponsibility—those in retirement will still have higher pensions, poorer families will still receive more in tax credits, and lower earners will still be better off as a result of our changes to personal allowances. Those are real, credible, long-term policies that will stand the test of time, not half-baked initiatives conjured up over a weekend that do not last even the course of a single debate.
That brings me on quite nicely to the impact of the rising cost of fuels. Opposition Members know all about that, because as we have heard, the previous Government increased fuel duty four times in their last 16 months in office.
Robert Halfon
Is my hon. Friend aware that the previous Government planned six future fuel price increases, even though they knew the state of the economy?
Justine Greening
Absolutely. They left many tax bombshells, but perhaps that pre-planned tax increase was the tax road mine. There was a pre-planned additional per pence increase on fuel and a pre-planned year-on-year RPI increase—the so-called escalator. Ironically and utterly bizarrely, we are today debating a Labour motion that goes against the policy introduced by the previous Labour Government.
Richard Graham (Gloucester) (Con)
Given that I and several Conservative Members were not in the House for Labour’s last Budget, will the Minister confirm whether the hon. Member for Wallasey (Ms Eagle) and her colleagues on the Opposition Front Bench voted for the seven increases in fuel duty proposed by the Chancellor at that time?
Justine Greening
I do not know exactly how they voted, but the previous Labour Government consistently increased fuel duty on motorists, taking no account of whether that was affordable.
Mr Russell Brown
I thank the hon. Lady for giving way—at the end of the day, she is a fair person. She talks about the increases imposed by the previous Labour Government, but she must also recognise that on 11 occasions over a nine-year period, they saw fit to suspend or abandon any proposed increases simply because of the rising price of fuel. I sincerely hope that she and her colleagues remember that in the light of the motion.
Justine Greening
The hon. Gentleman is talking about postponements, because those fuel duty increases eventually came through. That is one reason why in their final months in office—from December 2008 to April 2010—the previous Government increased fuel duty no fewer than four times.
Over the weekend, the shadow Chancellor confidently proposed cutting VAT on fuel.
Sammy Wilson (East Antrim) (DUP)
The Minister quite rightly highlights in her amendment the previous Government’s fuel duty increases, but the motion recognises that people are feeling pain now, and holds out the hope that the Government will do something about fuel duty. Rather than talk about what the previous Government did, will she tell us what she intends to do to alleviate the hardship for people in places such as Northern Ireland?
Justine Greening
I shall not pre-empt next week’s Budget, but the hon. Gentleman knows that both parties in the coalition Government spoke in opposition about the effect of fuel duty on motorists. Conservatives spoke in opposition about how the oil price fed through into fuel prices at the pump, and Liberal Democrats talked about the impact of fuel prices on people living in remote rural areas. The coalition Government are now looking at how to tackle both those problems, but I cannot pre-empt the Budget.
Ms Angela Eagle
Will the Minister now admit that although before the election the Conservatives said they would reduce fuel by 10p a litre if petrol prices were high, they have actually increased fuel duty twice—once in October and once in January—since getting into power?
Justine Greening
Listening to the Opposition is stunning. The outgoing Chief Secretary’s message to the incoming Government was that there was no money left. Worse than that, the previous Government had pre-planned increases, which were due to come in now, as the hon. Lady just pointed out. The bottom line is that it is outrageous for the Labour party to cry crocodile tears about tax increases that it had planned—it is disingenuous in the extreme, and shows that it has no credibility and no leadership on the issues that matter to people, such as motoring, which we are debating today. The audacity of the motion is stunning.
Let me turn—as I was about to—to the Opposition’s proposal to cut VAT on fuel. [Interruption.] The shadow Chancellor is hectoring from a sedentary position, and I think the reason is that he is worried that we are about to talk about his policy—a policy that unravelled within hours of his announcing it. He has come late to the debate on motoring. Obviously he spent many years being driven around in a Government car that the taxpayer paid for. I understand that it was reported in the papers that he used to use it for journeys of just 100 yards. Perhaps he was not aware at that point of how much it cost people to fill up their cars, but perhaps he knows now, and perhaps that is why he has suddenly realised that this is an issue, as we did in opposition. He has come to this debate late, but his policy-making suggestions are, to put it bluntly, illegal under EU law.
It is quite an achievement to make a proposal along those lines. As I said to my hon. Friend the Member for Gillingham and Rainham (Rehman Chishti) , the shadow Chancellor is quite wrong to say that we can reverse the VAT rise on fuel, because doing so would be illegal under the EU VAT directive. However, if the right hon. Gentleman thinks that the UK operates under a different VAT directive, perhaps he would like to intervene on me right now. [Interruption.] I think we have established that there is only one EU VAT directive, and his proposal is illegal under that directive. The other big flaw in his argument—[Interruption.] Does he want to intervene?
Ed Balls
When we have only one reduced rate, but Italy, France and Poland have three reduced rates, and when the French President secured a VAT rate cut for French restaurants, is the hon. Lady really saying that she is going to hide behind European law and fail to stand up for the British motorist? Is that really what she is saying?
Justine Greening
There is only one party failing to stand up for the British motorist, and it is the Labour party. Let me outline precisely why France was able to get a reduced VAT rate on—
Justine Greening
There is no point the right hon. Gentleman asking a question and then getting excited about the fact that I might answer it.
Justine Greening
If the right hon. Gentleman just calms down for a second, I will answer him; if he then wants to intervene on me, he can do so. However, if he is that desperate to get in on this debate, perhaps he should have opened it instead of his hon. Friend the Member for Wallasey (Ms Eagle).
The right hon. Gentleman is right to point out that across Europe different products have different VAT rates. Some are exempt from VAT, some have a zero rate, some have a reduced rate and some have a standard rate. Indeed, he should be well aware of that because he was an economic adviser at the Treasury the last time the negotiations that he referred to started. In fact, they took six years. He mentioned President Sarkozy’s determination to secure a reduced VAT rate for restaurants, which is indeed what he did. However, in that renegotiation of the rules governing which products would be in which categories and which would no longer have standard VAT rates, I am not aware of the UK Government at any stage pressing for anything other than the standard rate to apply to road fuel. Perhaps the right hon. Gentleman can confirm that: yes or no?
Ed Balls
At no point did we apply for a special reduced VAT rate for road fuel, and the reason was that we never raised VAT on fuel. The people who have raised VAT are this Government. Can the Minister confirm that it is entirely in her gift and that of the Chancellor, who is not here, and the Chief Secretary, who has not turned up either, to apply for a derogation to reverse their mistaken increase in VAT? They have not done so and will not, but they could if they wanted to stand up for the British motorist.
Justine Greening
I do not think the right hon. Gentleman even believes that himself. The bottom line is that he wants—[Interruption.] The shadow Chief Secretary says that we need to take action now, but he wants us to embark on a process that took six to seven years the last time it happened. How is that taking action now?
Let me tell the House on which items the rate was changed. Here are a few of the products and services to which a reduced VAT rate is now applied in other countries:
“minor repairing of bicycles, shoes and leather goods, clothing and household linen”.
Window cleaning was also one, and hairdressing was another. The Government at that time—a Government of whom the right hon. Member for Morley and Outwood (Ed Balls) was part—did not seek to add road fuel to that list. He says that that was because the previous Government never raised VAT on fuel. That is not strictly true, of course: they reduced it, but then put it back up again, as we have heard. The other reason was that, year on year—and, in the final stages, month on month—they were consistently raising fuel duty, so they had no need to use VAT as a tool. They were getting plenty of additional tax from the motorist.
Mr Aidan Burley (Cannock Chase) (Con)
The last Government might not have increased VAT, but they certainly increased fuel duty. When Labour came to power in ’97, duty on unleaded petrol was 36p a litre; when the last Government left office in 2010, it had risen to 57.9p a litre. Does my hon. Friend think that Labour Members should take some responsibility for increasing fuel duty by more than 20%?
Justine Greening
I will give way one more time, but then I really must make some progress so that other Members can have their say.
Justine Greening
And a huge fiscal deficit and debt to boot, so we will take no lectures from the Labour party. Perhaps the hon. Gentleman can discuss with the shadow Chancellor how he thinks the huge deficit that his party left our country—it costs us £120 million a day to service our debt interest—should be addressed. The elephant in the room, which we have not talked about so far today because it is not in the Opposition’s motion, is how they would tackle the deficit. The answer is that they would not tackle it, which is why it is so lucky that Labour is not in government at the moment.
Justine Greening
I will not give way to any more Opposition Members, and I will tell the House exactly why. This is not the first time that there has been an opportunity to debate fuel duty rises: last month a Conservative MP had a debate in Westminster Hall. The reason the Opposition have now gone quiet is that they probably did not know that that debate was due to take place, but if they did, it is even more disgraceful. How many Opposition Members turned up to participate in that debate and represent their constituents?
Justine Greening
Absolutely none, so all this is nothing more than political opportunism in advance of the Budget, and it is incredibly poor quality opportunism too, because the Opposition have made a proposal that is impossible to implement and is utterly flawed in every respect.
Justine Greening
No, sorry.
The other reason why the Opposition’s proposal is flawed is that they say in their motion that they would pay for the proposal with receipts from the bank levy. The first thing to say about that is that we introduced a bank levy—something that Labour never managed to do—but, secondly, we brought forward the rate at which it would fully kick in early, because the banks were doing better and therefore could afford it. The money is a one-off additional revenue stream that we are getting a year earlier, but the Opposition are so economically illiterate that they want to use it to fund a long-term, permanent tax reduction on fuel. Looking at their faces, I do not think they necessarily realise that yet, so as well as their proposal being illegal, their figures do not add up.
To finalise my comments, it is only this Government who are serious about helping British motorists. We tasked the Office for Budget Responsibility with investigating the impact of oil price fluctuations on the economy and we are actively considering proposals for a fair fuel stabiliser.
Justine Greening
No, I will not.
Motorists deserve better than a VAT proposal on fuel that everyone knows is completely unrealistic and unworkable. It is disingenuous of the Opposition to suggest it, and it is unaffordable, given the economic mess that we inherited. They want a derogation that would be unsuccessful and take six to seven years to implement. We are talking about taking action to tackle the cost of living now. That is the choice facing the House today. At the end of the day, we all know that this motion is just a smokescreen, and that the Opposition have no plans whatever to tackle the deficit. Yet again, they have missed a chance to be credible on the economy. Yet again, they have failed to show any leadership on their solutions to the big problems facing Britain today. I sincerely hope that the House will vote against their motion, because it is one of the lowest-quality and most disingenuous motions that we have debated on the Floor of the House recently.
Barbara Keeley (Worsley and Eccles South) (Lab)
I thank my hon. Friend for giving way, as the Minister did not. The Minister talked about living in the real world, but I am sure that we on the Opposition Benches know more about that than she does. I am sure that my hon. Friend’s constituents will be struggling with the £450 a year increase—
Justine Greening
On a point of order, Mr Deputy Speaker. The hon. Lady has just made an accusation about what I do or do not know about living in the real world. That goes beyond what I think is a personal comment. She has no understanding of what I do or do not understand. I can assure her that I get on the District line every day to come into work and I know exactly what is going on in the real world. I only wish that the Opposition did.
Mr Deputy Speaker (Mr Nigel Evans)
That is a point for the debate, not a point for the Chair.
Fiona O’Donnell
I am sure that all my constituents will feel so much better after hearing that intervention. They do not want to hear the hon. Gentleman’s political point scoring and opportunism; they want to hear what the Government are going to do for hard-working families, for pensioners and for those with disabilities in my constituency.
I have had e-mails from people who have lost their jobs. People living in East Lothian need to be able to keep their cars on the road in order to access the services that will help them get back into work, to turn up for job interviews and to get out there to find and keep a job. I have also had e-mails from people who have been struggling throughout the past few years. I am going to admit that, for those on fixed incomes, times have been difficult, but the message is now clear that, under this Government, they are getting tougher.
I am also going to be unusually generous and congratulate the Tory party on a splendid result in the general election in East Lothian, where it moved up to second place. The Scottish National party—I see that its Members have now deserted us—moved down to fourth. Before the Tories get too excited, however, I should point out that that result involved a 0% swing from Labour. Many of the people who have contacted me voted for the Tories at the election, and I am representing them today without fear or favour. They want to know when the Government are going to deliver for them. If the Government will not listen to me or to those on our Front Bench, I urge them to listen to my constituents.
I know that the first questions that my constituents would want me to ask today are, “Where is the Chief Secretary to the Treasury?” and “Where is the Chancellor of the Exchequer?” They will be insulted that the Chancellor and the Chief Secretary have not had the guts to turn up and take part in this debate and to answer my constituents’ questions. I have something of interest to tell the House. I went to the same school as the Chief Secretary to the Treasury. The right hon. Member for Ross, Skye and Lochaber (Mr Kennedy) also went to that school, and he has remarked to me, “That’s now one of us from each of the political parties.” I am particularly disappointed that the Chief Secretary to the Treasury, who represents a rural constituency, does not see the impact that the increase in fuel prices is having.
I try hard not to be judgmental about the Conservatives, and I try hard not to make the kind of comments that the Minister finds so harsh. But when they talk about the tough choices that they face in government, I have no sympathy for them. I am sick and tired of hearing them talk about that. Being in government and having a chance to reach out to families in East Lothian is not what is tough in life; what is tough for people is working out how they are going to fill up their car at the Co-op in Tranent next weekend in order to keep their family on the road. That is what is tough.
Mr Speaker rightly criticised the hon. Member for Burnley (Gordon Birtwistle) for bringing an electronic device into the Chamber. I presume that the hon. Gentleman has been running around for the past half hour trying to find a printer somewhere on the estate. I have gone to the trouble of printing off a couple of the representations that I have received from my constituents, and I should like to read them out to the House. One comes from Alec Flynn in Tranent, who says of the fuel price rise:
“We are a small family road haulage business…and we would like your support to fight the price the government plan to put on in the budget”.
I want the Minister to address Alec Flynn’s concerns, and to stop moaning about tough choices.
Justine Greening
Many hauliers can recover VAT, and I do not think that the Opposition’s proposal on VAT would provide the help that she is seeking to provide for them.
Fiona O'Donnell
Perhaps I have some responsibility here. I have not formally congratulated the Government on winning the general election, so perhaps it is my fault that they have not grasped the fact that they are now in government. They are in a position to change their minds, to lower the VAT rate on fuel and to make a difference to Mr Flynn and to ensure that the people he employs continue to have jobs. I suspect that Mr Flynn will remain disappointed, however. We were certainly not planning to increase VAT or to make life even more difficult for people.