Capital Gains Tax (Rates)

Mark Durkan Excerpts

Wednesday 23rd June 2010 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

Thank you for calling me, Mr Deputy Speaker. May I, too, congratulate you on being elevated to the position of Deputy Speaker?

Before I came to the House today, I thought about what was I going to say, and I was mindful of that saying, “Whenever the clouds are on the horizon, you can either shelter from the storm or run with the wind.” I am conscious that this Government are doing more sheltering from the storm. The question for us, as elected representatives at Westminster, and for our constituents is: is there somewhere to shelter? That is what I shall comment on, but I am also conscious of the comments that I make. I always try to make constructive comments, because that is my nature, but I shall also underline some concerns that I, as an elected representative and MP, believe I am duty bound to mention.

In Northern Ireland, and in Strangford, which I represent, there is a very clear tightening of the belt. The marks are already there, and I just wonder how tight the belt will be by the time the Budget is eventually farmed out to all parts of the United Kingdom and all Departments. We in Northern Ireland are mindful of that in relation to the block budget.

I am very conscious also of the serious economic state that we are in. I am not ignoring it, and neither are the people of the United Kingdom. We all recognise that drastic measures need to be taken, but I have to ask: are they being taken in the right place and taken correctly, and will they adversely affect my constituents and, indeed, those of many other hon. Members who have spoken today? I recognise the need for health and perhaps international development to be ring-fenced, and that the Budget will not necessarily affect those areas. There is some talk about education, or at least some parts of it, remaining untouched as well, but in that case there will have to be cuts in other Departments.

I recognise that this House is very supportive and proud of the armed services as they fight in Afghanistan, Iraq and all over the world. Is a 25% cut in defence fair? The Prime Minister has given a commitment to the soldiers on the front line, wherever the war is taking place. However, if there is to be a 25% cut in defence, someone has to feel the pinch and the pain, and if it is not the soldiers on the front line—and it should not be—it has to be those at home. I am pleased that the cut will not affect the front line, but concerned about how it will affect other areas. Will it mean that commanders are pensioned off? Will it affect the MOD in buying equipment? The MOD will look for the best prices, as it probably should, but we do not want spending to be diminished in such a way that its position is undermined.

The cadet forces make a significant contribution across the whole United Kingdom, but particularly in Northern Ireland. It is very important for us in Northern Ireland to have cadet forces that bring the communities together. We have tried to achieve that for years, and we are now seeing the partnership begin to work better than it ever has before. Cadet forces, by their very nature, are drawn from both communities. There are more people from the Roman Catholic side of the community in the cadet forces in Londonderry, which the hon. Member for Foyle (Mark Durkan) represents, as well as in Limavady, Enniskillen and Strabane. That has come about because joining the cadet forces has been attractive to young boys and girls, who recognise that some day they will want to serve in the British Army and the other services, including the Royal Air Force.

I want to highlight lone parents. I welcome the fact that the Government want to encourage them back to work; I think we all want to do that. However, when they have the opportunity to do so, we want them to have the jobs to go to. It is great to have this support in theory, but how does it come about in reality? Do the people have jobs, and are there opportunities and options? I am not sure that there are. I am concerned about the Government’s position.

[Mark Durkan (Foyle) (SDLP)]

The hon. Gentleman makes an important point. Does he accept that many of us represent constituencies with large numbers of single parents who are doing valiant work as parents, and that for them the problem is not a lack of work ethic but a lack of work?

[Jim Shannon]

I thank the hon. Gentleman for his intervention; I wholeheartedly agree with his comments. It is all very well to have the theory of getting lone parents back to work, but if the jobs are not there, that theory is undermined. The Government must consider that.

In Northern Ireland, some 60% of jobs are in the public sector or public sector-dependent. I said this in my maiden speech a fortnight or so ago, but I will say it again because it is very important. I understand that the Government’s pledge is to increase private sector jobs and build up that area. However, before anything changes in the public sector, there has to be a private sector that fills the gap, so that those opportunities are there.

I turn to the 2.5% rise in VAT. In the area that I represent, there are a great many small and medium-sized businesses, which by their very nature create a lot of jobs collectively. Individually, that may amount to three, four or five jobs in a family business, but collectively they run into many hundreds, probably thousands. Although the rise is not going to kick in until January 2011, it causes great concern for the area that I represent, and specifically for businesses. Some small businesses may be hanging on by the skin of their teeth, and finding it very hard to get through difficult times, while looking ahead to perhaps another two, three or four years of austerity and the associated difficulties. Many businesses will try to absorb the VAT increase rather than pass on the extra prices, which they cannot do—not because they do not want to, but because they cannot do it in the competitive market that they are in. They have to try to take on large multinational businesses that have a bigger market and can therefore absorb such costs.

--- Later in debate ---

[Geoffrey Clifton-Brown]

I entirely agree with my hon. Friend. Many pensioners have told me exactly that—that it was an insult—so I hope that we can move away from treating our elderly people in such a way. As I have said before in the House—I remember raising this point with the then right hon. Member for Sedgefield during Prime Minister’s questions—the way in which a society treats its elderly people is a mark of that society’s civilisation. I hope that we will treat our elderly people with respect.

In an excellent, sober speech, my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) put his finger on an interesting yet under-mentioned aspect of our economic problems. It is demonstrated by the table on page 7 of the Red Book, which shows that private debt has doubled in the past 13 years. It is, of course, up to members of households to make their personal decisions, but it is also up to the Government of the day to regulate the totality of private debt. The level of private debt has become unsustainable, something on which I often chased the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) in Budget debates. As the Red Book shows, the savings ratio was lower by the end of the Labour Government than at any time since the 1950s. It is incumbent on any Government of the day not only to encourage savings, but to ensure that the savings culture exists in a stable regime in which inflation is not completely out of control. If we did not take the action outlined in the Budget, interest rates would rise, thus putting inflationary pressure on the economy.

[Mark Durkan]

Given the hon. Gentleman’s concern to ensure that the Government always encourage a strong savings culture, what does he think will be the impact of removing child trust funds and abandoning the saving gateway?

[Geoffrey Clifton-Brown]

No Government would willingly take such action, as my hon. Friend the Member for Caithness, Sutherland and Easter Ross said. My right hon. Friend the Chancellor had to set out a host of tough choices yesterday, but I do not think that the Budget was ideological. The hon. Gentleman has to be honest with himself when he thinks about ways to deal with the deficit. We should not underestimate the scale of the problem. This year’s public sector net borrowing requirement of £149 billion is almost the equivalent of the combined budget for health and education. The scale of the deficit explains why my right hon. Friend the Chancellor had to make really difficult and brave decisions, but by taking such action now, I hope that we will be able to return to a situation in which we can start to help some of the poorest and most vulnerable people in our society, which is what any responsible Government ought to be about.

We will get out of this mess by promoting growth in the private sector and rebalancing our economy. We need to get Britain innovating and making things, and to sell our goods and services to the rest of the world. All the calculations in the Budget are predicated on a rate of growth, and it is the private sector that will deliver that growth. By taking the right measures in the Budget and concentrating on the right things, we might be able to exceed the growth targets set out by my right hon. Friend the Chancellor yesterday. Labour Chancellors have been pretty bad at forecasting growth rates. My right hon. Friend, in line with the Office for Budget Responsibility, has given very prudent forecasts of growth rates. I sincerely hope that we will be able to exceed those forecasts.

Until the election, I served as the shadow Minister for international trade and development, and I know that the actions of the Chancellor in supporting exporters will be critical to how our country moves forward in the coming months and years. After all, in the years from 1996 to 2004, firms that were new to exporting achieved, on average, a 34% increase in productivity in their year of entry—the very fact of their going into exporting made them increase their productivity—and 60% of the UK’s productivity growth was attributable to exporting firms. It is therefore welcome that the Chancellor mentioned exports twice in his speech yesterday.

UK Trade & Investment is the Government’s arm that encourages exports and foreign direct investment. Its chief executive, Andrew Cahn, worked under seven different Trade Ministers in the previous Government. I hope that we will not have that revolving door in the present Government and that we will have consistency of Ministers, who will be able to look at our exports problem and achieve considerable improvement. In the years of Labour Government, UKTI’s budget was cut consistently.

Manufacturing accounts for more than half of our country’s exports. Labour Members will not like the figures I give, but they are absolutely true. In 1997, manufacturing employed 4.19 million people, but by December 2009, under Labour’s stewardship, that number had fallen to only 2.592 million. In other words, there had been a significant decline in the number of people employed in the manufacturing sector. That happened despite the value of sterling falling 24% between July 2007 and the present day. Perhaps one of the most devastating of figures pertaining to the period of Labour stewardship is on our trade deficit in goods, which has increased from £3.1 billion to more than £21 billion.

If Labour Members want to know the reason why we had our longest and deepest recession of our post-war history, it is that the Labour Government failed to support sectors of our economy that provide sustainable economic growth. If we are to exit the grips of recession, cushion the impact of austerity and have a sustainable future, exporters will be the engine room and will need to be given priority in the Chancellor’s thoughts and, indeed, across all Departments.

In his Budget statement, the Chancellor said that departmental budgets will be set out in the spending review later this year—quite rightly, he set a date for that of 20 October—with an average real reduction for unprotected Departments of 20%. Let me say to my right hon. Friend the Chancellor and my hon. Friend the Economic Secretary, who is on the Treasury Bench, that UKTI—our trade promotion body—is a rare thing: it is one of the few parts of Government that actually makes this country money. To meet the challenges of the future, to provide adequate support for our exporters and to attract FDI into this country, its budget must be protected, so that it can continue to support private sector growth and job creation in the UK.

We must also recognise that real reforms are needed to how we support our exporters and attract FDI to adapt to an ever-changing global marketplace. Those changes cannot be made without the correct budgetary support for UKTI, but the rewards for successful implementation are there. We appreciate the opportunities presented to us by having Europe on our doorstep and through our close relationship with north America. Currently, 70% of our exports go to the traditional developed markets of north America and the EU, but the financial support available for firms seeking to export to the wider and increasingly accessible world beyond that must be maintained, because estimates suggest that, by 2020, the EU and USA share of global gross domestic product will have declined to less than 40%. As was correctly identified—I tried to intervene on the shadow Chancellor—we have turbulence in our European markets and EU growth is expected to be sluggish for some time. That is why it is important that we pay due attention to rapidly expanding global markets elsewhere, which cost proportionately more to service than the easier markets of Europe and north America.

We must be proactive, not reactive. British firms must be backed to head for the second-tier cities in larger markets such as India and China. They must also look for unrealised potential in other countries first, before our competitors have won all the contracts. I looked at that problem around the world, and I found country after country where there was huge potential. The British were welcomed, our business men went out there and expressed interest, but somehow it was the Japanese, the Germans, the Americans and the Chinese who popped in and got the contracts. We must provide better support for our companies.

We must benchmark the performance of UKTI against the best of other countries, so that our trade efforts match or exceed those of our competitors. With our overseas network of embassies, we have a fantastic platform for developing British business, and we cannot afford to let departmental cuts affect their work. We need a widely respected senior figure—a FTSE ex-chairman —to go out banging the drum for the UK, selling the country around the world, and consistently to visit those markets to build up contracts.

Nationally, we must concentrate our efforts away from the regional structure introduced by the previous Government. What nonsense that was. Different regional assemblies had offices in the same city, such as Shanghai or Mumbai, all competing with one another for the same business. What a waste of taxpayers’ money, and what confusion it caused to those countries in which they were located.