Nia Griffith
Main Page: Nia Griffith (Labour - Llanelli)Department Debates - View all Nia Griffith's debates with the HM Treasury
(12 years ago)
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Mr George Howarth (Knowsley) (Lab)
It regularly seems to be my lot to follow the hon. Member for Cities of London and Westminster (Mark Field). Perhaps that is appropriate in some respects, as he represents a constituency at the other end of the spectrum from mine. He made a typically thoughtful speech, although he set out a couple of priorities that I would not share, and that he would not expect me to share—namely, supporting the banking industry, for example through the tax system.
However, one thing that I take issue with is the hon. Gentleman’s assertion about the rights of people in employment in this country compared with those elsewhere. When I speak to employers, as I am sure we all do in our constituencies, one of the questions I often ask is: “To what extent do employment laws have on impact on you? Do you feel they put you at a disadvantage?” Sometimes they will say, “Yes, they do,” but at the margin, if at all. If I ask employers to list their hierarchy of concerns, they put employment rights very low down, while concerns about our macro-economic direction and the way the economy is being run are very much at the top.
Nia Griffith (Llanelli) (Lab)
Does my right hon. Friend agree that what employers dislike is duplication of the various forms they have to fill in? The vast majority of employers are supportive of clear employment law, which helps both employees and employers.
Mr Howarth
My hon. Friend is precisely right. I worked in industry on the shop floor prior to the introduction of health and safety legislation. On another occasion—this is not the appropriate time—I might, if I get the opportunity, describe the conditions in which people worked in a lot of factories in those times. Often they were almost Dickensian.
Julian Sturdy
I hope that some of the hon. Gentleman’s friends might support me in Copmanthorpe—you never know. He is right that many rural garages in my constituency and throughout north Yorkshire are struggling. Independent forecourts are struggling even more than the supermarket chains. Fuel prices have gone up, but that is due to the higher oil prices, which have escalated dramatically over the past two years. As I said, if we had not stopped the previous Government’s tax increases on fuel in the past 18 months, fuel prices would have been 9p to 11p higher than they are. The impact on rural areas and hard-working families across the country would have been huge.
Nia Griffith
Has the hon. Gentleman asked the Chief Secretary why a rebate seems to be available in some parts of the highlands and islands of Scotland, but not in Yorkshire or Wales?
Julian Sturdy
Obviously, as a north Yorkshire MP who represents a rural constituency, I understand the impact of fuel prices on rural areas and economies, and the Government must consider that. However, as I said, the Government have to consider the wider impact when they make such decisions. They would like to do many things, and I would like them to do a lot of things—I would like the 3p rise not to come in in August, and I hope that it will be kept under review if oil prices continue to rise—but they have to take a balanced view.
Nia Griffith (Llanelli) (Lab)
I rise to say a few of the things I was unable to say just before the recess because my speech was limited to about three minutes. I shall make up for it this evening.
It is important to put the Budget in context. No Budget can be considered without the context in which it is to be carried out. My major concern is that it does not address the problems we are facing. Of course, we have a deficit and we need to reduce it, but we can do that only if we make money, and there seems to be no strategy to get the economy going. The Government do not even seem to know where to feed money into the economy, and seem to be wasting money by giving it away in the wrong places and not using it to do things that would stimulate the economy.
Let us look at what has happened to date. Since the emergency Budget of 2010, and subsequent measures, the Government have already planned to take a huge amount out of the economy, much of it from people on low or modest incomes—the very people who by necessity have immediate spending on the essentials of life simply to keep their families fed and warm. What seems to have happened in the Budget is that we are seeing money given away to those at the top end of the scale, and there is no guarantee at all about what they will do with their money. They could choose to do all manner of things with it and it may never come back into our economy. The money may go abroad or be stashed away somewhere, but it will not immediately feed back into the economy. The Budget proposals present a serious problem from an economic and a fairness point of view.
Bob Stewart
Does the hon. Lady agree that, from the point of view of fairness, it is a really good thing to increase the tax threshold for those people who pay little tax? That was well done in this Budget, and it will be better next year. Surely that will help the lowest-paid in our society.
Nia Griffith
The difficulty with raising the personal tax allowance is, first, that those on very low incomes—those who will have their disability living allowance or housing benefit cut—do not even pay tax. Secondly, those much higher up the scale will benefit from the increased personal allowance. It is often dual-income families, quite high up the scale, who benefit from the personal allowance being pushed up. It is a very expensive way of helping people who are in the position that the hon. Gentleman sets out.
Although people criticised the tax credit system, the whole point of it was that it maximised the amount of benefit that went to the people who really needed it. The irony is that when we were in government, we were often accused of introducing stealth taxes, but look at the amount of indirect taxation now. What people have supposedly been given back through the direct taxation system—that is, through their personal allowance—has already been taken off them through the 20% VAT rate. That is the type of “stealth tax”—the same goes for fuel and so forth—that people resent. They are actually saying that they are paying more tax than before. Even the increased personal allowance will not make up the difference.
The Government propose making a very expensive move that is not properly targeted, and that is worrying, because the money will not feed back into the economy as quickly as it would if it were targeted at those who really need it and would want to spend it straight away. The first problem is that the money is going to the wrong place.
Secondly, we seem to have no growth strategy at all. We are lucky that some of our manufacturers are able to export because they are selling to markets in countries where there are stimulus packages, or strategies to stimulate growth. The fact remains that if we were relying solely on the home market, our manufacturing would be in a dire condition.
With growth flatlining and unemployment rising, the Government, far from bringing the deficit down, are facing the fact that they will have to borrow an additional £150 billion simply to pay people who are out of work. What is the point of that, when we could be paying them to do constructive things such as build council houses or schools? Through employment in manufacturing, they could be learning skills that they could use later. That would keep the skills base going. One of the big problems when there is mass unemployment and a massive drop in the number of people in an industry, whether it is coal mining or building, is that we lose a generation of skills.
People do not want to sit about doing nothing. The overwhelming majority of people whom I meet who cannot find a job are very frustrated at not being able to find work. They are looking for anything and everything. It is often older workers in their 50s and early 60s who particularly suffer. They feel that time and again, they turn up for an interview only to be told that they are too old and cannot be taken on. We want the opportunity for all people—young and old—to get back to work.
Let me give an example of the type of money being taken out of the economy, so that we can see the real problem. In Wales alone, some £6.3 billion will be taken out of the economy over the next three years. We are talking about a very small population of not even 3 million people. The money is coming directly out of the Welsh economy. It is coming from the VAT increase, the loss of jobs in the public sector, and, significantly, most of all, from cuts to the tax credit system and to a wide range of allowances, including the disability living allowance, housing benefit, and council tax benefit. It is coming from a whole range of moneys that were put in to help people who struggle to pay particular bills—people who really could not make ends meet without the money.
As was mentioned, many of the people affected by the housing benefit changes will either find themselves homeless or simply have to use money that they would normally use for food and heating to pay the rent.
Lyn Brown (West Ham) (Lab)
Does my hon. Friend agree that part of the problem is that people in that situation have not realised that they are going to be short of money to pay their rent? As they try desperately to keep up with rent payments while their benefit payments are going down, they will find themselves in an awful position, facing debt and having to move home as well.
Nia Griffith
My hon. Friend is absolutely right. The frightening thing is that we have not seen anything yet. The cuts in the public sector jobs are just beginning to bite, but the cuts in the tax credit system and in the housing benefit system are loaded towards the next two or three years. The worst thing happening this year was the terrible cut in tax credits on 6 April, with some of the least well-off people losing £4,000 per year because they cannot get extra hours. We know perfectly well that getting extra hours is extremely difficult.
By contrast, our Chancellor lowered the number of hours from 30 to 27 at one point, after the 2008 economic crisis, in order to help people who could not claim working tax credit because they could not get enough hours. We made the reverse decision because we recognised that people were desperate for hours. I met many people who were desperate for any sort of work.
The Government’s policy is very damaging but, as my hon. Friend pointed out, the vast majority of cuts are still to come. The effect on Wales of the tax credit cuts is that £17 million went last year, £148 million will go next year, £188 million the following year, £219 million the following year and £222 million the year after that. Each year the savings are greater, and with every saving there is a bigger cut in people’s income. The same is happening with housing benefit and all the reforms to the universal credit that are coming in.
Those cuts represent a tragedy for each individual family, but more importantly for the whole economy, that is money being taken out of the economy. In other words, it is money that people do not have to spend and therefore money that is not circulating. That will have a devastating effect on our high streets where we are already seeing many well known retailers closing shops. We are lucky in Wales that we had a rescuer for Peacocks. My hon. Friend the Member for Pontypridd (Owen Smith) has its headquarters in his patch and it has been taken over. None the less, more than half the stores are closing, including two in my own town. That is just one example. I could list dozens of retailers, as I am sure all hon. Members could, in towns up and down the UK, each of which tells the same story: nobody has any money to spend.
It is vital that we consider which way round we should be working in order to get money back into the economy, rather than taking it out. We start with the situation in which money is being dragged out of the economy. What do we do to try and stimulate the economy? We could create jobs. One of the things that Labour suggested is a repeat of the bankers’ bonus tax. We could use the money to create jobs for young people and to stimulate the housing industry and other building projects, such as schools or roads. If we did that, we would be repeating a tax which raised a lot more than this Government seem to be prepared to raise from their banker friends. Their present tax proposals would raise a limited amount from the bankers. Believe me, on the doorsteps people say that they still want to see the banks paying their fair share to put right the problems that they put us into in the first place.
We are lucky in Wales that we have a Labour Welsh Government. Welsh Government Ministers are implementing policies specifically to create jobs. We have spoken about creating jobs through a bankers’ bonus tax. The Welsh Government are creating 4,000 jobs with the limited finances that they have. It is specifically a young person’s jobs programme, with an emphasis on the private sector because we recognise that a much greater emphasis on the private sector is needed. We recognise that we are too dependent on the public sector.
Anne Marie Morris
May I take it, therefore, that the hon. Lady welcomes the new scheme in this Budget that will enable young people to apply for loans to start up businesses, in the same way as they can to go to university?
Nia Griffith
I certainly applaud measures to give young people the opportunity to take out loans to start up businesses, but even people with immense experience are finding it incredibly difficult to do that. There is just not the right climate at the moment to start a business. I would like to see more stimulus for the economy so that people who want to establish start-ups have a viable chance of making a success of them. At the moment, it is terribly difficult for anybody to sell anything to anyone or to persuade anyone to part with their money, which is the essence of getting a business going.
In Wales, we are trying to create jobs for young people; we are also investing money in infrastructure projects, again within the limitations of the Welsh budget. The Welsh Minister for Business, Enterprise, Technology and Science is providing grants and loans to companies to help them to expand and get their businesses going, because we are having so much difficulty with the banks. For example, in my constituency, Tallent Automotive has received money to keep workers in work, which people are very pleased about, and EBS Automation, a very enterprising engineering firm, has received money to expand, which means new jobs for young people in a high-skilled field. Those are the sorts of programme that I would like to see from the UK Government. What the Welsh Government can do affects only a small part of the economy in Wales. I would like to see the same kind of stimulus across the UK. First and foremost, my concern is about the lack of a coherent growth strategy.
Consumer confidence remains low. Many people fear that they may lose their job or have their hours cut. People have been hit hard by rising prices, which have been compounded by the VAT rise. Obviously, people on low and modest incomes have little spare income to put by, so their money goes straight back into the local economy. That contrasts with the money given away to millionaires at the top, who do not have to do anything with it immediately and do not know what they will do with it. They know that there is no benefit to them from putting it back into the local economy.
Mr Stewart Jackson (Peterborough) (Con)
What does the hon. Lady say to the 810,000 people in the eastern region who are better off because their tax allowance has been altered? Those are low-paid working people who have had a stimulus and are spending the money locally as a result of the measures in the Budget.
Nia Griffith
If the hon. Gentleman had been listening earlier, he would have heard me explain that those people have already lost that money through the VAT increase. That is a stealth tax and a regressive tax, which always affects the least well-off the most. Many of the people who will get a little more in their pay packet because they will pay a little less tax when the personal allowance goes up will find that because of other taxes that have been implemented, they have lost that money already. Sadly, those people will not do so well.
The personal allowance helps people nearly all the way up the income scale, particularly those in two-income families. Frankly, although it is an expensive measure, it is not a well targeted one. As I mentioned, I would have liked to keep the tax credits system, which helped those who really needed it and took account of people’s different circumstances because it was based on the household income.
There is nothing to incentivise people to put their money back into the local economy and nothing to encourage people to unlock their savings and help the economy. We had the car scrappage scheme, so that people who were planning to buy a car that would last them for the next 10 or 12 years would bring the purchase forward by a year or two to take part in the scheme. We did the same thing with the replacement of boilers. Those schemes were introduced specifically to get the economy going. What have this Government done? They have thrown out of the window the one such scheme that they did have, which was the solar panels scheme, under which people were unlocking £10,000, £15,000 or £20,000 of their savings and spending it immediately in the local economy. Even if the panels were not made locally, all the fitting work to install the solar panels was done by skilled plumbers and craftsmen, so the money went directly into the local economy.
The Government completely messed that scheme up and destroyed the industry’s confidence by incompetently changing the rules before the consultation was finished. They did not scale the scheme down in a sensible way, as the industry had asked. People in the industry accepted that the tariff would change over time, but they could not stomach being treated like idiots. The Government just said, “We’re going to change all this,” even though people had invested a lot of money. Some people had spent £3,000 on a course learning how to convert from being an ordinary central heating plumber to a solar panel installer. Some firms had expanded for the purpose, and firms in my constituency are laying people off because of the ridiculous changes.
What other scheme do the Government have in mind to get people to unlock their savings for an excellent investment that is environmentally friendly and provides local jobs? We have not seen such a scheme in the Budget. We have made some suggestions, but it seems that the Chancellor has ignored them. For example, we suggested a cut in VAT on repairs and improvements to houses. With the construction industry on its knees, that would have enabled plumbers, carpenters, electricians, plasterers and so on to find extra work, and people would have been encouraged to take on home improvements. What did the Chancellor do? The exact reverse. He slapped additional VAT on alterations to listed buildings.
Mr George Howarth
I fully support my hon. Friend’s point about a cut in VAT on home repairs. Does she accept that because of the high level of VAT, many repairs are now being undertaken in the black economy? If we could bring VAT down to a level that people could afford, that might have a positive effect on revenue.
Nia Griffith
That is extremely worrying, because there is not much point in having VAT on anything if it is not collected. Groups in my constituency that want to do up listed buildings, such the Cwrt farm project, with which I have been involved, and the Llanelli Railway Goods Shed Trust, which I chair, care for all manner of buildings in the town. The fact that they will have to pay much more VAT means that they will spend the same amount of money—the amount that they have raised, or that individuals have available to give them—but have less work done. Less of that money will be spent on wages for local people, so less money will be circulating in the local economy. Rather than finding ways of stimulating the amount of work being done, the Government seem to be trying to close everything down and provide fewer and fewer opportunities for anybody to make money.
Practically everywhere I have gone in Llanelli over the past four weeks, I have met people struck by the fact that pensioners are being punished and millionaires are getting away with a tax break. That has incensed everybody from all walks of life.
Charlie Elphicke
Can the hon. Lady tell the House exactly how many pensioners in her constituency who earn more than £10,000 a year will be affected?
Nia Griffith
I can certainly tell the hon. Gentleman that over the whole country, 4.4 million pensioners who earn between £10,000 and £29,000 will be affected, including a huge number in my constituency.
People are incensed—not just pensioners but their friends and relatives. They say, “This is how it’s been since the 1920s, and the change came from nowhere.” Older people like to plan; they tend to be careful and like to know what will happen. In a Budget that was leaked and leaked, this change was just pulled out of a hat like some dreadful spotted rabbit. People were appalled, given all the emphasis that had been put on other measures that might be in the Budget.
Pensioners have to face that on top of losing their winter fuel allowance, which was a universal benefit and very useful for all manner of pensioners. We are talking about pensioners who have put by a little money and made some provision for their old age. They feel aggrieved because they have tried to do the right thing. They have been hit by the VAT rises. They have been lucky that it has been a mild winter this year, but they all tell me, “Look at my electricity and gas bills.” What are the Government doing to control energy prices? Absolutely nothing. Prices have gone through the roof even though the weather has been milder than last year, and pensioners are struggling to pay those bills. Then there is the fiasco at the petrol pumps. People had already been hit by mid-March with very high petrol and diesel prices, when suddenly the Government inflamed the situation by telling everyone to rush out and panic buy. Of course, everyone now faces even higher, inflated prices at the petrol pump.
Pensioners have been hit time and again. For those on a fixed income when interest rates are low, the rampant inflation that we have experienced is particularly hurtful. Again, pensioners have been badly affected. All in all, there is a feeling that the Budget takes from the wrong people. It takes from people who spend their money locally, tend to be careful with their money, and have saved. They spend a certain amount on their grandchildren, but they will have less money to do that—all to fund the cut in the 50p tax rate for those who earn more than £150,000. For some people who earn millions, it will mean that they are not just hundreds but thousands and tens of thousands of pounds better off. That is extremely unfair.
The people I meet ask why that is happening and why we are not all in it together. They ask why the 50p rate is not kept so that there is a fairer distribution of taxes across society.
Mr Stewart Jackson
I must remind the hon. Lady about the deficit. The previous Labour Government ran a structural and a cyclical deficit before the financial crisis. Between 2000 and 2010, they increased public expenditure in real terms by 53%, yet managed to double youth unemployment. The hon. Lady extols the virtue of Keynesian economics and growth management, but we have to deal with the deficit, and that is why we must make such difficult decisions.
Nia Griffith
The hon. Gentleman knows perfectly well that, until 2008, we were reducing the national debt. Obviously, when a world crisis occurs, a stimulus must be provided. By the time we left government in 2010, the economy was beginning to pick up. It has flatlined since. We gave the Government the opportunity on a plate to try to get things going, but they squandered it and have put us back behind the starting posts. We are now in a truly difficult situation because getting things going again will be much harder.
The Budget has the wrong priorities. We do not seem to be getting the economy going and we are not putting money where it needs to go. Instead, we seem to be giving it away frivolously and stupidly. The money that is used for tax cuts for the wealthy should be put into stimulating the economy so that everybody can have a share of the wealth.
Jacob Rees-Mogg (North East Somerset) (Con)
It is a great pleasure to have this opportunity to speak in favour of the Finance Bill, which shows the wisdom of the Government on the key point of reducing the deficit. That was what the Government came into office to do. They set out a course to do that, and they are following it bravely and boldly. It is the essential part of the policy the Government are pursuing.
Nia Griffith
Why, therefore, has £150 billion had to be borrowed, and how can the hon. Gentleman measure that as a success?
Jacob Rees-Mogg
Very simply, because £150 billion extra has not got to be borrowed. Forecasts of what may happen are fundamentally unreliable. In a large economy, no efforts to forecast a small percentage of growth that there may or may not be have been successful. In the history of economic forecasts both in this country and across the world, there is one thing of which we can always be certain: that they are wrong and that the outcome will be different. This extra £150 billion that is proposed is based on a theoretical level of growth that was never going to be achieved, and that was never able to be achieved.