Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 1st March 2016 Commons Chamber

[Mr Osborne]

Our argument is that we will be stronger and better off inside the European Union. That is the positive choice that we face as a country. I, personally, do not think that we should leave the EU, but even those who contemplate doing so should think about this. With the economic situation that the world faces at the moment, and with the geopolitical situation that we face in Europe with Putin on our doorstep and the crisis in the middle east, is this the right moment to leave? My strong advice, the advice of the British Cabinet and the advice of the British Government is that we remain in this reformed EU.

[Stewart Hosie (Dundee East) (SNP)]

The Scottish First Minister Nicola Sturgeon was in London yesterday making the case for the UK to remain in the EU. She made the point that access to that market supports some 300,000 jobs in Scotland and some 3 million jobs in the UK. May I ask the Chancellor to agree with me—I am sure he will—that in terms of EU membership, trade deals are easier to agree as a bloc, harmonised regulation helps businesses to export and, notwithstanding the fact that improvements can always be made, being a member of the EU benefits consumers as well?

[Mr Osborne]

I agree that Scotland benefits from both being part of the United Kingdom and being part of the European Union. The hon. Gentleman is right to highlight the fact that EU agreements on things such as air travel and mobile phone charges have reduced costs for consumers. It is also the case that a depreciation in sterling leads to increased inflation.

[Stewart Hosie]

The extent to which the EU has succeeded is actually quite remarkable in terms of free trade, free movement—we think it is a boon—and, indeed, the commensurate protections for the environment, social protection and employment rights. These substantial achievements of the European Union are to be celebrated, not renounced. That is the positive case we are making. May I urge the Chancellor and his right hon. Friend the Prime Minister to make a positive case, because the in campaign does not have a 20-point lead to squander with a negative campaign?

[Mr Osborne]

I am making the positive case that we will be stronger, safer and better off, which are all positive outcomes for our country, and I am pointing out that there are question marks over the alternatives. It is perfectly reasonable to point out that we do not know what the leap in the dark would entail, but of course I want to do this in a positive way. There is a healthy debate across our political system as well as across our country, but I take the view of Ronald Reagan’s 11th commandment, which is that “I won’t speak ill of a Conservative.”

Bank of England and Financial Services Bill [Lords]

Stewart Hosie Excerpts

Monday 1st February 2016 Commons Chamber

[Harriett Baldwin]

The hon. Gentleman is right to recognise that the NAO is completely independent of the Treasury. Although I have a nominal role on the Public Accounts Committee, the NAO is rightly accountable to Parliament.

[Stewart Hosie (Dundee East) (SNP)]

I very much welcome the move to turn the PRA into the PRC on a par with the MPC and the FPC. Does the Minister not have any anxiety, however, that that leaves the FCA, the consumer protection conduct of business element, out on a limb, with a different status from the other three committees?

[Harriett Baldwin]

The hon. Gentleman is right to highlight the fact that the FCA is set up completely differently. However, I stress that the similarity lies in the operational independence. When it comes to the FCA, the Treasury is obviously able to appoint the chief executive and the board, but the operational decisions are for the FCA board, as we have made clear in recent weeks.

Let me move on to the second element of the Bill, which will make changes to the senior managers and certification regime. As hon. Members will know, the Government are committed to driving up standards of conduct across the financial sector, and to tackling the abuses and unacceptable behaviour of the past. That is why the Government are replacing the discredited approved persons regime with a much more robust new system, the senior managers regime, legislated for by the previous Government in the Financial Services (Banking Reform) Act 2013.

I find it quite extraordinary that, in the amendment they have tabled, Opposition Members have seen fit to claim that

“the Bill reduces regulation of financial services”.

This Bill is a vital opportunity to remove what the Parliamentary Commission on Banking Standards described as the “complex and confused mess” of the approved persons regime for 60,000 financial services firms, all insurers, FCA-regulated investment firms and all consumer credit firms, and to replace it with the more targeted and robust senior managers and certification regime.

Let me set out the benefits of the new regime; perhaps the Opposition will then reconsider their position. The approved persons regime is a relatively broad, unfocused regime in which all individuals who were considered to hold significant influence functions in the firm, or who dealt with customers would be subject to the regulators’ pre-approval in a tick-box exercise. Crucially, clarity of responsibilities at the top of firms was woefully inadequate. Firms could pass the buck for ensuring the fitness and propriety of their staff to the regulators, and the regulators could take enforcement action only against the individuals they had pre-approved.

The senior managers and certification regime tackles those problems head on. First, it focuses regulatory pre-approval on senior managers, the key decision makers at the top of firms. It enhances the accountability of these individuals through statements of responsibilities, documents that give clarity on which senior manager is responsible for each area of the firm’s business, and through the proposed statutory duty of responsibility that requires senior managers to take reasonable steps to prevent breaches of regulations in their areas of responsibility.

--- Later in debate ---

[Harriett Baldwin]

I appreciate my right hon. Friend’s contribution, because he has been examining the issue for longer than most. He will know of the points that were made about this topic in the other place. The regime is due to come into force on 7 March 2016, which is pretty soon. The rolling out of the implementation will focus on the larger organisations first, but the Committee and, I am sure, the Treasury will want it to apply in particular to the large, systemically important firms by 7 March.

The third element of the Bill relates to the extension of the important new freedoms that the Government are granting to allow people to take control of their retirement savings. It will help to ensure that consumers who will be able to sell their annuity incomes through the secondary market in annuities are sufficiently supported. There are two key measures. The first will extend the Pension Wise guidance to those who, from April 2017, will be eligible to sell their annuity incomes through the secondary market in annuities. That will include the offer of guidance to those who have a right to an income under the annuity, such as any dependants and beneficiaries as well as the primary annuity holder.

The second measure will require the FCA to make rules to ensure that specified firms check that individuals with annuities above a threshold value have received appropriate financial advice. On 19 January, the Chancellor set out the Government’s intention to legislate to place a new duty on the FCA to cap excessive early exit charges. I should like to take this opportunity to announce that that new duty will be introduced as a Government amendment in Committee.

[Stewart Hosie]

The Minister has used the words “guidance” and “advice” almost interchangeably in her last few sentences. Many of us across the House are concerned that it is advice that will be required, particularly by those with rather modest annuities. Can she give a guarantee that what is being offered is advice and not merely guidance?

[Harriett Baldwin]

The hon. Gentleman is absolutely right to highlight that semantic distinction. His constituents and mine want help; they do not know whether they are asking for regulated advice or guidance. He will also be aware that we have carried out a consultation—the financial advice market review—which closed in December. We are now studying the responses to that consultation with a view to seeing whether the current distinction is linguistically, and indeed legally, appropriate. He will hear more on this interesting topic in due course.

The Bill also makes a number of smaller changes. We are legislating to give the Treasury the power to make recommendations to the PRA and the FCA about aspects of the Government’s economic policy. Those will be non-binding remit letters. We are also allowing the Treasury to make regulations implementing a more competitive framework for insurance-linked securities business. That will help to preserve London’s position as a centre for specialist insurance and reinsurance. Following debates in the other place, we are also making a change that will support our ambitions for a diverse financial sector by putting consideration of mutuality and other types of business organisation into both regulators’ guiding principles. There will also be changes within an existing banking group to authorise a bank to issue banknotes in Scotland and Northern Ireland.

Illegal moneylenders prey on the most vulnerable people in society, causing their victims immense misery. That is why we will act now in the Bill to ensure that illegal moneylending teams have the funding they need to continue to protect consumers and prosecute loan sharks. We will introduce an amendment in Committee to give the Treasury a power to provide financial assistance to persons involved in taking action against illegal moneylending. The amendment will also give a power that allows the FCA to collect a levy from consumer credit firms in order to fund their financial assistance.

In conclusion, the measures that I have outlined today build on reforms to financial regulation and contribute to the Government’s commitment to deliver a new settlement for financial services. I see that the hon. Member for Hayes and Harlington (John McDonnell) is now on the Opposition Front Bench. By indicating that they do not support the Bill, the Opposition have put themselves on the wrong side of the argument on a range of sensible measures. By voting against the Bill, they will be voting against stronger governance and transparency in the Bank of England and in particular against making the Bank more accountable to Parliament and the public by giving the National Audit Office the power to conduct value-for-money studies of the Bank. They will be voting against extending the benefits of greater accountability for the senior managers and certification regime to all authorised financial services firms.

By voting against the Bill, the Opposition will be voting against ensuring that consumers who can sell their annuity income through the new secondary market have access to Pension Wise guidance and, where appropriate, take financial advice to support their decision. As well as that, they will be voting against proposals to place new duties on the FCA to cap early exit charges for those eligible to access the pension freedoms and to ensure that illegal moneylending teams have the funding they need to continue to protect consumers and prosecute loan sharks. The Labour party has been wrong on financial services regulation in the past and it is wrong again today. I commend the Bill to the House.

HMRC and Google (Settlement)

Stewart Hosie Excerpts

Monday 25th January 2016 Commons Chamber

[Mr Gauke]

My right hon. Friend raises an important point. Our international tax system is based largely on that set up in the 1920s, but the world has moved on and the way multinational companies operate has changed significantly. That is why, some years ago, led by my right hon. Friends the Prime Minister and the Chancellor, we encouraged the OECD to establish the BEPS project. We are now seeing the first signs that that is working—that companies are changing their behaviour and the tax system is becoming better suited to the modern world.

[Stewart Hosie (Dundee East) (SNP)]

First, the diverted profits tax, set at 25%, came into effect last April. May we have the Minister’s assurance that the Google deal does not cover any of the period when diverted profits tax should have applied? Secondly, the rules on disclosed evasion are clear: tax should be paid at 100%, plus interest, plus a 30% penalty. May we have his assurance that that was rightly not applied in this case? Finally, given the difficulty the Netherlands got into with the Starbucks deal and Luxembourg got into with the Fiat deal, when the Commission insisted they recoup between €20 million and €30 million extra, should the Google deal not be put to Commissioner Vestager to ensure that it complies with state aid rules?

[Mr Gauke]

The United Kingdom does not engage in special deals with any taxpayer. When accusations to that effect were made before, Sir Andrew Park, a retired High Court judge, investigated them on behalf of the National Audit Office and concluded that in every case he had investigated the settlement was reasonable and the overall effect of the arrangements was good. For the very reasons I set out, I cannot comment on the individual matter beyond what is in the public domain. I do believe that there is an important principle here—that tax should be collected on the basis of the law, and that a Department that is independent from Ministers should be able to make the assessment of the right level of tax due under the law without politicians interfering in operational matters. I hope that that has the support of Members of all parties.

Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 19th January 2016 Commons Chamber

[Mr Osborne]

My hon. Friend is right, and the Help to Buy ISA has been a spectacular success. In the few weeks since its launch, 170,000 families have taken it up, and it is helping people to get on the property ladder and save for that deposit. We are doing everything that we can to support the aspirations of the families of Britain.

[Stewart Hosie (Dundee East) (SNP)]

The Government’s plan requires the doubling of exports by 2020 to £1 trillion —a promise repeated in “Fixing the Foundations”, which was published in this Parliament. Does the Chancellor still hold to the intention and promise to see UK exports rise by £100 billion a year every year for the next five years?

[Mr Osborne]

We hold to that target, but frankly it will be very challenging to meet. We have been improving exports, but many of our main export markets have been weak, and we would like further economic reform on the continent of Europe. Some of the big emerging markets are struggling at the moment, but a good economic dialogue is taking place today with India, and British exports to India are increasing. Only recently has the United States economy started to grow. There are many challenges, but I do not think we should duck those challenges or ditch the target. Increasing exports is a key priority for the UK.

[Stewart Hosie]

I agree that we should set ambitious targets, but they must be credible. Given that the British Chambers of Commerce states that the export target will be undershot, and the Office for Budget Responsibility states that it will fail to be met by some £350 billion, is it better to set a realistic and achievable target, rather than risk losing credibility as the Chancellor did when he failed on debt, deficit and borrowing targets in the previous Parliament?

[Mr Osborne]

It is right to set and to try to meet a stretching target, even if that will be challenging. The hon. Gentleman talks about realistic and credible numbers. If Scotland had listened to the Scottish nationalists, it would be separating from the United Kingdom in two months’ time. The Scottish Government based their claim for independence on an oil price of $115. Scotland would now be heading for economic catastrophe if it had listened to the hon. Gentleman and Scottish National party members. Before they talk about credible and realistic economic policies anywhere else in the United Kingdom, they should get one themselves.

Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 1st December 2015 Commons Chamber

[Mr Osborne]

The fact that the apprenticeships levy is set up in such a way that a large company employing high-quality apprentices will be able to receive back from the Government more than it puts in sets it aside from classic payroll taxes. Indeed, it has been broadly welcomed by the business community, even though it accepts the additional burden it represents. That is going to be very important. We made the calculations for the impact on the public sector in our public finance projections, and I am happy to write to my right hon. Friend with the precise numbers.

[Stewart Hosie (Dundee East) (SNP)]

Will the Chancellor confirm that in addition to the 17% cut to the funding of the Department for Business, Innovation and Skills, the autumn statement did, as other Members have said, add £11 billion to the tax bill of businesses, in the area of business growth and skills, and mainly driven by the apprenticeship levy?

[Mr Osborne]

I would have thought and hoped that the Scottish National party supported an apprenticeships levy whereby we use the money to create 3 million apprenticeships in this part of the United Kingdom and make sure that there are arrangements to pass the money to the Scottish Government so that they can improve skills in Scotland. But of course if one looks closely at the record of the SNP Government, one sees that they have been cutting further education places in Scotland. As usual, the SNP says one thing here and does something different in Scotland.

[Stewart Hosie]

The question was of course about the £11 billion extra tax cost for business and the cut to the Department for Business, Innovation and Skills—something the Chancellor does not want to talk about. Given that there was no increase in retail sales in the last quarter, that the CBI industrial trends survey is down, that consumer confidence is down, that the deficit in the trade in goods is a colossal £134 billion and that manufacturing output is down, why does this political Chancellor think that cutting BIS by 17% and adding £11 billion to business costs over the spending review period is even remotely sensible?

[Mr Osborne]

Because we do not equate the health of the business sector with the size of the Business Department. We have increased the money going into innovation by raising the budget for the catapult centres, and we have boosted the budget for science, one of the great UK strengths, which would be undermined if Scotland became independent. I would make a further point. The hon. Gentleman asked about economic projections, but in the independent OBR forecast growth is up, jobs are up, living standards are up and wages are up. That is all part of a successful economic plan which is delivering the goods for the whole United Kingdom.

Spending Review and Autumn Statement

Stewart Hosie Excerpts

Wednesday 25th November 2015 Commons Chamber

[Mr Osborne]

My right hon. Friend is absolutely right. As an economy, we have been growing faster than most of the advanced economies of the world. In that situation, not getting the deficit and the debt falling is really signalling to the world that we are never, ever going to try to bring public finances under control. As it is, we have debt falling in every year of this forecast, and it is lower than the forecast in the Budget. The deficit is also falling and overall borrowing is lower in this forecast than in the one I produced in the summer Budget. We take these steps to pay down our debts. Our national debt, at 80% of national income, is uncomfortably high. It does not necessarily, therefore, give us all the flexibility we would want if we were to be hit by some kind of external shock and is all the more reason for us to use the better times to pay down the debt.

[Stewart Hosie (Dundee East) (SNP)]

I was intrigued by Tory Back Benchers cheering the humiliating U-turn on tax credits. It seems barely three or four weeks ago that they were cheering on, and voting for, the implementation of the tax credit policy. But times move on and things change.

The genesis of today’s statement was the decision announced last year when the Chancellor stated that he wanted to reduce public spending to barely 35% of GDP by the end of this Parliament. That was adjusted up to just over 36% in the summer Budget, but the direction of travel—the shrinking of services provided by the state—was very clear. It was set in stone with the fiscal charter earlier this year, with the intention to run a current account surplus of £40 billion a year by 2019-20. Those numbers have changed slightly today. The Chancellor wants not only to shrink the size of the state to 36.5% of GDP but to run a current account surplus of £42 billion. Can we just be clear? The UK has not routinely seen spending at 36% or 37% of GDP since the 1930s and 1940s. The Chancellor’s ideology has not changed. In essence, he still intends to cut £40 billion a year more than he needs to, to run a current account budget in balance by the end of this Parliament.

Notwithstanding the humiliating U-turn on tax credits, the Government added £37 billion of cuts in tax rises in the summer Budget to the £121 billion of fiscal or discretionary consolidation in the previous Parliament. Announced in the Blue Book today is £18 billion of cuts and the Chancellor was very clear that the £12 billion of welfare cuts remain on the table. Even after today, the public are facing a decade of austerity. These decisions are political choices. The Government ignore the fiscally responsible alternative course of action, which, with a very modest increase in public expenditure, would ensure that no one is left behind.

The Government are not for working people. Nothing they say can camouflage the failure of the past five years, and the Chancellor’s statement merely confirms that they are making the same mistakes all over again. We saw the impact on GDP growth of rising inequality in the 20 years to 2010. The continuation of the austerity agenda represents a wilful disregard for and failure to learn the lessons of the recent past.

The Chancellor may not care about inequality, and the 1 million people receiving food parcels compared with barely 25,000 five or six years ago, but the Government should care about its impact on economic growth. Let me ask the Chancellor some specific questions. We have been concerned for some time about the failure to increase productivity. The Chancellor knows that the UK sits in the third quartile of advanced economies. How does a 17% cut to the Department for Business, Innovation and Skills help to support firms seeking to increase productivity?

We have been concerned about the negative impact of balance of trade, a situation that got worse between the spring and summer Budget forecasts. The impact for every year published today is still negative. How does the absence of a plan to encourage exports and a further cut to the UK Trade & Investment budget help to reverse the dire balance of trade position? We share the Chancellor’s concern to protect growth and tax yield, and to close the tax gap, but how does the closure of 137 HMRC offices possibly do anything other than weaken the ability of the Revenue to collect the tax that is due?

The Chancellor said that the UK would take the fight to its enemies, but he omitted to mention action in Syria. Should the Government get the vote they want in the next few weeks, will he tell us how much he plans to set aside for the reconstruction and stabilisation of Syria after any military intervention is over? We remain as concerned as he does about the failure to invest in capital, which is absolutely imperative to boost economic growth. We welcome the increase in capital spend announced today. I just say to him, however, that cuts last winter, increases in the spring, cuts in the summer and increases in the autumn represent a shambles of a way to plan long-term capital investment.

In Scotland, we saw cuts to revenue and capital over the previous Parliament. We have had confirmation today of further real-terms cuts to Scottish revenue funding over the spending review period. Instead of the Bullingdon sneering about oil, which the Chancellor did earlier, he would have been better recognising that the Scottish economy is now 2.5% larger than it was pre-crisis and productivity is 4% higher than in 2007. It is contributing to the UK recovery. Instead of hobbling and undermining the Scottish Government, he might consider it to be worthy of support.

The Government received barely a third of the vote of those who voted and the Conservative party achieved its worst result in Scotland since 1865. Let us be clear. I do not expect the Chancellor to change his mind, but the public in Scotland and in the UK did not vote for a decade of austerity.

[Mr Osborne]

This spending review delivers economic and national security for the people of Scotland. It funds a £1.9 billion increase to their capital budget and the block grant goes up by £1 billion. There is a 14% capital boost from the United Kingdom Government. Instead of complaining, the hon. Gentleman might, on behalf of the Scottish Government, have welcomed that and set out any plans he might have for how to spend it. I suspect we will hear a lot from the Scottish nationalists in this Parliament about process, constitutional issues and all that, but they will not tell us what they are actually going to do to improve the lives of people in Scotland. He talks about productivity. If we look at the Scottish Government’s record, we see that they have cut 140,000 further education college places in Scotland. They have used the money they have taken from the university sector for free prescriptions for millionaires, as if that is a good use of Scottish taxpayers’ money. Health spending in Scotland is rising more slowly than it is in England, where the Conservative Government are in charge of the English national health service.

In the spending review, there is extra capital for Scotland so it can invest in its long-term future. There is a huge commitment to the defence estate in Scotland, with new planes based at RAF Lossiemouth and a massive investment in shipbuilding on the Clyde for many years to come. By the way, I know that the SNP is keen to court the unions in Scotland. The GMB said that the news about the frigates

“should be welcomed and not used for political mischief”.

That is another sensible thing the GMB has said. And there is the huge investment at the base at Faslane, where 8,000 people work. The Scottish National party pretends it would get rid of the nuclear deterrent and somehow give all those 8,000 people jobs in our defence establishment—the SNP is not being straight with the people who work on the Clyde or in Scotland’s defence industries.

We are also working on implementing the Glasgow city deal, and on a city deal for Inverness and for Aberdeen, and we are ready to sit down with John Swinney to negotiate a fiscal framework. We have now the Scotland Bill, which Lord Smith says “delivers the legislation required” to deliver the agreement. For months, SNP Members have been telling us that we were not doing what the Smith commission said, but now Lord Smith says that we are. To make these powers work, we need agreement on a fiscal framework. Let us sit down—we can sit down tomorrow, next week or whenever—to agree a fair fiscal funding framework.

The truth is that SNP Members complain about decisions on public expenditure, but if Scotland had voted to be independent, its public finances would be in complete tatters. The OBR forecast today is that oil revenues are down 94% in the North sea because of the fall in the world oil price. That is a £20 billion hole in the financial programme that the SNP Government tried to foist on the people of Scotland. The whole thing can be summed up by the words of Mr Alex Bell, who was the former First Minister’s head of policy. He said this week:

“The SNP’s model of independence is broken beyond repair…the campaign towards the 2014 vote, and the economic information since, has kicked the old model to death. The idea that you could have a Scotland with high public spending, low taxes, a stable economy and reasonable government debt was wishful a year ago—now it is deluded.”

That is the SNP verdict on the SNP plans.

The Economy

Stewart Hosie Excerpts

Wednesday 18th November 2015 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I start by agreeing with what the shadow Chancellor said in opening his remarks—that cost should be no obstacle to providing the necessary security and intelligence to protect the people from the kind of threats that we are now seeing and that we saw in Paris. I therefore say to the Economic Secretary that if the Government wish to increase spending in those areas, there will certainly be no resistance from the SNP. I agreed with her, too, when she said that we need to cut out unnecessary and wasteful spending. I think that is absolutely right, and no one with any common sense would say that we should spend money on things that we do not need. So we will offer up a starter for 10, which is £167 billion on Trident and its replacement.

We will back the Opposition motion today. There is no doubt at all that this Tory Government and their coalition predecessor have failed, and we have seen the evidence of that failure, which I shall come on to develop. We essentially have an austerity programme from an austerity Government who have failed to deliver the growth the economy needs and are instead committed to making precisely the same mistakes all over again.

When I say that this Government have failed, we should remember precisely what the Chancellor promised when he became Chancellor in 2010. He said that debt would begin to fall as a share of GDP by 2014-15; that the current account would be in balance this year; and that public sector net borrowing would be £20 billion. We know now—many of us warned of it in the last Parliament—that debt did not fall as a share of GDP as planned; that the current account will not be back in the black until 2017-18 at the earliest; and that public sector net borrowing is not the £20 billion promised, but over three times that, at £70 billion. The key point is that the Chancellor failed to meet every single one of the targets he set for himself. In the eyes of any reasonable man or woman in the street, that is failure.

[Jeremy Quin]

The man in the street and the woman in the street have already spoken; they spoke five months ago, and they want more of the same. They want the deficit to continue to be brought down. We have halved the deficit and done so while maintaining one of the best levels of growth of any country in the G7.

[Stewart Hosie]

Growth was strangled throughout the early part of the recovery in the last Parliament. If it has picked up since, that might say more about the weakness of our major competitors than any inherent goodness or sense in the Tory plan, which, as I say, has actually failed. This is an austerity programme that saw £121 billion-worth of cuts, tax rises and discretionary consolidation in the last Parliament that strangled the recovery. With an extra £37 billion to come, we are now on track for a full decade of austerity.

It is worse than that, however. With the Government changing the ratio of tax rises to cuts from 4:1 to 9:1 during the last Parliament, we have the clearest indication not simply of failure, but of failure delivered by trying to balance the books in a way that was never going to succeed and on the backs of the poor. That is a situation that will only get worse, as the motion mentions, through changes to tax credits.

[John Stevenson (Carlisle) (Con)]

Does the hon. Gentleman not think that the creation of 2 million jobs is a success?

[Stewart Hosie]

I think that the creation of every job is welcome for the person who gets it, and I think that the creation of well-paid, permanent and secure jobs is fantastic, as those provide not only the income that families need, but the security with which to build strong and stable communities. Of course I welcome jobs as they are created, but we need to look at every single part of the economy, not simply single metrics—whether they be good or bad. The Government’s record in the round is lamentable.

I mentioned the plan to cut tax credits. Of course change may be announced next week, but few believe that the stubborn Chancellor and his Government will actually stray too far from the plans originally announced. Those plans have a quite horrendous impact on households in Scotland and throughout the UK. For many real people, real families and real communities, the erosion of household income is quite extraordinary. The average figures of £1,200 a year or £100 a month is routinely used, and it is an accurate figure, but for some households the annual loss is around £4,000 a year. [Interruption.] The Tories may find this funny, but a loss of that amount of cash implies a marginal tax rate of 90% on some of the poorest working households in the country. If the Government were to propose that, the Tory Back Benchers would be up in arms, but because they are taking what they see as benefits from poor people, it is suddenly okay, because that is the way smirking Tories always think.

[Catherine West]

Does the hon. Gentleman agree that part of the problem with working tax credit cuts is that they are concentrated in certain areas, which means that there is a double effect on the local economy, where that money is no longer going into the high street or into the pockets of children and others and the poverty effect is multiplied?

[Stewart Hosie]

The scenario whereby pockets of poverty exist in communities that have been more reliant on tax credits or other benefits is well known. Of course, those communities always suffer disproportionately when this sort of cut is made, so the hon. Lady is absolutely right. That is an argument for having not simply an economic policy, but some form of regional industrial strategy that will deliver not just any old job, but good jobs in every part of the country.

The real failure of this Government’s so-called “long-term economic plan” is the absence of any real strategy to deliver inclusive growth, and that is what concerns me most. To the SNP, inclusive growth is essential if we are to narrow the inequality gap and absolutely vital to deliver the overall economic growth we need. The UK lost 9% in GDP growth between 1990 and 2010 due to rising inequality, so it is unforgivable to see the same mistake being made all over again.

Let us look at the big picture of the UK’s economic record in the Chancellor’s own words:

“We don’t export enough; we don’t train enough; we don’t save enough; we don’t invest enough; we don’t manufacture enough; we certainly don’t build enough, and far too much of the economic activity…is concentrated…in the centre of London.”

He went on to say in his Mansion House speech:

“We will tackle each and every one of these weaknesses with the same determination we have brought to tackling the deficit—and we’ll draw the whole government effort together in a single plan for productivity”.

The problem is that, on productivity, which is an essential prerequisite, very little has been done. The UK still lags behind the US, Germany, France and even Italy in GDP per hour worked. Even on a GDP per worker basis, the UK is still not competitive. The position in Scotland is broadly similar: both Scotland and the UK sit at the top for the third quartile. We should both be doing so much better than that.

The focus should be on productivity, innovation, internationalisation, and investment in infrastructure, skills and inclusive growth, which I have mentioned. To be fair, the Minister talked about investment and infrastructure. I will come back to that, however, because I am not sure whether her version of the world really matches up either to reality or to what was announced in the summer Budget. For example, on innovation, the 2014 Budget increased the amount available for research and development tax credits—which is to be welcomed—but the UK Government simultaneously reduced the qualifying expenditure.

On exports—I am glad this is back on the political agenda—the deficit in trading goods for 2014 was £124 billion. The deficit on the current account was £93 billion, up from £77 billion the year before. These numbers are all going in the wrong direction. In the Red Book, the contribution to GDP from net trade is negative for the entire forecast period. For the entire period of this Parliament, the contribution to GDP from net trade is negative in every single year. Where is the plan to actually encourage innovation and to support more companies to export and to drive up productivity?

We know that productivity requires investment. The Economic Secretary mentioned that and I said I would come back to it. In particular, we need investment in infrastructure. That is vital for the future. The Economic Secretary is right that the Chancellor and the Government have announced yet another review, but in terms of cold hard cash, capital expenditure forecasts were down for every single year in the Parliament between the spring budget and the summer Budget. That is not the way, if any Government are serious about infrastructure.

When we talk about investment to grow the economy, it is also vital to include investment in education. That will, of course, be the subject of the second debate today, but may I put on record, because it is important to this debate, our view that the Tory approach to education in England runs contrary to the investment approach needed? May I also put on record, because it is in context, my pride at what the Scottish Government have achieved: better school results, a record 119,000 full-time college places, a record 33,000 young Scots going to university, a move towards 30,000 apprenticeships every year and more children than ever from poorer backgrounds going on to further and higher education? This is the investment in education that will deliver the economic growth of the future. [Interruption.] If the Minister wants to chunter or defend the position of the Government in England, I will happily take an intervention.

Today’s motion talks about green jobs. There is much to commend an approach that supports the green economy and investment in it, because of the export potential that goes with those jobs. Like so much else, however, the Tory failure on the economy has been replicated in its approach to the green economy. We saw that with decisions on onshore wind farms, the calculation of the renewable strike price compared to nuclear, and the shorter contract length, all of which sucked investment from that important industry. We have seen it with the failure of successive UK Governments to address the inequity of connectivity charges to the grid over many years.

Any real economic plan should correct the imbalance of a £25 kW charge to connect to the grid in the north of Scotland, against a £5.20 subsidy in London to allow maximising the opportunity of investment. Indeed, the International Energy Agency has suggested that the stop-go political support for renewables is detrimental to establishing a more secure energy system, and that Governments

“must remove the question marks over renewables.”

Even the UN’s chief environment scientist highlighted the damage the UK Government’s “reckless, regressive and irrational” cuts are doing to the support that is necessary to the renewables sector.

[Catherine West]

Does the hon. Gentleman agree with the CBI, which said in a recent all-party meeting that the Government’s policy on the solar industry has severely affected investor confidence?

[Stewart Hosie]

I do agree. I thought it was telling that when the announcement in relation to onshore wind farms was made in this place to remove any support for those that had not passed every single hurdle, Tory Back Benchers were on their feet making the first attack on the solar sector as well. I agree with the hon. Lady entirely.

[Sammy Wilson]

Does the hon. Gentleman not see the contradiction, however, between some of the comments made by his own party colleagues last week when we were discussing the decline in the steel industry and the high energy prices and his support for renewables? Does he not accept that in Spain, for every one job created in the renewables industry, 2.2 jobs are lost in traditional industries?

[Stewart Hosie]

I have heard that argument before. I am not sure about its efficacy and I am not going to comment on it. On the substantive point, however, there is absolutely no contradiction at all between a general attempt to decarbonise, which is the right thing to do, and a clear recognition of the costs of high energy-using industries that are of strategic importance. There is no contradiction there whatsoever.

There is one final point of failure in the UK Government’s mismanagement of the economy: last week’s announcement of HMRC closures. If the UK Government are serious about clamping down on avoidance, evasion, fraud and even error, if they are serious about reducing the £16.5 billion tax gap from small and medium-sized enterprises, if they are serious about reducing the £14 billion tax gap from income tax, national insurance and capital gains tax, and if they are serious about maximising tax yield for investment, then closing 137 HMRC offices, including almost every single one in Scotland, is a catastrophic mistake.

[Chris Evans (Islwyn) (Lab/Co-op)]

I draw the hon. Gentleman’s attention to the Public Accounts Committee report, which said that HMRC is answering less than 50% of the calls put through to it. He, like me, is a constituency MP, so he will know that the biggest frustration for businesses is that they cannot get through to HMRC on the phone. This is a real problem for small, medium and large-sized businesses. Does he condemn the cuts to HMRC as much as I do?

[Stewart Hosie]

I absolutely condemn them. That point is extremely well made. Most individuals and businesses want to be honest. They want to pay their tax. They want to go to a counter, face to face, to make sure everything is absolutely as it should be and then pay the bill. If less than half the calls are being answered now, it will only get worse. Given that in Scotland there will be no face-to-face point of contact north of Edinburgh and Glasgow—Dundee, Aberdeen, Inverness and the whole of the highlands—or south of Edinburgh and Glasgow, including the whole of the borders, this is an idiotic and counterproductive thing to do.

What are the Tories’ plans all about? As the shadow Chancellor hinted, it is ideological to insist, as the Chancellor has done, that the economy not simply breaks even but runs a current surplus hitting £40 billion by 2019-20. It is economically foolish. To do that by delivering additional welfare cuts totalling £33 billion in this Parliament, alongside £5 billion of cuts to essential capital investment—announced in the summer Budget—is, frankly, vindictive, nasty and counterproductive. In short, to cut £40 billion more than is necessary to run a balanced current budget, with almost all of it paid for by punishing the poorest and stripping the capital budget by another £5 billion, is a policy we reject. It is a policy we have already seen fail. It is most certainly a policy the people of Scotland did not vote for.

[Several hon. Members rose—]

National Insurance Contributions (Rate Ceilings) Bill

Stewart Hosie Excerpts

Tuesday 3rd November 2015 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

If the European Union Bill was undersubscribed, this is even more so. Is it such an important Bill, or will we discover that it is not really necessary at all?

The Bill is designed to prevent any increase in the current rates of class 1, class 1A and class 1B national insurance contributions paid by employees and employers for the duration of this Parliament. The Minister said that it would also provide that each of the annual upper earnings limits could not exceed the higher rate threshold—the sum of the personal allowance and the income tax basic rate limit.

As I said on Second Reading—I am happy to put it on the record again today—there is absolutely nothing wrong with any Government providing certainty in the tax code for the duration of their term in office, but let us be clear that we do not need legislation to do that. Legislation is simply a gimmick.

I also said on Second Reading that these proposals should not have come as a surprise because, as the Minister has just said, they were included in the Conservative election manifesto. In many ways, this small three clause Bill is utterly pointless. The real failing with it is that it represents a wasted opportunity.

In July, the Financial Secretary to the Treasury commissioned the Office for Tax Simplification to review the interplay between income tax and NICs. He said:

“I would like the Office of Tax Simplification to look at what the impacts, costs and benefits of closer alignment would be and to set out what the necessary steps would be to achieve closer alignment.”

But this Bill does nothing to help deliver the perceived benefits of closer alignment, and does not offer any real progress towards tax simplification overall.

John Whiting, tax director of the OTS, gave evidence to the Committee. He argued that, although the maintenance of rate levels represented a simplification of the system as it removed some uncertainty, it could represent a complication of the tax system overall if the Government were to make changes to other taxes to compensate for the tax lock. The measure also introduces an inherent inflexibility.

Jonathan Portes of the National Institute of Economic and Social Research has been quoted before, in particular his comment that the pledge not to increase the main taxes

“considerably reduces our flexibility if things turn out different from expected. This is why I have absolutely no doubt that Treasury and Bank of England officials were tearing their hair out at this.”

Yet I am not aware—and I have asked the question before—of what discussions, if any, the Minister or the Chancellor have had with the central bank about these proposals.

I also explained on Second Reading the complexity of the NICs regime. I will not go through that all again, but there is a complex series of employee, employer and self- employed NICs. There are class 1, class 2, and class 4 profit-related contributions, with primary and secondary thresholds, small profits thresholds and lower and upper profits limits. In all of those, the limits and thresholds are different and the rates paid above and below the various thresholds are different. Surely this Bill should have been the opportunity to iron out those inconsistencies in the NICs system. It is yet another wasted opportunity to make the whole system more straightforward.

I also said on Second Reading that individuals may be entitled to make voluntary class 3 contributions to avoid or fill gaps in their national insurance record to ensure that they qualify for basic retirement pension and bereavement benefits. But as yet there appears to be no answer to the question of whether more or fewer people will make additional voluntary contributions as a result of this so-called tax lock.

It is also the case—and this point was alluded to by the hon. Member for Salford and Eccles (Rebecca Long Bailey)—that most NICs receipts are paid into the national insurance fund, which is separate from all of the other revenue raised by taxation. The fund is used exclusively to pay for contributory benefits. If the revenue yield from NICs does not rise in the heroic way planned, can we expect to see cuts directed at the contributory benefits for which people have already paid? That is an important question given that the Minister was quizzed in Committee on the impact of the freeze on the national insurance fund.

It is doubly important given that the Centre for Policy Studies reported in 2014 that the surplus in the national insurance fund had fallen from £53 billion in 2009 to £29.1 billion in 2013. It warned that, as a result of persistent negative real earnings growth, fund exhaustion could transpire as early as 2016. That was echoed by the Treasury’s own figures, which have shown that the fund was able to cover 71% of liabilities in 2009 but that that fell to 25% in 2014. Perhaps the Minister can confirm whether, as is being speculated, the fund might fall below 16.7% of its liabilities this year, which is the minimum recommended by the Government Actuary’s Department. The measure might actually be storing up problems for the future and we still do not know for certain what behavioural change, if any, might be likely following these measures. We have also not yet heard any confirmation of the consequences for spending and other taxes that flow from this measure.

We know the level of discretionary consolidation tax rises and cuts being planned by the Minister and how they are meant to be paid for, but the entire spending plan is predicated on NICs bringing in £115 billion this year and £126 billion next year, rising to £152 billion in 2020-21. That is a forecast rise in revenue yield of 9.6%, 4.3% and 4.7% the year after that, so, even at this late stage, there is one question that the Minister must answer. Given the arbitrary freeze on NICs and other taxes, should the forecast yield be significantly less than expected, will other taxes rise, and if so, which ones, or will the Chancellor take the axe to yet further spending, perhaps pensions? Or will borrowing rise and will the deficit reduction forecast simply be abandoned, delivering the same failure as we saw in the previous Parliament?

We will not oppose the Bill, even though it is rather pointless, but finally, and most importantly, I said a moment ago that the majority of NICs receipts are paid into the national insurance fund, which is used exclusively to pay for contributory benefits, so may we have a cast-iron guarantee that this Bill is not the start of an attack on the contributory principle that applies to NICs in the UK?

[John Redwood]

(Wokingham) (Con): I welcomed the manifesto pledge and am very pleased that we know that for five years there will be no increases in the major tax rates. I listened carefully to the Labour response, and one of the worries expressed was what would happen if there were a cyclical downturn or if the economy hit a bad time because of a world recession or something similar. As I am sure the hon. Member for Salford and Eccles (Rebecca Long Bailey) knows, it is common policy between the major parties in this House that if that happens we will normally borrow more. If revenues fall because people have lost their jobs and are not earning so much, and if costs have gone up because more people are out of work, which we do not foresee and do not wish, it is quite sensible to borrow a bit more to help the economy through the difficulties. Fortunately, the official and external forecasts say that we can look forward to several years of continuing progress and growth, as we have had since 2009, so, we trust, the problem will not arise. I think that that answers her point.

[Stewart Hosie]

The right hon. Gentleman would be right in normal circumstances, but we now have the fiscal charter. Given that it has a rolling four-quarter on four-quarter comparison, if forecasts begin to fall the automatic stabilisers might not necessarily kick in in the way that he has described, which was traditionally the case.

[John Redwood]

I think that we would make a judgment at the time, but fortunately we do not have to make that judgment now. If we should get into that awful position, I am sure that there will be a lot of debate in this House. The hon. Gentleman and I might even share the same view, or we might have a difference of view. We would have to judge it on the figures and on the merits of the case.

On this side of the House, we regard having more people in jobs as a very good thing and want to promote better pay, particularly for those whose pay is very low and needs topping up with benefits. I buy into the Government’s vision that we want more people in work and more people in better-paid work, with less benefit top-up needing to be paid. They should be better off as a result of these changes.

In the course of proceedings this afternoon on this Bill and on the European Union (Approvals) Bill, we have been told that not enough time has been allocated to debate tax credits. I recall that we have had three major debates on that subject quite recently, and three votes, and the House has come to the same view on each occasion. This is another such opportunity. I note that Opposition Members have not come to the Chamber, but it seems to me to fall quite within the remit of the Bill, which is about how to tax work and what people keep as a result of work, to discuss tax credits as another part of the equation. I see the Bill as an important part of the Government’s strategy of making work pay.

We regard work as a good thing, as I trust all parties do, and we do not really want to be taxing good things. Unfortunately, however, we live in a world where we need a lot of revenue, so we end up taxing good things as well as bad things. However, where we have the chance to shift the balance, surely it makes sense to tax the good things less, such as work and earnings, so that people can have more opportunity of finding a job and of keeping more from a better-paid job. We can then find less desirable things that we are more prepared to tax, as well as running sensible value-for-money government so that the overall demands are not too great.

The danger, if one went down the route of opposing the Bill, is that it might become all too easy to put an extra 1% or 2% on national insurance. One might say that people would not notice it, but it would have two immediate adverse effects. First, there would be fewer jobs as it is a direct tax on jobs and, secondly, employees would be worse off because of the effect on their contribution and we would have to find more money under our scheme for tax credits or other top-ups.

In conclusion, it is excellent that my party intends to keep its clear promises to keep these tax rates down, which I fully supported and campaigned on. We must see it as part of the wider debate, and today is another opportunity to debate national insurance in the context of tax credits. If we keep taxes down or reduce them more, there is more scope to deal with the tax credit problem.

--- Later in debate ---

[Mr Gauke]

The proposition of the independence movement was much more optimistic about receipts than the OBR at the time of the referendum. Most important of all, the United Kingdom is more easily able to absorb a volatile oil price than an independent Scotland would be—a point that I would have thought anyone looking at this fairly had to accept.

[Stewart Hosie]

I will not be tempted by the Minister, however generally he put it, other than to say that he is wrong and that the UK Government’s barrel price for gas was higher than that used in Scotland. That is not the point. I completely understand the technical answer that the Minister has just given, but will he please answer the specific question: does this pose a threat to the contributory principle which applies to many of the benefits that people in the UK receive?

[Mr Gauke]

Let us be clear that the OBR’s projections for oil prices—those are the ones that the Government use—were much, much more cautious than those of the independence movement. The black hole that would be the finances of an independent Scotland, had the SNP succeeded in obtaining independence, would have been very considerable, and it is about time that those who campaigned for independence were straightforward with the British people and the Scottish people about what has happened.

The Bill makes no change to the structure of national insurance contributions that would undermine the contributory principle. I am happy to make that explicit to the hon. Gentleman. I hope that is helpful to the House, and I hope the House will support the Bill before us.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 27th October 2015 Commons Chamber

[Mr Osborne]

My hon. Friend makes a very important point. The savings we make in welfare are part of a package that includes a national living wage. Although the national living wage starts to come in next year, over 200 major companies—such as Sainsbury’s, Morrisons, Costa Coffee and many others—have already, since the Budget, introduced wage increases that match what we are proposing to do by statute, so we are already seeing the benefits of the national living wage coming into effect before it is even introduced.

[Stewart Hosie (Dundee East) (SNP)]

We know that there are 500,000 more children in poverty since 2010—[Hon. Members: “No.”] There are 500,000 more children in poverty since 2010, and there will potentially be 4 million children in poverty by the end of this Parliament. If the Chancellor is in listening mode, knowing that he does not need to make these cuts to balance the budget, why does he not listen to those who say, “Stop now with the policy of tax credit cuts”?

[Mr Osborne]

I am afraid that the hon. Gentleman is just not correct on the numbers. Child poverty is down by 300,000 since 2010, and the number of children in workless households is now 500,000 fewer than it was when the Government came to office. The truth is it is difficult to take any lectures from Scottish National party Members about balancing the books. They made forecasts for their oil revenues that would have left Scotland with a £30 billion black hole if they had ever got their way. We will go on delivering economic security for the people of Scotland, and indeed the rest of the United Kingdom, by taking the difficult decisions that his party ducks.

[Stewart Hosie]

The Chancellor is in denial—absolute denial. Did not yesterday, 26 October, demonstrate two things—the Chancellor has lost his political touch, and his chance of being Prime Minister has just gone up in a puff of ermine-clad smoke?

[Mr Osborne]

As ever, when pressed, all that SNP Members want to talk about is party political gains, rather than sorting out the mess that this country was in six or seven years ago. As a result of the changes we have made, there are hundreds of thousands more people in Scotland with jobs, businesses are investing in Scotland, as they are across the United Kingdom, and we will go on making those changes. The hon. Gentleman can go on praying in aid a House of Lords that he has spent his whole life campaigning to abolish. I will go on delivering the reforms to our economy that are needed to help Scotland to continue to grow.

Charter for Budget Responsibility

Stewart Hosie Excerpts

Wednesday 14th October 2015 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

Thank you, Mr Speaker. I shall be as concise as I can be, within reason.

The Chancellor was right to talk about the ups and downs in the economy, and he is right to be cognisant of the risks involved, but to set out a charter with a fixed target with a fixed timescale—namely, to run a fiscal surplus by 2019-20—is precisely to remove any flexibility that might be required in the meantime. No one could have been in any doubt about the Government’s intention when the charter for budget responsibility summer update—the most recent update—was published in July. It was to target a fiscal surplus by 2019-20 and continue to run a surplus thereafter.

The problem for us is what that means in the real world, for ordinary people in the real economy. We kind of know what it means because many have told us—not least the Institute for Fiscal Studies, an organisation often prayed in aid by the Chancellor. We have had our disagreements with the IFS, but for the purposes of tonight’s debate I have to say that it is doing a sterling job. It has published an updated analysis on the scale and distribution of the public sector spending cuts expected in the November spending review. Those cuts underpin the charter’s objectives and the Government’s austerity policies, but the IFS says that those policies put a disproportionate burden on the most disadvantaged families.

The IFS also talks about the higher minimum wage, but says that it will not be enough to compensate lower income households for the welfare cuts. That is a particularly important point, given how many of the welfare cuts are now being directed at tax credits. We all believed that tax credits were an essential tool to “make work pay”, but they are now to be removed to the extent that perhaps 3 million households will be worse off. Also, the scale of cuts to public services envisaged by this trajectory in the public finances will be substantial, with non-ring-fenced Whitehall Departments being asked to find real-terms cuts of between 25% and 40% over the next four years. In short, the austerity measures announced in July will disproportionately harm the poorest and most vulnerable households and non-ring-fenced Departments while of course giving tax breaks to the better off, thus increasing inequality.

Indeed, the IFS and others have repeatedly warned that the planned changes to the tax and benefit system are regressive. They have said that, given the array of benefit cuts, it is no surprise that the changes overall are regressive, taking much more from poorer households than richer ones. The September analysis of the IFS said that the poorest two income deciles will each lose on average about £1,000 a year as a result of the tax and benefit changes announced for implementation during this Parliament. Of course the richest two deciles will be largely unaffected.

According to research by the House of Commons Library—this is the most commonly accepted figure—we are now looking at some 3 million households losing somewhere in the order of £1,300 a year. Importantly, notwithstanding the rhetoric we sometimes hear from the Government Benches, it is the case that the increase in the minimum wage for people aged 25 and over—wrongly branded a living wage—is nowhere near enough to offset the cuts in tax credits.

If we go back to what the IFS said, the national living wage is not a substitute for targeted benefits and tax credits when it comes to helping poorer households and tackling poverty, which runs rather contrary to the assertions made in answers by the Prime Minister at Prime Minister’s questions today. The irony is that the largest part of the gains from the new minimum wage will not go to the poorest households. Indeed, 55% will go to households with higher than average median earnings. The Chancellor’s national living wage is no such thing. In the context of the charter it is important to remember that the real living wage reflects the minimum income necessary to achieve an acceptable standard of living and accounts for existing in-work support. As tax credits are cut, the current living wage, which is already higher than the proposed national minimum wage, will have to be increased further. On top of that, the UK Government are set to continue with their cuts to day-to-day public services. That is the implication of the fiscal charter. Those day-to-day cuts to public services in unprotected Departments will be around £24 billion—19% in real terms over the rest of this Parliament. Scotland, Wales and Northern Ireland will see something in the order of a 5.2% real terms cut to their budgets over the same time frame.

Let us put that in context for the people who may be watching this debate. This will be 10 years of discretionary consolidation—a decade of austerity for real people and the real economy. Austerity strangled the recovery early in the previous Parliament and it will increase inequality in this one. All of that is driven by the fiscal charter. [Interruption.] I think I will leave our friends in the Labour party to their own mourning over the shambles of the position changes over the past 24 hours.

[John McDonnell]

rose—

[Stewart Hosie]

Before I move on to the fiscal charter, I will happily give way to the shadow Chancellor.

[John McDonnell]

Is it not true that the proposals that the Scottish National party have now brought forward are actually Labour’s proposals from six months ago?

[Stewart Hosie]

May I say gently to the hon. Gentleman, whom I genuinely like, that we voted against the fiscal charter on 13 January? Whether he liked it or not, it was his party that voted with the Tories. I am pleased that it has changed its position, but I think on balance it might be better to focus on this matter, where the Chancellor and his party are on rather weak ground, rather than on some internecine struggle.

Before I move on to the fiscal charter, I want briefly to ask the Chancellor about the consequences for Scotland. He knows that under the Scotland Act 2012 Scottish Ministers now have limited borrowing powers, so can he confirm that there is nothing in the charter that will limit the exercise of those statutory powers and that, irrespective of whether or not the UK is borrowing, Scottish Ministers will remain free to borrow up to the agreed limits?

What the Chancellor has done, of course, is insist that the economy not only breaks even, but runs a current account surplus that will hit £40 billion by 2019-20. He announced in July that, in order to do that, additional welfare cuts would total £33 billion in this Parliament. Cuts to essential capital expenditure would total another £5 billion in this Parliament. Essentially, he is cutting £40 billion more than is necessary to run a balanced current budget, and almost all of it will be paid for by punishing the poor and stripping the capital budget of another £5 billion.

[James Cartlidge (South Suffolk) (Con)]

rose—

[Stewart Hosie]

I will happily give way to the hon. Gentleman if he can tell me why he is going to support the economics of the mad house.

[James Cartlidge]

I will tell the hon. Gentleman very clearly. He talks about punishing the poor, but last week the Office for National Statistics showed that the number of workless households is at the lowest level on record. Does that not show that our strong economy is delivering not only stability, but social justice?

[Stewart Hosie]

I am absolutely delighted when workless households get one or more people into a job and have the opportunity to better themselves, but what I am not prepared to tolerate is people who work harder than us having £1,300 a year cut from their tax credits, which stops making work pay.

Essentially, the Chancellor is cutting £40 billion more than is necessary to run a balanced budget, by cutting £30-odd billion from welfare and £5 billion from essential capital expenditure. As ever, these plans are dressed up in the argument that there is no choice. These are always political choices, and he has made the wrong one.

What we need more than anything is growth, and Governments cannot cut their way to growth. To get growth we must narrow the inequality gap. The UK lost 9% of GDP growth between 1990 and 2010 as a result of rising inequality, so it is irrational and counterproductive for the UK Government to be making the same mistakes all over again. To do that at the same time as raising inheritance tax thresholds and cutting tax credits is to take from the poor and give to the rich.

We campaigned against austerity during the election, and we did rather well on that basis. We will continue to hold to our position. Indeed, a modest real-terms increase in Government expenditure would have protected the poorest from the cuts, protected the Scottish budget and ensured that capital spending across the UK was not subject to more cuts while essentially still seeing the deficit fall and debt come down as a share of GDP. That is the option for the UK fiscal mandate suggested by the Scottish Government. It is credible, responsible and fiscally sustainable, and above all it is fair.

[Several hon. Members rose—]