Amendment of the Law

Stewart Hosie Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I would love to say that it was a pleasure to follow the hon. Member for Southend West (Mr Amess), but instead I will restrict myself to saying that I agree with him entirely that the hon. Member for Barnsley Central (Dan Jarvis) made a very good maiden speech indeed. It is certainly a pleasure to follow him, if not the hon. Member for Southend West. [Interruption.] The Economic Secretary to the Treasury says from a sedentary position that that is harsh. It is only a little harsh.

The Budget was billed as a Budget for growth, and by goodness, we need it, so let us test that. In his statement and in the Red Book the Chancellor gave us a great deal of information. Our national debt for 2010-11 was expected last year to be £932 billion. It is now forecast to be £909 billion for that year. It was expected to be £1.6 trillion next year, but it is coming in at £1.46 trillion. The deficit was expected to be £149 billion for last year. That seems to be coming in at £146 billion. But the figure for 2011-12 was forecast to be £116 billion and that is now up to £122 billion, if the numbers are to be believed. That tells us that the Chancellor may have had a little room for manoeuvre, but growth is essential if the figures are to remain on target and if we are to have any chance at all of protecting jobs and services.

I welcome the direction of travel on corporation tax but, because the Budget was so thin and fiscally neutral—the entire Budget barely shifted £10 million in total—it effectively confirms that the cuts, which were forecast last year at £99 billion and revised down to £81 billion in the comprehensive spending review, are still there. It confirms that £29 billion of tax rises announced last year are effectively still there. It confirms the swingeing benefit cuts of £11 billion announced last year and confirmed in the CSR. It also confirms the changes in some of the pension component, particularly the RPI-CPI switch, which will yield the Exchequer £1.2 billion this year, rising to nearly £6 billion in 2014-15.

On pensions, the Chancellor spoke about a single-tier pension. That is similar to the citizens pension concept that many of us support, but to deliver that with savings predicated on changing not just the state pension, but all public sector pensions, which are contracted and paid into, in some cases, for many, many years, cannot be right. He also said in relation to pensions that he would accept all the Hutton recommendations. It may well be that all of us have to save a little more a little longer for the pension that we expect at the end, but let the Government be in no doubt that a 3% hike in pension contributions now will put some of our constituents—indeed, many of our constituents—in serious financial difficulties in the short term. I hope that the implementation of that is carefully considered.

On PFI—the Labour party’s worst legacy—the figures are truly frightening. The value of the capital projects is some £56 billion. The cost of the outstanding repayment liability is £214 billion. The average repayment each year until 2047-48 will be £6 billion, and that will peak at more than £9 billion in 2017-18. The Chancellor said nothing about that, or about how we would replace the PFI system. Throughout his speech he spoke of encouraging private investment, and some of that is to be welcomed, but he said nothing about how we would replace PFI by means of public capital investment. We know how vital that is, given that the economic impact multiplier for capital expenditure is 1:1. It is the most significant thing we can invest in and, more dangerously, the worse possible thing we can cut.

The Chancellor had a great deal to say about oil, which is not surprising given that the forecast for 2011-12 shows that the North sea will generate an additional £4 billion. He is right to take immediate action because households and businesses are struggling. The price of a gallon of petrol in rural Scotland is routinely £6.50, and we know that in the past four or five weeks the price increase in diesel has added £1,000 to the annual cost of running a truck. That is unsustainable and inflationary. I welcome the 1p cut and the fact that the proposed increase has been stopped, but the Government said that they had introduced a stabiliser, and I have re-read his speech any number of times. The stabiliser seems to me to suggest that when the barrel price increases it is merely the escalator that is cancelled, leaving the indexed rise in place. I always understood that the stabiliser would reduce the duty level when the price rose so that we could temper out some of spikes in rising prices. By only including the escalator, we do not have a stabiliser at all and will still see many of the spikes that we have been trying to smooth out to bring some stability back into the economy, particularly in the haulage sector.

The Chancellor said surprisingly little about the banks, so I will go back to what he said in February. He announced that the banks would lend more, especially to small businesses, pay more taxes, bring responsibility and restraint to the sector, pay less in bonuses, be more transparent and make a greater contribution to the regional economy. That is all fine, but in order to thrive and grow companies need access to affordable and flexible funding, and they need it now. That remains a huge hurdle for many of our businesses.

The lack of new lending in particular is continuing to have an adverse impact on individual companies as well as on the economy as a whole. Business investment, as the Minister knows, will remain some 20% below pre-recession levels. Indeed, there was a 0.5% fall in gross fixed capital formation in the last quarter of 2010, which is extremely worrying, given that this is supposed to be a business growth and export-driven recovery.

All the evidence I have seen highlights the importance of expanding sustainable lending. Although we welcome the lending commitments agreed between the Government and the banks, it is important to ensure that they move quickly on the issue. I would have thought that the Chancellor had much more to say today about how the banking community would increase even gross lending to businesses across the country. Instead, although he did increase enterprise investment scheme limits to encourage private investment, which I welcome, he said nothing about bank lending. It is the retail banks on the high street that most of our small businesses depend upon for both capital and cash flow.

The two key issues of oil and access to finance are not just about economic recovery, but about fairness, as is alcohol duty, and there were a few changes on that today. However, the Government brought forward no measure whatsoever to tax alcoholic drinks by alcohol content. Whisky is still penalised and we still have the ludicrous situation where 4% beer is taxed more heavily than 7.5% cider, which does nothing to promote public health or address the wider social and economic consequences of excessive drinking. Picking up the tab for those costs is estimated to equate to a tax of some £3.5 billion in Scotland alone. I am surprised that the Chancellor did not use the Budget to take measures to deal with that problem.

There are also huge dangers in the Budget, as it confirms the cut to the Scottish budget and threatens recovery there. I am sure that the whole House will welcome the recent reduction in unemployment. The figures for March show that unemployment in Scotland has fallen by 16,000 and employment has risen by 8,000, the eighth consecutive reported rise in employment. That is all good news, and we have to drive it forward, but cutting the Scottish budget, particularly £800 million from the capital budget, will have a huge impact on the Scottish Parliament’s ability to drive forward many of the initiatives that were making a difference as we came out of the recession.

Given the economic backdrop, particularly the fourth quarter figures for the whole UK and the need to continue to support growth, the Scottish Government and, indeed, the UK Government need a Budget that supports clear, targeted resources. Given also that the Chancellor had some flexibility, I am surprised that he did not offer up a targeted measure to increase capital expenditure, because it has the most significant impact of any public spending.

What the Chancellor did talk about was enterprise zones, of course, and we certainly welcome those as a concept. They could be used in Moray, for example, given the closure of RAF Kinloss, but the Budget offered little detail beyond suggesting some business rate reductions and streamlined planning measures, both of which the Chancellor rightly said are devolved. For enterprise zones to work properly, they should revert to the old form, which included the significant use of capital resources, but, given that there is only £80 million in four years’ time, or £4 million per site, much of which I suspect will be used to offset business rates for local authorities, it strikes me as inconceivable that the Government have planned and prepared for the significant use of capital allowances to deliver their potential.

[Mr Kevan Jones]

The amount is actually less than that to which the hon. Gentleman refers, because, although page 42 of the Red Book cites £80 million in year four, over the period, if we spread the amount across the 21 proposed enterprise zones, we find that it works out at less than £1 million per zone.

--- Later in debate ---

[Stewart Hosie]

I am glad that the hon. Gentleman has done the four-year forecast and the average for me, but the point is the same: there is very little money in what ought to be an initiative with the potential, at least, to deliver some significant economic investment.

We need targeted measures, and one measure that the Chancellor could have introduced today was targeted help for the computer games industry. A targeted tax break was suggested previously but pulled from the previous Budget. Debates in the Scottish Parliament have backed it, and debates in Westminster have had all-party support, but he rejected the idea in 2010 and rejected it today. He did say, however, that he would improve the intellectual property regime and increase the small companies R and D tax credit, and I look to understand from the Government at some point whether there is a specific way in which the video games industry and other growing high-tech industries might access it, and access it in an appropriate way that protects them and grows them in future.

In terms of targeted measures, we also believe that there was a compelling case for the Scottish Government to be given responsibility for the administration and revenues of the Crown Estate in Scotland, given the focus in Scotland and the UK on driving a low-carbon economy and the existing responsibilities for marine planning and economic development. This Budget provided the Chancellor with the opportunity to indicate that he was prepared to do that through Government amendments to the Scotland Bill, but no commitment was made.

The Chancellor could also have demonstrated—another small targeted measure—that he was prepared to adjust the tax treatment of participants and sponsors at the Commonwealth games in Glasgow in 2014 so that there was equality of treatment with participants and sponsors at the Olympic games in 2012. I know that the Scottish Government and others have contacted him on the matter, because it is important to the overall success of the 2014 games and to the economic regeneration of the east end of Glasgow, so I am deeply disappointed that, in a Budget when he had the opportunity to talk about parity of tax treatment, he did not take it.

I know also that, following the abolition of the end-year flexibility agreements with the devolved Administrations, a new system was to be introduced and the Chancellor intended to set out details in this Budget. They might be tucked away in a document I have not read, but there was no mention made of that at all, or of whether a new end-year cash reserve could be established so that end-year flexibility was maintained in a way that was beneficial not just to the Scottish Administration, but to Wales and to Northern Ireland.

The Chancellor spoke a lot about the green economy and about several measures that he intends to take, and, as the Economic Secretary and the Chancellor know, there is still accrued £195 million of fossil fuel levy that only the Scottish Government can use. It ought to be released, but under the current rules it cannot without a comparable claw-back from the block grant. This was the opportunity for the Chancellor to release those funds, but he missed it.

That is particularly disappointing in relation to the announcement about the green investment bank, which was supposed to be the alternative. In November 2010, in the Treasury Committee, I asked the Chancellor what the timing was for its establishment, and he said that he wanted to get it up and running as soon as possible. He said that he hoped to come forward with proposals on how it was going to be structured between now and Christmas and that he would have set aside money to go into the bank in the comprehensive spending review. It is therefore hugely depressing that we have to wait another year, until 2012, before it can start to function. Given the press coverage that I am sure we have all seen, it looks as though it will be 2015 before it is fully operational.

A further green disappointment is that there was no mention whatsoever of green individual savings accounts—a key Tory policy to be introduced within two years as a way of helping savers to benefit from the growth of the green economy, because the billions raised from their sale would fund the state-backed green investment bank. Yet it seems that because of objections they are to be dropped, choking off a funding stream that would have channelled an estimated £2 billion a year into green technologies. I do not know if the shutdown of green ISAs is part of a wider move to curtail the potential operations of the green bank before it is even set up, but it is extremely worrying. Finally on green issues, the carbon floor price was mentioned. I understand from those who know more about that than I do that it is, in effect, a secret subsidy to the nuclear industry, which is anything but green.

The Chancellor said that this was a Budget for growth, but growth will be stifled if the banks do not lend, and if he takes no action on alcohol duty. Growth will be restricted by his failure to reassess the cuts in capital expenditure, and the opportunity of enterprise zones will be squandered without the proper application of capital allowances. Growth sectors such as the games industry will be damaged by the refusal to introduce tax breaks. Growth in the green economy will be slowed because of the refusal to release funds from the fossil fuel levy, and investment in our green future will be reduced because of delays in setting up the green bank. The Chancellor took an hour to shuffle £10 million. It was a profoundly wasted opportunity when he could have done so much more.