Finance Bill

Lord Davies of Oldham Excerpts

Wednesday 16th July 2014 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, this has been a wide-ranging debate. I wish the noble Lord, Lord Flight, well in his campaign to wrest control of supply from the other place; he has to reverse more than a century of history and quite significant political obstacles before he achieves that objective.

We have had very interesting contributions. Of course, I particularly enjoyed that from the noble Lord, Lord Lawson. I appreciated him as a historian when he indicated to us that spads going on to become prominent parliamentarians is by no means a new phenomenon but went back more than half a century. As I shall show in a moment, he is also pretty good as a forecaster, because I shall be critical about the Budget. He is right on both counts.

First, I pay tribute to the noble Lord, Lord MacGregor, who introduced his report on limited liability companies and has played such a significant part in enriching our debates on Finance Bills through the reports of his committee. This was one of the more challenging reports in many ways, because it asked the Government to delay what they had clearly set their mind to do and indicated why consultation ought to be respected more clearly than appeared to be the case by both the Treasury and HMRC. My noble friend Lord Joffe put a particular perspective on that, suggesting that the committee itself could enhance its role in relationship to future Finance Bills by ensuring that it consulted in greater depth and produced reports that established contact with the smaller organisations in the country—even the very smallest. After all, this report was significantly about limited liability partnerships and SMEs. Of course, they are small. I gather that the danger for the committee was that it listened to representative organisations and a little less to those who are active on the ground. I am sure that my noble friend Lord Joffe has a significant point there. However, we all very much respect the work of the noble Lord, Lord MacGregor, and thank him for his contributions over the years. We know that he will still contribute significantly to our deliberations, even when he has retired from the chairmanship.

The noble Lord, Lord Wakeham, also introduced an interesting dimension to the debate. I identified three quite significant taxes which he wanted the Revenue to wipe out in terms of receipts. We are often accused on this side of the House of spending money too easily—quite wrongly, of course—but the noble Lord is in great danger of reducing the receipts of government in a dramatic way. Unless he comes out with some pretty clear proposals for where other tax revenues are going to emerge, I am quite sure that the Government will be giving fairly limited consideration to that at present.

The noble Lord, Lord Razzall, indicated that there will be choices before any Government after 2015. We know those choices to be harsh and challenging but he indicated that some amelioration might occur if the economy grew. My goodness: that is partly to recognise the Opposition’s case that the economy has not grown fast enough over these past few years, hence the level of privation. It is also not likely to grow very fast over the next few years, with the Government hell bent on following the principles which they have up until now.

I want to demonstrate that the Bill does of course show a long overdue growth in our somewhat fragile economy. There clearly is growth in the economy but in 2010, the Chancellor forecast that over this period, the economy would have grown by 9.2%. In fact it has grown by exactly half that, or 4.6%. Is it therefore any wonder that the Chancellor is short of some resources? I might add that if it is suggested that the economy now is doing well compared with other economies, first, it has risen from a very low base and, secondly, the United States and Germany have still both had growth rates over this period which have been far higher than those of the United Kingdom. There is not much to boast about there. It is also the case that the Chancellor is borrowing over this period £190 billion more than was planned and, as the Minister made quite explicit, the Chancellor is going to clear the deficit in 2018 when the proposition in 2010 was that it would be cleared by five years of coalition government. It is a pretty tawdry success that the Government are presenting to the House in this Bill.

Of course, we are all in this together, as has been emphasised on all sides. It is true that the top 1%, in order to be along with the rest and in it together, needed a tax cut which has been worth £3 billion while 7 million people who are at work are in poverty. That is the nature of it. I know that the Government constantly emphasise the employment figures but we are going to examine them more carefully. The nation knows the quality of the jobs that are being created. There are people who define themselves as self-employed, move out of the unemployment category and are living hand to mouth. That is why there is so much concern in the country about the constant use of food banks, and why on all sides there are indications that pressure upon ordinary people is very intense.

What is at the root of this? Quite clearly, it is that wages have continued to fall behind prices, and the Government know this to be so. Even this month, that has been confirmed for the most recent period. So people’s living standards have fallen over these five years. It may be that the Government think that because we now have a recovery—the slowest recovery for 100 years—people’s minds will wipe out the level of deprivation over these past years. They may not be right. If ordinary families are £974 worse off through tax and benefit changes than they were in 2010, these problems are deep.

Is the coalition completely unaware that in the past four years a massive stimulus has been given to the continuing creation of the unfair society, where wages stagnate and the resources devoted to the highest rewarded sections of our society continue to escalate? I know that from time to time it hits the headlines that some shareholders carry out a minor revolt against their chief executive but what continually goes on, day in and day out, is the widening of differentials between the pay of the super-rich—I am including people who work; I mean the chief executives of companies—and the average pay in their companies.

This growing inequality brings, as so much research now indicates, a clear problem of dissatisfaction in society, a sense of unfairness that may express itself in passive disillusion but may not be reflected at the ballot box in quite that way. The Government have opted for a low-wage, low-skill economy. That is what we have, with all these people working harder and longer for less, yet the Government pretend that they can congratulate themselves on the employment statistics that they represent. Surely the clearest indication of the Government’s limited success in this area is the decline in productivity and the problem of Britain being able to earn its way. Our balance of payments continually shows an increased deficit.

We are clear that this Budget and Finance Bill should have been based on much fairer principles than have been reflected in them. Hard-pressed families need help with their energy bills, which we have all seen rise rapidly and unfairly. Indeed, although the noble Lord, Lord Lawson, waxed strong on certain issues regarding energy, I do not think that he commented on whether he thought the public had been exploited by private monopolies in the way in which energy bills have gone up in recent years.

We will of course get rid of the dreadful bedroom tax. I am not sure that Members of this House are at all aware of the cost to families of very limited resources who are in real need and the misery that they suffer when they are told that they must give up the one room that they hold for a visitor or another member of the family, to give them some respite, particularly when it is concerned with the disabled, and the bedroom tax forces them into penury or having to move. We think that the ordinary earner also needs a fairer basic rate of taxation, and will attend to that.

Another area where we think there should have been much more emphasis in these past four years is housing stimulus. I understand the Minister’s role with regard to infrastructure and we applaud many of the initiatives taken in that area, but where is the support for the construction industry and the building of houses? Surely that has to be recognised as a priority, otherwise we are faced with a situation where the Government provide a token measure to help people to buy while house price inflation is rampant.

We believe that this Budget is a missed opportunity. The Government could have tried to get the people on their side, and they will pay the cost for not having done so.