Finance (No. 2) Bill

Angela Eagle Excerpts

Wednesday 25th March 2015 Commons Chamber

[Ms Angela Eagle (Wallasey) (Lab)]

On a point of order, Mr Deputy Speaker. It has just come to my attention that the Government have tabled a motion for debate on the final day of this Parliament, with no notice whatever to myself as shadow Leader of the House. The motion proposes changes to the way in which the Speaker is elected—procedural matters in the House—with no consultation with Her Majesty’s loyal Opposition and no consultation with the Chair of the Procedure Committee, for debate in only one hour tomorrow. Is this in order? Do you believe that the procedures of this House should be bandied around by the Government in this way, and that we should have surprises delivered to us in this manner on the last day of the first ever fixed-term Parliament? The motion attempts to influence the results of the first thing that will happen in the next Parliament, with no chance for large numbers of Members who had no knowledge that this was happening to participate.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

It is a business matter for the Government, as the shadow Leader of the House is well aware. Rightly or wrongly—whichever the House may decide—a business motion was agreed to yesterday, as I understand it, and as we know, business of the House is decided by the Government, not by the Chair, so it is not a matter for the Chair.

Professional Standards in the Banking Industry

Angela Eagle Excerpts

Thursday 5th July 2012 Commons Chamber

[Ms Angela Eagle (Wallasey) (Lab)]

Today’s debate—especially the beginning of it—makes the case more eloquently than I ever could for a forensic, judge-led inquiry, free from charges of partisan political game-playing of the type in which the Prime Minister and, even more disgracefully, the Chancellor have engaged since last Monday. Anyone genuinely wishing for cross-party agreement on the approach to be taken in an inquiry into this incredibly important industry would not have conducted themselves as they have since last Monday. However, since then we have had a more nuanced and calm debate, which I was not expecting after the beginning we had. I am glad that temperatures have cooled.

As I said last week when news of the LIBOR fixing scandal first broke, the potentially criminal behaviour that has been uncovered at Barclays is truly shocking. We also know that other banks are certainly involved, and that investigations are currently being conducted by regulators across three continents. This should not be an occasion for petty party-political points scoring, therefore; it should be a matter of the utmost concern on both sides of the House. Our constituents want us to concentrate on getting to the bottom of this and putting it right, and that is what this debate should be about.

Today, we have a choice between a Government motion proposing a tightly drawn, limited parliamentary inquiry and a motion, supported by all the Opposition parties, proposing an independent, forensic, two-part, judge-led inquiry, with the first part reporting by the end of 2012 on the scandal surrounding LIBOR, and the second part reporting within a year, looking at the wider issues of culture and practices in the banking industry.

The House must today consider whether the scale of misconduct in the banking industry justifies a judicial inquiry, rather than a quick parliamentary examination. In deciding which approach is more appropriate, we need to consider the following questions. Are there issues of culture and practices across the industry that need to be forensically examined? Does the scale of misconduct in the banking industry threaten the future prosperity of the UK if problems are brushed under the carpet and the situation quickly returns to business as usual? Is the culture of multi-million pound bonuses for bankers as a reward for high-risk, complex trading—a culture that took root in the 1980s—something we should worry about? A moment’s consideration reveals that the answer to all those questions is yes.

[Mark Reckless]

rose—

[Ms Eagle]

I will give way to the hon. Gentleman, but I ask him to remember that I only have 10 minutes.

[Mark Reckless]

The Opposition motion says we need a judge to examine forensically the culture of banking. Is the culture of banking really susceptible to legal analysis in that way?

[Ms Eagle]

With expert advice, certainly. That is therefore the approach we must choose.

The banking industry does not want a judicial inquiry; it wants—a multi-billion pound—business as usual. We saw that in its response to the Vickers commission on reform. Top banking executives lobbied hard to protect the status quo, and the Chancellor caved in, but the British people want a judicial inquiry, because they are sick to death of bankers taking mega-bonuses while refusing to lend to small business—we have heard about some instances of that—or to support struggling households. They are angry that greed and irresponsibility in the banking sector led to the credit crunch and they are angry about the real suffering it has inflicted. They want change, not the status quo. They do not want business as usual.

[Alun Cairns (Vale of Glamorgan) (Con)]

I am grateful to the hon. Lady for giving way. Does she recognise the anger among the public, which warrants swift action? We will completely lose their confidence if we wait years before legislative changes are brought about. Does she not recognise that the public demand immediate action?

[Ms Eagle]

The public demand action that will be effective, and that is calm and considered.

A year ago, this House had to decide the best way to get to the bottom of practices in the media. The House made the right choice then. It decided that a judicial inquiry was the best way to get to the truth, to get to the bottom of what had gone on, and to produce recommendations on how culture and practices could be improved. In that instance, the Prime Minister said that the best way of getting to the truth was

“a judge-led inquiry with Ministers answering questions under oath where all the documents have to be revealed and the whole thing is pursued properly by a team of barristers who are expert at finding out the facts”.—[Official Report, 30 April 2012; Vol. 543, c. 1251.]

I am frankly baffled about why the Prime Minister thinks that the best way to get to the bottom of what went on at News International is a judicial inquiry, but the best way to get at what has happened in banking is anything but. It is the wrong choice. Why is the Prime Minister doing what the banking industry, rather than the country, wants him to do?

Let us consider the two options before us today: a parliamentary inquiry or a judge-led inquiry. The Inquiries Act 2005 requires the panel to be independent. This is especially important when there are allegations of the involvement of Whitehall and the Bank of England. The Act ensures transparency and guarantees due legal process. Its enforcement powers are clear and set out in statute, and it can draw upon expert skills and resources to complete its task.

In its 2004-05 report, the Public Administration Committee observed that Committees are not ideally suited to conducting specialised investigations into particular events because of perceptions of partisanship—we have had a little bit of that today—and the limits of ongoing co-operation which could reasonably be expected from Government, and because their evidence-taking procedures are not well suited to drawing out the truth from witnesses. I agree with that assessment. Because of the extraordinary tone adopted by the Prime Minister and the Chancellor, this inquiry has already been poisoned by political partisanship—a point recognised, to his credit, by the hon. Member for Chichester (Mr Tyrie).

A parliamentary inquiry would be dependent on support from Treasury officials who are answerable to obviously partisan Ministers. The rules for parliamentary Committees are in a state of flux; they are obscure and potentially difficult to enforce. A judicial inquiry, as the Prime Minister has said, would have a team of barristers and experts in their field to get at the truth. It is for those reasons that the House rightly chose to set up the Leveson inquiry. Although the Culture, Media and Sport Committee did a good job in examining conduct at News International, it had some obvious limitations. First, the Committee’s powers were insufficient to get at the truth, a matter that is currently being considered by the Standards and Privileges Committee. Secondly, the Culture, Media and Sport Committee was unable to agree a unanimous report and split on party lines, diluting its effect. A judicial inquiry would command widespread public support because of the requirement on those involved to act in a non-partisan way. This House made the right choice in opting for a forensic, judge-led inquiry. It should do so again today.

The Prime Minister has made the wrong choice. The Government first opposed holding any inquiry at all.

[Sarah Newton (Truro and Falmouth) (Con)]

Will the hon. Lady give way?

[Ms Eagle]

No, because there is only a minute left.

With no consultation with Opposition parties, the Prime Minister announced a tightly drawn parliamentary inquiry. He first opposed a parliamentary vote, only then to give way. Over the last three days, on every day, at every stage, the Prime Minister has made the wrong choice.

This inquiry will have a Government majority, so far as we can see, because the Prime Minister’s guiding principle has been partisan interest, not the national interest. From day one, the Prime Minister, the Chancellor and their parliamentary outriders—we have heard from some of them today—have smeared their way around this issue with innuendo and noise, in order to cover up and make it as partisan as possible.

The Government had a choice this week, but they made the wrong one. They have rejected an independent inquiry to get to the truth of what has gone on in the banking industry when we could have had all-party agreement. They have rejected the opportunity to work on a cross-party basis and instead have sought to maximise narrow partisan interests. The result was the start of our debate today. The Government have rejected the opportunity to begin the work to reshape our banking industry so that it plays a positive role in Britain’s economic future and trust is restored, but I hope that Government Members will see sense and join us in the Lobby today. These issues are too important to be dealt with as the Government suggest and the British public will not be satisfied with anything less than a full, forensic and judge-led inquiry.

Financial Statement

Angela Eagle Excerpts

Wednesday 21st March 2012 Commons Chamber

[Mr Osborne]

To be Europe’s technology centre we need to have the best technology infrastructure. Two years ago Britain had some of the slowest broadband speeds in Europe. Today our plans will deliver some of the fastest, with 90% of the population having access to superfast broadband, and improved mobile phone coverage for rural areas and along key roads across the UK. But we should not be complacent by saying it is enough to be the best in Europe when countries such as Korea and Singapore do even better, so today we are funding ultra-fast broadband and wi-fi in 10 of the UK’s largest cities—Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, Manchester, Newcastle and London. My hon. Friend the Member for Brighton, Kemptown (Simon Kirby) asked me to help small cities too, no doubt with his own city in mind. I agree; £50 million will be available for smaller cities too. The fastest digital speeds in the world available in our cities, with the most connected countryside in Europe and the most creative digital content anywhere—that is what a modern industrial policy looks like.

My right hon. Friend the Business Secretary and I have asked Michael Heseltine to review by the autumn how Government spending Departments and other public bodies can work better with the private sector on economic development. From Liverpool to Canary Wharf, Michael knows how it is done. Of course, these projects succeeded because they were not killed off by the planning system. No one can earn their future if they cannot get planning permission. Global businesses have diverted specific investments that would have created hundreds of jobs in some of the most deprived communities in Britain to countries such as Germany and the Netherlands, because they cannot get planning permission here. That is unacceptable.

Next week my right hon. Friend the Communities Secretary and the Minister of State, Department for Communities and Local Government, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), the Minister with responsibility for planning, will publish the results of our overhaul of planning regulation. We are replacing 1,000 pages of guidance with just 50 pages. We are introducing a presumption in favour of sustainable development, while protecting our most precious environments. The new policy comes into effect when the national planning policy framework is published next Tuesday. This is the biggest reduction in business red tape ever undertaken.

As a country, we also want to make the most of the Olympic and Paralympic games. Some of the biggest events will be on a Sunday. When millions of visitors come to Britain to see them, we do not want to hang up a “Closed for Business” sign, so we will introduce legislation limited to relaxing the Sunday trading laws for eight Sundays only, starting on 22 July.

Earning our way in the world means giving young people the skills to compete. In time, the school reforms being introduced by my right hon. Friend the Education Secretary will do more to improve the long-term economic performance of our country than any Budget measure ever will. But we have got to help the young adults who have already been let down by the schools system. We are offering a record number of apprenticeships and our youth contract comes into force next month. I can tell the House that we are also exploring the idea of enterprise loans. Young people get a loan to go to university or college; now we want to help them get a loan to start their own business.

We are also looking to see whether we can make public sector pay more responsive to local pay rates. As we have just heard, that is something the last Government introduced in the Courts Service. London weighting already exists across the public sector. Indeed, the Opposition have proposed the interesting idea of regional benefit rates. So we should see what we can do to make our public services more responsive and help our private sector to grow and create jobs in all parts of the country. We have asked the independent pay review bodies to look at this issue. Today we are publishing the evidence the Treasury is submitting to them, and some Departments will have the option of moving to more local pay for those civil servants whose pay freezes end this year.

New infrastructure and investment and ambitious reforms of planning, education and welfare to help businesses create jobs will all help Britain to earn its way in the world, but we also need a tax system that supports work. Two hundred years ago Adam Smith set out the four principles of good taxation, and they remain good principles today: taxes should be simple, predictable, support work and be fair. The rich should pay the most and the poor the least. The tax system this Government inherited from our predecessor has drifted far from these principles. We have already addressed some of the problem. We have established an Office of Tax Simplification to drive out complexity. Companies are moving to Britain, not away. We stopped the jobs tax. We have taken 1 million low-paid people out of tax altogether. But now we need further reform. We need to give Britain a modern tax system fit for the modern world.

The first goal is a far simpler tax system that businesses can easily navigate and where ordinary taxpayers understand what they are being asked to pay, so we will radically change the administration of tax for our smallest firms. Last year I asked the Office of Tax Simplification for recommendations. It has proposed that we tax small firms on the basis of the cash that passes through their businesses, rather than asking them to spend a huge amount of time doing calculations designed for big businesses. I agree, so we will consult on this new cash basis for calculating tax for firms with a turnover of up to £77,000, double what the Office of Tax Simplification proposed. This will make filling in tax returns dramatically simpler for up to 3 million firms.

We are also pressing forward with our ambition to integrate the operation of income tax and national insurance, which I announced at last year’s Budget, so that we do not ask businesses to run two different payroll tax administrations. A detailed consultation on how we will do this will be published next month.

We will also address some of the loopholes and anomalies in our VAT system. For example, at present soft drinks and sports drinks are charged VAT, but sports nutrition drinks are not. Hot takeaway food on the high streets has been charged VAT for more than 20 years, but some new hot takeaway products in supermarkets are not. Some companies are using the VAT rules that exempt the rental of land to avoid the tax that their competitors are paying. We are publishing our plans today to remove loopholes and anomalies, but we will keep the broad exemptions on food, children’s clothes, printed books and newspapers.

We should also simplify the age-related allowances, which the Office of Tax Simplification recently highlighted as a particularly complicated feature of the tax system. The National Audit Office points out that many pensioners do not understand them. These allowances require around 150,000 pensioners to fill in self-assessment forms, and as we have real increases in the personal allowances, their value is already being eroded.

So over time we will simplify the tax system for pensioners by doing away with the complexity of the additional age-related allowances for anyone reaching the age of 65 on or after 6 April 2013, and I will freeze the cash value of the allowance for existing pensioners until it aligns with the personal allowance. This will protect the existing level of allowance pensioners have while introducing a new single personal allowance for all. It is a major simplification, it saves money, and no pensioner will lose in cash terms.

Under this Government, pensioners next month will receive the largest ever cash increase in the basic state pension of £5.30 a week. Now we want to simplify the basic state pension and its interaction with the second state pension. I pay tribute to the work my hon. Friend the Pensions Minister has done on this. Such is the complexity of this means-tested system that only someone like our Pensions Minister can work out exactly what someone is entitled to and what they need to save, so I can confirm that we will introduce a new single-tier pension for future pensioners, set above the means test. This is currently estimated at around £140. It will be based on contributions and will cost no more than the current system in any year. We will bring forward further details later this spring. It will be a single, generous, basic state pension for those who have worked hard and saved hard all their lives, and a further major simplification of our tax and benefit system.

In the information age people should know what taxes they are paying and what their money is being spent on. My hon. Friend the Member for Ipswich (Ben Gummer) recently proposed to this House that we send taxpayers an annual statement showing them just that. I think this is an excellent idea and intend to put it into practice. HMRC contacts roughly half of taxpayers each year. From 2014, these 20 million taxpayers will at the same time receive a new personal tax statement. This will tell people how much income tax and national insurance they have paid, their average tax rates and how this contributes to public spending—in other words, how much, proportionately, of their tax bill goes to fund the healthcare, education, or welfare bills and how much is spent on servicing interest payments on the national debt. People will know what they are paying and what they are paying it for. A tax system that is simple and transparent: that is our first goal.

Our second goal is a tax system that is more competitive for business than any other major economy in the world. Our predecessors wanted to increase taxes on small businesses. Instead, we have cut the tax rate on small companies to 20%. Our predecessors wanted to increase national insurance on jobs, and we have cut it. Our new controlled foreign company rules will be legislated for in the coming Finance Bill and will stop global firms leaving Britain, as they were, and encourage them to start coming here.

This Government also support research and development here in Britain instead of abroad. We have already increased the generosity of the R and D tax credit for smaller firms. I confirm that from next year we will also introduce an above-the-line R and D tax credit that business organisations such as the Engineering Employers Federation, the Institute of Directors and the CBI have campaigned hard for. We will help new start-up businesses to recruit and retain talent by more than doubling the enterprise management incentive scheme grant limit to £250,000 and easing the rules so that academics in our universities can turn great ideas into great companies. The Treasury will review for this autumn what more we can do to encourage employee ownership.

All these tax reductions will help to win business for Britain, but the headline rate of corporation tax remains the most visible sign of how competitive our country is. We have already cut the rate from 28% to 26%. This April it is due to fall again to 25%. I can tell the House today that we will have a further cut of 1%, to be implemented right away.

From next month, Britain will have a corporation tax rate of just 24%, and we will continue with the two further cuts planned next year and the year after, so that by 2014 Britain will have a 22% rate of corporation tax. That is the biggest sustained reduction in business tax rates for a generation—a headline rate that is not just lower than our competitors, but dramatically lower: 18% lower than the US, 16% lower than Japan, 12% below France and 8% below Germany. That is an advertisement for investment and jobs in Britain, and it is a rate that puts our country within sight of a 20% rate of business tax that would align basic rate income tax, the small companies rate and the corporation tax rate.

I am also increasing the rate of the bank levy to 0.105% from next January, so that the additional corporation tax cuts do not benefit the banks, and so that our levy will in addition raise the £2.5 billion a year that we said it would.

That brings me to the main duties. Let me start with alcohol duty. The Government will shortly be publishing their alcohol strategy to address the growing problem of alcohol abuse, and the many billions of pounds it costs our NHS and criminal justice system, but today I have no further changes to make to the duty rates set out by my predecessor.

Turning to tobacco duty, smoking remains the biggest cause of preventable illness and premature death in the UK. There is clear evidence that increasing the cost of tobacco encourages smokers to quit and discourages young people from taking it up. So duty on all tobacco products will rise by 5% above inflation. That is 37p on a packet of cigarettes, and this will take effect at 6pm tonight.

One area where I am today making substantial changes is gambling duties. The VAT treatment of gaming machines is being repeatedly challenged by operators in the courts, so I will introduce a new machine games duty, with a standard rate of 20%, and a lower rate for low stakes and prize machines of 5%, of net takings. The current duty regime for remote gambling introduced by the last Government was levied on a “place of supply” basis. This allowed overseas operators largely to avoid it, and much of the industry has, as a result, moved offshore. Ninety per cent of online gambling consumed by our citizens is now supplied from outside the UK, and the remaining UK operations are under pressure to leave. This is clearly not fair—and not a sensible way to support jobs in Britain. So we intend to introduce a tax regime based on the place of consumption—where the customer is based, not the company—and, from this April, we will also introduce double taxation relief for remote gambling. These changes will create a more level playing field, and protect jobs here.

I turn now to fuel and vehicle excise duties. High oil prices have put real pressure on household budgets and on businesses. That is why we took action in last year’s Budget to cut fuel duty so that it is 6p lower than our predecessors planned. We have also scrapped the last Government’s fuel duty escalator of annual above-inflation rises, regardless of the oil price, and we are today confirming the fair fuel stabiliser. Above-inflation rises will return only if the oil price falls below £45 on a sustained basis—currently equivalent to about $75. These measures mean that this Government have eased the burden on motorists by £4.5 billion at a time when money is very short. I do not propose to make any further changes to the fuel duty plans already set out.

I am increasing vehicle excise duty by inflation only. To encourage fuel efficient fleets, we will extend the 100% first-year capital allowance for low-emission business cars, reduce the CO₂ threshold for the main capital allowance rates and increase the percentage list price of company cars subject to tax. I can also announce that I am again freezing vehicle excise duty for road hauliers.

I now turn to personal and property taxation. My goal is a tax system where the lowest paid are lifted out of tax altogether, while the tax revenues that we get from the richest increase. Most wealthy people pay their taxes, and without them we could not begin to afford the public services upon which this country depends, but under the last Government it was the boast of some high earners that, with the help of their accountants, they were paying less in tax than their cleaners.

I regard tax evasion and, indeed, aggressive tax avoidance as morally repugnant. We have increased both the resources and the number of staff working on evasion and avoidance at HMRC. Taken together, the anti-avoidance measures in this year’s Finance Bill will increase tax revenue over the next five years by around £1 billion, and protect a further £10 billion that could have been lost. This week we have signed a further agreement with the Swiss to stop UK residents evading tax.

We have done all these things, but today we do even more. On coming to office, I asked Graham Aaronson QC to establish whether a general anti-avoidance rule could work in the UK tax system. He recommended that such a rule would improve our ability to tackle tax avoidance without damaging the competitiveness of the UK as a place to do business. We agree, so we will introduce one. We will consult on the details of the new rule and legislate for it in next year’s Finance Bill.

A major source of abuse, and one that rouses the anger of many of our citizens, is the way in which some people avoid the stamp duty that the rest of the population pays, including by using companies to buy expensive residential property. I have given plenty of public warnings that this abuse should stop, and now we are taking action. I am increasing the stamp duty land tax charge applied to residential properties over £2 million that are bought into a corporate envelope. The charge will be 15%, and it will take effect today.

We will also consult on the introduction of a large annual charge on those £2 million residential properties that are already contained in corporate envelopes, and, to ensure that wealthy non-residents are also caught by these changes, we will be introducing capital gains tax on residential property held in overseas envelopes. We are also announcing legislation today to close down the subsales relief rules as a route of avoidance.

Let me make this absolutely clear to people. If you buy a property in Britain that is used for residential purposes, we will expect stamp duty to be paid. This is the clear intention of Parliament, and I will not hesitate to move swiftly, without notice and retrospectively if inappropriate ways around these new rules are found. People have been warned. It is fair when money is tight, and so many families could do with help, that those buying the most expensive homes contribute more. From midnight tonight, we will introduce a new stamp duty land tax rate of 7% on properties worth more than £2 million.

I also intend to deal with the unlimited use of income tax reliefs. Let us be clear: most rich people pay a lot of tax. It is also right that we have tax reliefs that promote investment, support charitable giving and reflect genuine business loss. But it cannot be right that some people make unlimited use of these reliefs year after year. Everyone in this country, and particularly those with the highest incomes, should contribute a fair share to the Exchequer. Some reliefs, such as the enterprise investment scheme and pensions relief, are already capped, and I do not intend to make any significant changes to pensions relief in this Budget. But, to make sure that those on the highest income contribute a fair share, I am introducing a new cap on those reliefs that are currently uncapped.

From next year, anyone seeking to claim more than £50,000 of these reliefs in any one year will have a cap set at 25% of their income. We have capped benefits. Now it is right to cap tax reliefs too.

That brings me to the rates of income tax and the additional rate of 50p. This tax rate is the highest in the G20; it is higher not just than the tax rate of America, but also of major European countries like France, Italy and Germany. It is widely acknowledged by business organisations and international observers as harming the British economy. Like the previous Chancellor who introduced it, I have always said that it was temporary. But I also said, three years ago, that I would not be prepared to reduce it while we were asking the whole public sector to accept a pay freeze, and I will stick to those pledges.

A 50p tax rate, with all the damage it does to Britain’s competitiveness, can only be justified if it raises significant sums of money. In last year’s Budget, I asked Her Majesty’s Revenue and Customs to look at the evidence, and especially to look at the self-assessment tax receipts that have come in since this January. I am publishing its report today. What it reveals is that the 50p tax rate has caused massive distortions.

HMRC finds that an astonishing £16 billion of income was deliberately shifted into the previous tax year, at a cost to the taxpayer of £1 billion—something that the previous Government’s figures made no allowance for whatsoever. Self-assessment receipts this year are below forecast by some £3.6 billion, while other tax receipts have held up. The increase from 40p to 50p raised just a third of the £3 billion that we were told it would raise.

Of course, the previous Government initially proposed a rate of 45p and then increased that to 50p. Let me tell the House what HMRC says about the difference between 50p and 45p. Its figures—

[Ms Angela Eagle (Wallasey) (Lab)]

What about the OBR?

[Mr Osborne]

I am coming on to the OBR, don’t you worry.

The HMRC figures tell the story. The direct cost is only £100 million a year. Indeed, HMRC calculates that the loss of other tax revenues may even cancel that out. In other words, it raises at most a fraction of what we were told, and may raise nothing at all. So from April next year, the top rate of tax will be 45p. No Chancellor can justify a tax rate—[Interruption.]

Oral Answers to Questions

Angela Eagle Excerpts

Tuesday 6th September 2011 Commons Chamber

[Mr Osborne]

I think that we can take important steps towards greater co-ordination of fiscal policy by implementing, as I say, the agreements that the eurozone came up with before the summer. That is the task at hand now. Speculating now about major treaty change is unrealistic. It is not going to happen in the next few years. It would take several years to bring about such a major treaty change and get it ratified by all the national Parliaments, even if those Parliaments agreed to it. The challenge this autumn is to bring greater stability to the euro’s governance arrangement, which is what our colleagues in the EU want to do.

[Ms Angela Eagle (Wallasey) (Lab)]

The Chancellor recently boasted that Britain is a safe haven from the problems in the eurozone, so will he tell us which EU countries have grown more slowly than the UK in the past 12 months, not in the last quarter?

[Mr Osborne]

As I said, this year, unfortunately, the German economy, the French economy and other major eurozone economies—[Hon. Members: “Ah!”] If Opposition Members do not want to look at the most recent numbers, it is no wonder they have not got a credible economic policy. Until they get one, and take a view on the eurozone and what is happening in Germany, France and the United States, they are not going to be taken seriously, as the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), has reminded them.

[Ms Eagle]

I do not think that the Chancellor knew the answer to that question, but today’s euro figures have revealed that only two countries—Romania and Portugal—have done worse on growth than the UK in the past year. Only yesterday, the Minister of State, Department for Communities and Local Government, the right hon. Member for Tunbridge Wells (Greg Clark), said from the Dispatch Box that there is a crisis of growth in this country. Was not the Chancellor’s friend, the new head of the IMF, Christine Lagarde, right at the weekend when she said that

“growth is necessary for fiscal credibility… We know that slamming on the brakes too quickly will hurt the”

economy “and worsen job prospects”?

We know that he will not listen to us, but why does the Chancellor not listen to sound advice from his friends, including, we hear, on this weekend’s draft G7 statement, which aims to slow the pace of deficit reduction—

[Mr Speaker]

Order. I am extremely grateful to the hon. Lady. I think that we have got the gist of it.

The Economy

Angela Eagle Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Charlie Elphicke (Dover) (Con)]

It is a real privilege and an honour to follow the hon. Member for Islwyn (Chris Evans), who has spoken quite brilliantly. I cannot understand why he has not caught the eye of the Leader of the Opposition before now. He richly deserves to do so, particularly after delivering such a fine speech as we have heard a few moments ago.

I shall now deal with the motion. This is a case of fantasy economics. It advocates the idea of building 25,000 affordable houses and creating 100,000 jobs for young people from a bank bonus tax, which raises less money than the Government’s own banking levy. There is a double-counting issue there, which causes me substantial concern, added to which the Opposition voted against £800 million being raised from tax avoiders. Yet again, Labour Members talk about all these wonderful things that people want, because they want to seem populist, while in reality supporting the very rich. The people on whose side we need to be are the grafters and hard-working people; we should ensure that they get better jobs.

[Ms Angela Eagle (Wallasey) (Lab)]

I thank the hon. Gentleman for giving way. To clarify the issue, the vote on the Finance Bill happened as a result of hundreds of amendments being tabled with almost no notice. The shadow Minister responsible said that we supported the intent behind the measure, but we wanted the Government to bring it back and review it. That is all on the record. The hon. Gentleman should not mislead the House in that manner.

[Charlie Elphicke]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. An hon. Member has been accused of misleading the House. I assume that the hon. Lady meant unintentionally misleading it. She should withdraw that comment.

[Ms Eagle]

I am happy to withdraw it, but the hon. Gentleman is presenting the House with a narrative that is so partial that it is very difficult to understand what he meant.

[Charlie Elphicke]

I am grateful to the hon. Lady for the U-turn she has announced.

When I intervened on the shadow Chancellor, he attacked me for opposing the weakening of our border controls. The previous Government were not well known for being strong on border security or on immigration controls, yet he criticised me for standing up and defending my constituency. Just as the motion before the House is fantasy economics, it was the shadow Chancellor’s fantasy that this Government cut our border controls. It was the previous Government who cut our border controls, such was the commitment of the previous Prime Minister to keeping our borders safe. He had the grand plan of selling off our English borders at Dover in a privatisation, so much did he care about England. In many ways, I wish that he were in the Chamber more often, rather than hidden away in Portcullis House, so that we could set forth to him our concerns about the policies he pursued. The recession and misery that have been brought upon people up and down the land by his serial mismanagement of the nation’s finances are nothing short of a disgrace.

The Labour party has gone from government to opposition, but has learned nothing and forgotten nothing. It has proposed a £13 billion unfunded VAT cut—populist but unrealistic. It has made £10 billion of welfare reform spending commitments—nice for the base of people in dependency culture, but unrealistic and unaffordable. We need to ensure that work pays.

--- Later in debate ---

[Ms Angela Eagle (Wallasey) (Lab)]

We have had an interesting debate. On this very day a year ago, the Chancellor came to the House to announce what he and his spin doctors from Tory central office characterised for reasons of base propaganda as his unavoidable Budget. In reality, they and he knew that it was nothing of the kind. He used such misleading language because he wanted to disguise the central feature of his purpose that day. His aim was to create the image of a Chancellor with little option, as he fought to defend the country from the attentions of the bond vigilantes, stalking the world’s treasuries, looking for countries to kill.

In fact, the reality was very different. The Chancellor deliberately talked up the dangers in the bond markets by irresponsibly claiming that Britain had been on the brink of bankruptcy. He knew then, and he knows now, that it was all overblown rhetoric designed to disguise the fact that his Budget was actually a political choice made by the Conservative-led Government and their Liberal Democrat human shield, and it was an extreme choice. At a time when the economic recovery had not been locked in, he made a political choice to embark on a programme of tax increases and spending cuts greater than any which had ever been tried in Britain’s peacetime history.

[Nadhim Zahawi]

Will the hon. Lady give way?

[Ms Eagle]

No, I will not give way.

The Chancellor’s choice to cut further and faster than was economically necessary ensured that the UK plan to deal with the deficit went from one that was in line with the plans of other G20 countries to one that was far more extreme than anything undertaken in any other advanced economy. In other words, it was a reckless and risky experiment with our economic future.

[Several hon. Members]

rose—

[Ms Eagle]

No.

The Chancellor’s choice meant breaking promises that he made before the general election by scrapping the future jobs fund, cutting tax credits for people on incomes under £50,000 and increasing VAT to 20%. For the hapless Liberal Democrats, his choice meant that they had to do the exact opposite of what they had promised in their election manifesto. Before the election, they promised a £3.1 billion stimulus package; just after it, they went along with a £6.2 billion cut. They campaigned for an end to tuition fees and then trebled them. They warned about a VAT bombshell and then voted for it.

[Alec Shelbrooke]

Will the hon. Lady give way?

[Ms Eagle]

No.

How strange, then, that the Liberal Democrat election slogan was, “No more broken promises”.

[Matthew Hancock (West Suffolk) (Con)]

Will the hon. Lady give way?

[Ms Eagle]

No, I am not giving way, especially not to the hon. Gentleman, who has not even deigned to be present in the House until now. [Interruption.]

[Mr Speaker]

Order. Government Back Benchers must not engage in rhetorical stalking. The hon. Lady has made it clear that she is not giving way, so the position is clear.

[Ms Eagle]

The Chancellor’s choice meant that only Ireland and Iceland have been expected to deliver more austerity measures. The result has been that only Greece, Ireland and Denmark have grown less fast than the UK has managed in the past year. Back then, in what he so theatrically described as his emergency Budget, the Chancellor stood at the Dispatch Box and told us that

“we are all in this together”.—[Official Report, 22 June 2010; Vol. 512, c. 167.]

Well, we do not hear that phrase cross his lips quite so often these days. True, that ludicrous claim was blown apart the day after the Budget by the Institute for Fiscal Studies, but a year on, even the Chancellor seems to have given up on it. Perhaps it has been consigned to the dustbin of history, along with his pre-election pledge to ensure that no one working for a nationalised bank would take home a bonus of more than £2,000. Perhaps it has joined the Government’s promise that there would be no top-down reorganisation of the NHS.

The Chancellor also promised fairness, but a year ago today, he delivered a budget that hits women and children first and hardest, and he was cheered to the rafters by both Government parties in scenes of sadistic jubilation at the cuts that I, for one, and many of our constituents will remember for many years to come.

One year on, the Chancellor’s Budget of extreme austerity is inflicting nothing but pain and hardship on the British people. One year on, people are suffering the biggest squeeze in their living standards for more than 80 years. Food prices are up, petrol prices are up, energy prices are up, transport prices are up—

[Several hon. Members]

rose—

[Ms Eagle]

VAT is up, wages are frozen, hours are falling and real standards of living are sinking fast. It is certainly hurting, but it does not seem to be working.

The Government’s choice to put deficit reduction above every other consideration means that, one year on, they have developed no credible strategy for growth and jobs. All the important economic indicators are warning that the British economy is moving in the wrong direction. The Chancellor’s irresponsible scaremongering about bankruptcy and his reckless decision to compare us to Greece talked consumer confidence down to a 20-year low in January. Inflation, which was falling last year, is now more than twice the Bank of England target and the third highest in the OECD. Unemployment is set to be 200,000 higher than predicted in every year of this Parliament, with youth unemployment blighting one in five of all our young people. Despite all of the talk of being a pro-growth Government, the truth is that growth forecasts have been downgraded, thanks to his choices, again and again and again.

Things were getting better when we left office, but after a year of the present Chancellor and his political choices, they are getting worse. He has created a vicious circle in the British economy. He has put this country into the economic slow lane. By choosing to cut too far, too fast many more people are out of work, claiming benefits and not paying taxes. As a result, the Government have to borrow £46 billion more in the coming years than they expected only last autumn.

We on the Opposition Benches warned the Chancellor last year that huge and rapid cuts in public expenditure risked stifling the economic recovery. We said that his plan to cut billions from public spending last June, when the economy was still fragile, was reckless and irresponsible. Now more people are expressing their doubts about his plan. We have consistently called for a steadier and more balanced approach to reducing the deficit, but instead this ideologically blinkered and arrogant Government continue to claim that there is no alternative. This is irresponsible, it is complacent and it risks putting a permanent dent in our future prosperity.

[Several hon. Members]

rose—

--- Later in debate ---

[Ms Eagle]

A temporary VAT cut could help kick-start our stalling economy and the Government should certainly consider it until growth returns. Instead of giving the banks a tax cut this year, the Government should repeat the bank bonus tax and use the revenue to create 90,000 youth jobs, build 25,000 much-needed houses and support more regional growth. The Chancellor badly needs to change course.

It is not as though the Government are not used to retreating, backsliding, U-turning and executing 180° handbrake turns. They have had enough practice recently. The list is long and growing: decimating school sport in the run-up to the Olympics—abandoned; flogging off our forests—abandoned; ensuring anonymity for rape victims—[Hon. Members: “Abandoned.”]; reinstating weekly bin collections—[Hon. Members: “Abandoned.”]

Only yesterday in the House after Treasury questions the Government executed two huge policy retreats on their proposals to offer 50% discounts on prison sentences and the massive car crash that is their wasteful top-down reorganisation of the NHS. Their Back Benchers might not like it, but they have learned to live with it. They are even learning to adapt their behaviour to accommodate it. Just look at what some of them are saying on the ConservativeHome website. One said:

“When I get a torrent of emails about a controversial issue now, I leave them for seven days before replying, because there is an increasing chance that the line is going to change.”

Another is being even more sensible. He wrote:

“I let the letters and emails on anything where there is a hint of a U-turn pile up for thirty days. Frankly I don’t want to make myself look stupid by defending a policy only for it to change a few days later.”

Another complained that the Whips asked them to write letters defending the Government’s reform plans then the next day abandoned them, stating:

“Ten times bitten, eleventh time shy.”

The reason for all these U-turns and policy retreats is that this is a reckless Government who act first and think later. This is a Government who rush to ideological judgments, act recklessly, and cause chaos and then have to retreat, causing uncertainty and waste. That pattern perfectly describes the Chancellor’s irresponsible first Budget. His decision to cut too far and too fast set the context of rapid cuts against which so many of the recent U-turns have had to be performed.

As the Prime Minister said yesterday:

“Being strong is about being prepared to admit you didn’t get everything right the first time”.

I could not agree more. It is time for this Chancellor to follow his Prime Minister’s example and be strong on the economy. It is time for a plan B.

Oral Answers to Questions

Angela Eagle Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr Gauke]

I shall try to focus on inflation, Mr Speaker, but I think that it is important to the economy all round, in terms of inflation and of other factors, for us to maintain credibility. That is something that the Government have and the Opposition, I am afraid, do not.

[Ms Angela Eagle (Wallasey) (Lab)]

How many of the 34 countries in the OECD have comparable inflation rates higher than the present rate in the United Kingdom?

[Mr Gauke]

The fact that global commodity prices are rising and that the UK experienced a significant devaluation under the last Government mean that we face an issue with inflation, but it is the Monetary Policy Committee of the Bank of England that has responsibility for that. It is one of the few policies of the last Government that still has any credibility. Is the Labour party distancing itself from that policy as well?

[Ms Eagle]

Obviously, the Minister did not know that the answer is only two: Estonia and Turkey. He can huff and puff and blame world commodity prices all he wants, but is it not obvious that the Chancellor’s decision to put up VAT in January because he chose to cut too far too fast is causing real hardship to families throughout the country as they struggle to cope with the most vicious squeeze on living standards in generations? When is he going to realise that his economic policy is hurting and it is not working, and that the whole Treasury Front-Bench team is out of its depth?

[Mr Gauke]

For a moment, the hon. Lady got quite close to supporting the policy the shadow Chancellor announced last week, but she did not quite do so. The fact is that the Bank of England says the main causes of inflation are to do with the devaluation and rising global commodity prices. That is the truth; that is the reality—[Interruption.] Well, that is what the Bank of England says, and I suspect it has a bit more expertise than the hon. Lady.

Oral Answers to Questions

Angela Eagle Excerpts

Tuesday 10th May 2011 Commons Chamber

[Mr Osborne]

Obviously, monetary policy is independent—the MPC sets it in the way we all know—so there is no co-ordination in that sense. I do not have a direct influence on monetary policy, but it is clear that by setting a credible fiscal policy, we give the MPC maximum room for manoeuvre and the freedom to keep interest rates lower for longer. The Governor of the Bank of England made that clear when he gave his Mansion House speech last year, and it is an observation also made by many independent observers of the British economy. Interest rates would be higher if we had a less credible fiscal policy.

[Ms Angela Eagle (Wallasey) (Lab)]

I would like to thank you, Mr Speaker, and the Chancellor for your tributes to David Cairns, our colleague, and to add our tributes from the Opposition side of the House. David was one of those very rare people who caused a change in the law in order for him to be able to take his seat in this place, and when he arrived his presence was not a disappointment to anyone. He was a great colleague and friend, and our hearts go out to his family and friends. We would like to add our deepest condolences at the shocking news of his untimely and very early death today.

Before the last election, both parties now in government pledged no rise in VAT, but with inflation running at double the Bank of England target, people are facing the biggest and longest squeeze in their living standards for 80 years. How does the Chancellor think that increasing VAT by 2.5% has helped them to cope with this issue?

[Mr Speaker]

Order. Whatever may be said about the question, I am sure that the Chancellor will focus on the monetary policy framework. That is what he can be relied upon to do.

Finance (No. 3) Bill

Angela Eagle Excerpts

Tuesday 26th April 2011 Commons Chamber

[Danny Alexander]

I believe that the reduction in corporation tax will benefit businesses in all sectors. As for the question of capital allowances, the changes in relation to short-life assets have been welcomed throughout the business community, and particularly by the Engineering Employers Federation.

In 2007 the last Government reduced the writing down allowances from 25% to 20%, and we are reducing them from 20% to 18%. That is a balanced move which will ensure that firms in all sectors, including manufacturing, benefit from the new corporation tax environment that we are introducing.

[Ms Angela Eagle (Wallasey) (Lab)]

The Chief Secretary has mentioned small business. It is clearly agreed throughout the House that the SME sector will make a vital contribution to future growth in the economy. Does it worry him that, once again, it has been demonstrated that lending to small business fell in the first quarter of this year, despite the attempts to boost it in Project Merlin? What is he going to do about that?

[Danny Alexander]

Of course I am worried if lending to small businesses is falling. The Merlin agreement, which we announced at the end of February, was an agreement with the major United Kingdom banks to secure an additional £10 billion of lending to small businesses this year. We will monitor the position, the figures will be made available, and we will watch the banks like a hawk to ensure that they deliver on the agreement. That is critically important: this Government have acted as the last Government did not manage to.

[Ms Eagle]

rose—

[Danny Alexander]

I am going to press on now. I want to deal with the issue of fairness.

Although growth is key to improving everyone’s prospects in the medium term, we know that many families face real financial pressure now. The Bill therefore includes measures to help hard-working people with low and middle incomes, and to support families who are struggling to make ends meet. The Government are committed to real increases in the personal allowance every year, until no one earning less than £10,000 is caught in the income tax net. Clause 3 takes the first step towards meeting this objective by increasing the personal allowance by £1,000 for this tax year. That is the largest single rise in history. It means that 23 million taxpayers in Britain will be £200 better off this year in cash terms, and that more than 800,000 people will be taken out of income tax altogether.

The Budget also revealed the next step in the process. An increase of £630 next year will keep us on track to deliver the £10,000 allowance by 2015, as promised. That is progressive action by a coalition Government who recognise that those with the broadest shoulders should continue to bear the largest burden, and that those on the highest incomes should pay their fair share.

The Bill includes 11 new measures to close tax loopholes that have remained open for too long. For example, clause 26 will help to end the unfair practice of disguised remuneration. No longer will highly paid employees be offered virtually tax-free lifetime loans which, in truth, will never be repaid. Such arrangements are completely unacceptable. We will ensure that they cannot continue, and that all income is properly taxed. We have consulted to ensure that the impact of the legislation on commercial arrangements is limited, and we intend to make further changes when the Bill is considered in the Public Bill Committee.

Those measures will give us more resources to help families who pay their taxes, but who are struggling with the daily cost of living. The same motivation lies behind clause 7, which increases the supplementary charge on the large profits being made from oil and gas extraction in the North sea.

I understand that the increases in the supplementary charge are controversial, at least in the oil and gas sector. Given that the sector is benefiting hugely from the rapid rise in the world oil price, which currently stands at $124 a barrel, it was right to ask it to share some of its profits with motorists, but we are listening carefully to its concerns about specific investments. As we said in the Budget, we are discussing with several firms the possibility of using the field allowance regime to continue to support investment. The industry is understandably concerned about the stability of the tax regime, given the long-term nature of investments in the North sea. That is why we committed ourselves in the Budget to working with the sector to provide certainty about the long-term future of decommissioning relief, and why we announced a fair fuel stabiliser to reduce the supplementary charge if oil prices fall below an agreed trigger level.

However, we should not lose sight of the fact that this money is financing a much-needed package of support for motorists. First, it is funding the 1p reduction in fuel duty to which clause 19 refers. Secondly, it has helped to cancel Labour’s inflation uprating until January next year. As a result of these two changes, fuel is 6p a litre cheaper now that it would have been under the plans we inherited.

I should also remind the House that this Government inherited plans for above-inflation increases in fuel duty for 2011, 2012, 2013 and 2014. The increase in the supplementary charge has allowed us to abolish this fuel duty escalator, so that duty will not rise above inflation for the rest of this Parliament. As with fairness, so in understanding the issues facing hard-pressed motorists it is this coalition Government who are looking to share the burden of higher oil prices.

Let me now turn to the issue of taxing Britain’s banks. The previous Government announced and implemented a temporary tax on bonuses for one year only. Indeed, it was the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), who advised against repeating that. Clause 72 introduces a permanent levy on bank balance sheets, which will raise £2.5 billion in each and every year of this Parliament. That amounts to £10 billion of additional tax from the banks over the next four years, and, thanks to the decision announced by the Chancellor in February, an extra £800 million for this year too. There will be extra money to help us support jobs and growth this year, such as by providing the finance for an additional £100 million of investment in new science facilities at Cambridge, Norwich, Harwell and Daresbury, and £250 million of investment in the FirstBuy scheme for new-build homes, giving a helping hand to 10,000 people as they climb the first rung of the property ladder.

The Bill will also deliver fairness over the longer term. The changes to the requirements on annuitisation set out in clause 65 have long been called for, and will give people more control over their finances. They will allow those approaching retirement to make their own choices about how they use their pension savings, and they will offer greater flexibility in planning for old age. The introduction of automatic enrolment that is supported by the taxation changes in clauses 68 to 71 will help ensure that a low-cost pension scheme is available for the 5 million employees expected to save in the National Employment Savings Trust. The simpler, fairer rules on pensions tax relief in clauses 66 and 67 will limit the amount of tax relief received by those who make the highest pension contribution. From this year, the annual allowance will be set at £50,000 and the lifetime allowance will be reduced to £1.5 million. That will generate about £12.5 billion by the end of this Parliament, and it will ensure that the pension system remains generous for savers, is fair to taxpayers, and is affordable for the Exchequer. At the other end of the age range, clause 40 introduces individual savings accounts for children, offering a simple and tax-free way to save for a child’s future

Turning to the environment, the introduction of a carbon price floor in clause 77 is a revolutionary move. It demonstrates this Government’s commitment to being the greenest Government ever, and it makes us the first country in the world to introduce such a measure for the power industry.

--- Later in debate ---

[Ms Angela Eagle (Wallasey) (Lab)]

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give the Finance (No. 3) Bill a Second Reading because whilst the Minister of State for the Cabinet Office acknowledged that the country faces an ‘immediate national crisis in the form of less growth and jobs than we need’ this Bill does not address it; because the economic approach set out by the Government in this Bill puts jobs and growth at risk; because the Bill cuts capital allowances to businesses who invest in growth; because the Office of Budget Responsibility estimates that after all the measures in the Bill are taken into account the number of unemployed will be higher by up to 200,000 than forecast in November 2010; because the Bill fails to reverse the higher petrol prices faced by families as a result of the Government’s VAT increase in January 2011; because it does not address the damage done to family living standards caused by the wider tax and benefit changes this month; and because without a repeat of the bank bonus tax, the bank levy alone will mean lower taxes for the banks at a time when families and children are bearing the brunt of the Government’s cuts to household incomes.”

At the beginning of the Second Reading debate on a Finance Bill, it is appropriate to take stock of the situation that we face in the UK and of the Government’s handling of our economy almost a year into their time in office. This was the self-styled “Budget for Growth” that downgraded the growth figures. When one in five young people were out of work, it was a Budget that forecast higher levels of unemployment. This was a Budget from the deficit cutters which forecast £46 billion of higher Government borrowing.

After listening for months to his analysis of the economic challenges facing this country, I must confess that I am very worried about the credibility of the Chancellor. His explanation of the origins of the banking crisis and the recession that it caused is partisan fiction—it has very little connection to economic reality. It seems that I am not alone in worrying about his grasp of the facts, because over the weekend he has been attacked by the enemy within. He has been accused of “fiddling the figures” and telling “untruths”, threatened with a lawsuit and told to withdraw “completely unfounded” claims or risk losing “his credibility as Chancellor”—that is just what the Energy Secretary is saying about him.

The Chancellor is clearly also a founder member of the enemy faction identified by the Deputy Prime Minister in his interview with The Independent over the weekend as

“a right-wing elite, a right-wing clique who want to keep things the way they are”.

Perhaps the Chancellor could tell us, if he bothered to turn up—[Interruption.] Perhaps the “Orange Book” Liberals are part of that right-wing clique. Perhaps the Chancellor will tell us whether this right-wing clique all have a uniform as fetching as the Bullingdon club tux?

What about the Chancellor’s deputy, the Chief Secretary? In response to the Chancellor’s wild accusations last week about the funding of the “Yes to AV” campaign, the Chief Secretary said:

“I think it is a real shame that this sort of pretty desperate scaremongering is going on.”

Well let me tell the Chief Secretary that I know just how he feels, because the Chancellor has been indulging in pretty desperate scaremongering about the threat of a UK sovereign debt crisis since his theatrically named “Emergency Budget” last June, and he has been aided and abetted by none other than the Chief Secretary. As the Energy Secretary said in his letter to the Chancellor over the weekend:

“Robust debate is normal in British politics. Persistent resort to falsehoods is not.”

So the Energy Secretary is off to consult his lawyers, and the Chancellor, the Prime Minister, the Foreign Secretary and the chair of the Conservative Party all appear to be in his sights.

In the meantime, will the Chief Secretary now admit, in the interests of not persistently resorting to falsehoods, that the banking crisis and global recession were not caused by the previous Prime Minister? The truth is that he helped to avoid a global depression and that the current Chancellor got every important call in those days of world crisis wrong. Will the Chief Secretary also have the decency to admit that the deficit was not caused by too much spending on schools and hospitals or by the profligacy of nurses and teachers? The truth is that the crisis was caused by unforgivable excess in the banking sector. Will he also take this opportunity to disown and stop repeating the Chancellor’s irresponsible and pretty desperate scaremongering about Britain being on the brink of a sovereign debt crisis like Greece or Portugal, when it is obvious that it is not?

Like the Energy Secretary, I believe that robust debate is normal in British politics, but persistent resort to falsehoods is not. Will the Chief Secretary therefore now disown the “pretty desperate scaremongering”—I use his own words—about the supposed threat of a UK sovereign debt crisis? The truth is that it was the banking crisis that had a disastrous impact on the public finances. Between 2008 and 2009, nominal GDP fell by 1.8%—that cost £20.6 billion—and tax receipts dropped by 3.7%, costing £19.9 billion. Will he acknowledge that this sudden collapse in economic activity is responsible for the bulk of the deficit? This is not a deficit caused by too much public spending before the crisis, but a deficit caused by the crisis. The truth is that the deficit is the price that we are paying for the failure of the banking system and the recession that was caused by that failure. It is also the price that we paid to prevent a global recession from turning into a worldwide depression, and it was essential to our future well-being as a nation that a depression was averted. We could all have a more mature and relevant debate in this House about the formidable economic challenges facing us, if we began with an acknowledgement of the truth of these facts.

Last June, in their first Budget, this Government embarked on a risky and dangerous experiment with the future of our economy. Last year, they abandoned Labour’s plans to halve the deficit in four years and decided to plough full steam ahead with a deficit reduction plan that went further and faster than that of any other major economy in the G20. So preoccupied were they with their desire to make the biggest public spending cuts since the second world war that they also failed to ensure that growth formed a key part of deficit reduction. They opted for a high-risk approach, and this Finance Bill continues that dubious experiment.

It appears that the Government are in thrall to the economic dogma of a long-dead 19th-century economist, David Ricardo, and their ideological preference for a small state. They imagine that the smaller the government, the less taxation and spending there will be. They think that the private sector will somehow automatically fill the gap left by cuts and that the economy will just grow. That is why they have embarked on a drastic programme of deep and immediate cuts that, if their theory is correct, should already be turning the economy around by now and why they are so uncomfortable with publishing their wholly inadequate self-styled, “Plan for Growth”, which was meant to be the public relations centrepiece of the Budget. Their laissez-faire economic approach assumes that growth will happen automatically without the need for any Government support, much less a plan. That is why the plan was so delayed and of such dubious merit when it finally arrived. Keynesians, however, believe that the economy works very differently and that the Ricardian equivalence dogma is wrong. We ignore the insights of Keynes at our peril, which is why the Government’s economic policy, as set out in the Bill, is taking us in the wrong direction.

The great banking crisis of 2007, which began in the American sub-prime mortgage market, administered a huge and near-fatal shock to the world’s financial system.

[Kelvin Hopkins]

I agree entirely with everything my hon. Friend has said. The Government have completely failed to understand the importance of demand in the economy if we are to get growth, and demand looks as though it is weakening. Even the Treasury now estimates that by the end of this Parliament, borrowing will overshoot by £11 billion. The Government are driving the economy in precisely the wrong direction.

[Ms Eagle]

That is essentially the insight that Keynes developed from his experience as a practising economist. We ignore his insights at our peril—[Laughter.] Hon. Gentlemen on the Government Benches can laugh, but if we get this wrong and the economy does not grow or develop, the price will be paid through a smaller economy, fewer opportunities and lower standards of living for men and women up and down the country. That is not something that the Government or the Government parties should be making a joke of.

The great banking crisis transmitted itself to the real economy in the form of a synchronised global recession. Nothing so serious has been experienced in the advanced economies since the Wall street crash. That great crash destroyed the economic and social fabric of many societies in the interwar years, causing untold hardship and misery. Governments in the 1930s were in thrall to the same Ricardian dogmas as now hold sway in both the Government parties. They did not see a role for the state in protecting the economic and social well-being of their citizens. Their lack of vision and hands-off approach to economic policy led to the great depression and ultimately, the collapse into dictatorships and a cataclysmic world war.

Fortunately, in 2007 the previous Labour Government and economic policy makers the world over did not make the same mistake. They had absorbed the lessons of the interwar years, and they took actions to prevent the recession from turning into a global depression, but before the recovery had become securely established, the deficit hawks reasserted themselves, demanding austerity despite warnings from leading experts around the world that that would be the wrong approach.

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

And from the Liberal Democrats.

[Ms Eagle]

That is true—the Liberal Democrats gave us such warnings before the election.

Undeterred by the lessons of history and without an electoral mandate for such drastic cuts, the new Administration in the UK have proved to be the most extreme of the deficit hawks. They decided that dealing at breakneck speed with the deficit created by the banking crisis was more important than any other consideration, including protecting people against long-term unemployment or against cuts in vital public services. So, before the patient was long out of the emergency room, the Government decided to start administering a deficit reduction shock therapy that could end up being worse than the original illness. There is nothing in economic theory that dictates that Governments should plan to eliminate deficits in four years rather than eight.

The sheer scale and speed at which the Government have proceeded came as a surprise, not least to the 6.5 million people who voted Liberal Democrat at the last election. The Business Secretary warned about the dangers of cutting too far and too fast before the election, only to go along with the most savage cuts that we have had in the UK in peacetime straight after it. Meanwhile, in his speech to the Liberal Democrat Scottish conference last year, the Chief Secretary promised to

“create…jobs and boost the recovery”.

Instead, he has followed the example of the leader of his party when it comes to election promises—he has done the exact opposite of what he said he would do.

Just today, Mr Gary Millar, a councillor in Liverpool, has quit the Liberal Democrats in disgust over their broken promises. He said that he was once

“happy to call myself a Lib Dem, today they make me question my integrity and reputation.”

Like so many others, he feels personally betrayed by the Liberal Democrats, which is why they will face the wrath of an angry electorate next week.

At the time of the election last year, the economy had begun to improve from the depths of the banking-induced recession. Growth was up, inflation and unemployment were falling and borrowing had come in £20 billion better than forecast in the 2009 pre-Budget report. Formidable problems lay ahead, of course, but we were moving in the right direction and growth was seen as part of the solution.

Since the fiscal hawks rolled up at the Treasury, our economy, which was improving, has ground to a halt. Unemployment is higher, inflation is double the Bank of England target and the Chancellor has presided over a collapse in consumer confidence to lower levels than it reached in the depths of the 2009 recession, because he made the political choice to inflict on ordinary families the largest and longest squeeze in living standards since the 1920s. As the cost of living rises and wages fall, he has chosen to impose the increase in VAT, huge cuts in local services and a reduction in the support for child care that threatens to drive many women out of their jobs. His VAT increase alone will cost the average family with children £450 this year, far more than they will gain through increases to tax thresholds. Little wonder, then, that the Office for Budget Responsibility has downgraded the growth forecast again and again.

In his Budget speech, the Chancellor boasted:

“Our country’s fiscal plans have been strongly endorsed by the International Monetary Fund, by the European Commission, by the OECD, and by every reputable business body in Britain.”—[Official Report, 23 March 2011; Vol. 525, c. 951.]

The IMF has lowered its growth forecasts for the UK, however, and its head, Dominique Strauss-Kahn, has warned against cutting budgets too far, creating long-term unemployment and abandoning entire generations to a workless future with no hope. The recent interim OECD assessment of G7 economies predicted that the UK was expected to grow more slowly than any other G7 country except Japan, which has just been hit by powerful earthquakes, devastating floods and the ongoing battle against a nuclear disaster.

[Kelvin Hopkins]

Again, I agree entirely with my hon. Friend, who is making an absolutely excellent speech. There is another factor, however, driving deflation, and that is the fear of unemployment. When people are frightened of losing their jobs, they stop spending their money and try to pay off their mortgages. That is what is happening now and that is why demand will be savagely cut by this Government’s policies.

[Ms Eagle]

My hon. Friend makes an extremely good point about confidence and sentiment in the economy transmitting their way into the real figures through their effect on demand.

Even those who gave their personal stamp of approval to the Chancellor’s aggressive cuts agenda last year in a letter to The Daily Telegraph are now voicing their doubts about weak growth. Ex-Tory MP Archie Norman is worried that the Government’s growth predictions are too optimistic and former Asda boss Luke Bond is predicting a two-year retail recession, which picks up on the point that my hon. Friend the Member for Luton North (Kelvin Hopkins) has just made.

The Government are going too far too fast, and we are paying the price in lost jobs and slower growth. Their phobia about the deficit means they are cutting public expenditure much further and faster than any other major economy. They have made deficit reduction the only thing that matters, regardless of how terrible its social or economic effects will be; they appear to be blind to the lessons of history; they refuse to listen to public concern; and they fail to recognise the absolute necessity of re-establishing growth to get the deficit down. Without growth, austerity measures simply make the deficit worse and impoverish the society they are inflicted on. The Chancellor should, as he so notoriously lectured us in February 2006, “Look and learn from across the Irish sea”. Ireland is on its fourth austerity budget with no end in sight. The evidence shows that all the countries that implemented drastic austerity measures saw their economies go into reverse in the fourth quarter of 2010. Those economies shrank in Greece by 1.4%, in Iceland by 1.5%, in Ireland by 1.6%, in Portugal by 1.5% and in the UK by 0.5%. In contrast, both the German and the American economies grew.

The Chancellor is not solving the problem; he is in danger of making it worse. The day after the Budget, the ratings agency Moody’s embarrassed the Government by suggesting that the UK’s triple A rating might be at risk not because of the deficit but because of slower growth. I would take any pronouncement from the rating agencies with a very large pinch of salt, as they are hugely compromised by the part they played in making the banking crisis worse and they need to be reformed, but, unlike the Chancellor, we have neither made their flawed and partial judgments the central justification for our economic policies nor installed them as the most important judges of our success by giving a dangerous credence to the fiction that the UK’s ability to finance its debts is at risk for reasons of petty party politicking. Their influence makes the inconvenient point for the Government’s political cuts narrative that growth is equally important to successful deficit reduction. Without growth, the deficit will not be sustainably reduced.

[Mr Love]

According to the Government, one of the major contributors to growth in coming years will be an increase in net exports, but with all our European partners struggling, as has been shown, how are we meant to get that increase in net exports and demand?

[Ms Eagle]

With a 25% devaluation in the value of our currency, we certainly ought to be seeing strong increases in economic performance, but my hon. Friend makes an important point about demand in other areas of the economy, especially in the European Union, which is our largest export partner—60% of our exports go there.

The Chief Secretary will already have seen the growth figures for the first quarter of 2011, and I am looking at his face for any scrutable or inscrutable reaction. The figures are due to be released tomorrow, so he has an advantage over the rest of us. I do not know whether he is going to give us any facial hints as to what is in them, but if the OBR’s three-times downgraded forecast of 0.8% is right, the economy will have grown a tiny 0.3% over the past six months against the 1.8% it achieved in the previous six months under the influence of the previous Government’s policies for recovery. As the Financial Times says today,

“it will be difficult to claim that the recovery is self-sustaining unless Wednesday’s number is at least 1.2 per cent and possibly as high as 1.7 per cent.”

The Government’s growth strategy is a hotch-potch of reheated Thatcherite fiddling on the supply side. At its centre is the dubious belief that the most important driver of economic growth is creating a low corporate tax jurisdiction for multinationals, but the economic literature shows that growth tends to be higher in countries that have a higher investment in social and intellectual assets, as well as good capital infrastructures. The Government have a simplistic view that cutting corporate taxes will automatically lead to more investment, but we believe that an investment strategy is needed and that it sends the wrong signal to cut investment allowances. The £200 million one-off extra investment in science and apprenticeships, although welcome, is dwarfed by the £5 billion-a-year cost of reducing corporate taxes, which will help growth only if that money is reinvested in business activities in the UK. The Government’s decision to abolish the regional development agencies and cut regional growth funding by two thirds has set back many viable plans for development that could even now have been building an economic recovery in every region of the UK.

Despite the biggest squeeze in living standards since the 1920s, the OBR is forecasting that one quarter of economic growth this year and a third next year will come from UK households and will be financed by a sharp increase in household debt. Close study has revealed something that the Chancellor chose not to mention in his Budget speech: the OBR expects families to go deeper into debt each year between now and 2015 and expects household debt to rise to a record high of 175% of disposable income, or £77,000 per family, by the end of this Parliament. The Chancellor claims that the only thing that matters is getting Government borrowing down, but he does not say that his plan is to pass that debt directly on to already hard-pressed families. Although they did not cause this crisis, ordinary hard-working people and families are being made to pay for it. People are suffering under the pressure of the Chancellor’s hike in VAT, sky-high petrol prices and inflation, and we know that his real economic strategy is to force people to take on even more debt just to make ends meet.

What then of the sector that caused the crisis? Instead of making the banks pay more this year, the Government are giving them a tax cut. Project Merlin, the Government’s so-called final settlement with the banking sector, is a damp squib. As the majority shareholder, the Government have just approved, for the chief executive of the nationalised Royal Bank of Scotland, £7.7 million in pay and bonuses for last year despite the bank’s having lost £1 billion. It has also emerged that bank lending to small businesses fell again in the first quarter of the year. Lending to small businesses is vital to recovery and despite all the promises from the banks it is going down, not up. The Government should not be giving the banks a tax cut, but should follow Labour’s suggestion and repeat the bank bonus tax this year. That extra money could be used to build 25,000 extra affordable homes, to create more than 100,000 jobs to help tackle youth unemployment and to boost enterprise in the regions.

The Government are hellbent on taking us back in time to the divided Britain of the 1980s. The Tory leaders in the coalition are trying to re-enact the failed Thatcherite policies of the past, which resulted in one part of our society being divided against another. Not only are they making life tougher for people, but they are kicking away the ladders to a better future. They are teaching people to blame the weak and despise the poor. It is happening all over again, just like in the 1980s, but this time the Liberal Democrats are helping them to do it. At the weekend, the Deputy Prime Minister accused the Prime Minister of “defending the indefensible”, but I think that the Deputy Prime Minister and his Government colleagues are doing a pretty good job of that themselves. In public they complain, but in private they roll over and agree to every damaging Tory plan.

The Government fail to recognise the pain that their economic strategy is inflicting on people up and down the country. They want Britain to have a smaller state; they want to create a nastier, meaner, shabbier society that leaves people to fend for themselves; and they are trying to fool the country into believing the myth that the economic storm was all Labour’s fault and that this extreme and dangerous fiscal consolidation programme is the only option to deal with it. The Government need not have cut this far or this fast, because there is a better, fairer and safer way. They need to wake up and accept that their economic polices are not working and are just hurting, and they need to change course before it is too late.

Oral Answers to Questions

Angela Eagle Excerpts

Tuesday 22nd March 2011 Commons Chamber

[Justine Greening]

Obviously, my hon. Friend has his ideas about how he would like to see motorists being taxed in relation to the environment. He will be aware that the way in which vehicle excise duty is structured encourages motorists to purchase and use cars with lower emissions.

[Ms Angela Eagle (Wallasey) (Lab)]

On the day that diesel prices have hit a new high and inflation has jumped higher still, making the squeeze on living standards even worse, why do not the Government admit that they got it wrong on VAT and give struggling working people some much-needed support by reversing the Tory VAT rise on petrol, which would take 3p off the price of a litre? Just do it!

[Justine Greening]

The hon. Lady says, “Just do it!”, but she should know that that is simply not legally possible. She fully understands that. The reason that the Opposition are talking about that is that the fuel duty rises that are coming through were legislated for by Labour, so they are desperately looking for something to say about an issue that they themselves created. She knows that her policy on the VAT rise is illegal, totally unworkable and completely unfunded. Labour wants to take seven years to support motorists; we want to see what we can do to support them now.

Fuel Prices and the Cost of Living

Angela Eagle Excerpts

Wednesday 16th March 2011 Commons Chamber

[Ms Angela Eagle (Wallasey) (Lab)]

I beg to move,

That this House recognises that rising world oil, food and commodity prices are increasing the cost of living and adding to the squeeze on families on low and middle incomes across Britain; believes this has been compounded by the Government’s decision to increase VAT to 20 per cent., which will cost a family with children an annual average of £450, has helped to push up the consumer prices index annual inflation to 4 per cent. and, according to the House of Commons Library, is adding £1.35 to the cost of filling up a vehicle with a 50 litre tank; notes that the AA announced last week that the cost of unleaded petrol has now reached an average of £6 a gallon and that the fuel duty stabiliser promised in the 2010 Conservative Party manifesto has not yet been announced or implemented; further notes that the previous administration regularly postponed planned fuel duty rises when world oil prices were increasing sharply, as they are now; and demands that the Government takes immediate steps to reverse January’s VAT rise on road fuels, using the extra £800 million from the bank levy and securing the appropriate EU derogation, in order to provide relief to hard-pressed motorists and, at the time of the Budget, looks again at the annual duty rise due in April.

It is a great pleasure to follow my hon. Friend the Member for Liverpool, Walton (Steve Rotheram), whose ten-minute rule Bill seeks to address an issue that is close to the hearts of all of us from Merseyside.

Times are increasingly tough for millions of ordinary hard-working people and families in our country. Since May last year, we have seen this Government embark on a reckless gamble with our future prosperity. Public expenditure is being cut too deep and too fast, and up and down the country millions of people are really beginning to feel the pinch. Families are facing the biggest squeeze in their living standards for 80 years, and some economists are warning that it could get still worse. Real wages are static, even falling. With recruitment freezes, job losses and rising unemployment, people are right to be worried about the future.

[Mr Greg Knight (East Yorkshire) (Con)]

Will the hon. Lady help the House? Over the past 13 years, in every aspect of Government policy, the Labour Government were deliberately and decisively anti-motorist. Does the motion before the House today represent a seismic shift in policy, or is it, as we suspect, a transient spat of opportunism?

--- Later in debate ---

[Ms Eagle]

I am rather sorry that I gave way so early in my remarks to that kind of comment. I do not recognise the right hon. Gentleman’s caricature of our policies for motorists. Perhaps he has been reading too much of the Daily Express. [Interruption.] Well, I am a motorist as well. He should realise that motorists are not confined to the Conservative Benches.

[Robert Halfon (Harlow) (Con)]

rose—

[Ms Eagle]

I will give way to the hon. Gentleman, but after that I should like to get some more remarks in.

[Robert Halfon]

I find the Labour motion astonishing, because over the past few years the hon. Lady’s party crucified Harlow’s motorists by putting up fuel duty by 6% a year and increasing it more than 12 times—and it was going to introduce another tax.

[Ms Eagle]

I will come to the details of the motion later. Perhaps the hon. Gentleman will do us the honour of staying in the Chamber and listening to that.

Taxes such as VAT are rising, and the Chancellor’s huge cuts in benefits and services are only just starting to bite. The Government are doing all this while the world economy is still very fragile after the international banking crisis. Global commodity prices are soaring, and these price increases are hitting people and businesses in Britain hard.

[Mark Tami (Alyn and Deeside) (Lab)]

Does my hon. Friend agree that this problem tends to have a worse effect in rural areas than in some towns? A lot of people in rural areas rely on oil as a fuel, so they are being hit by a double whammy.

[Ms Eagle]

I am pleased that the competition authorities have launched an investigation into what has been going on with heating oil. My hon. Friend is right to point out that transport in rural areas is a particular issue.

People who are already financially stretched by this Government’s slash-and-burn approach now find themselves trying to cope with sudden sharp increases in the price of essentials such as food, energy and fuel. Recent OECD figures put UK food inflation at 6.3%. That is higher than the consumer prices index, higher than the retail prices index, and higher than in most of the rest of Europe. In my constituency, parents are now worried about the rising cost of providing balanced meals for their children.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Does the hon. Lady agree that the fuel duty escalator is an important tool to send a clear message that oil prices are going to have to continue to rise, not only for geopolitical reasons but because of peak oil and climate change, and that a way of ensuring that the poorest are not hardest hit would be to scrap the recent VAT increase in totality and replace it with a crackdown on things such as tax evasion and tax avoidance?

[Ms Eagle]

The hon. Lady is right that there has to be a balance between the environmental aspects of taxes on fuel and living standards. However, I find, all too often, that on the green side of the argument the social justice aspects of imposing environmental tax rises are not thought about enough, and such measures tend to hit hardest people whom we are least able to help. She needs to help all of us, when we are thinking about this, by bearing in mind the effects on poverty of environmental taxes.

[Mr Dennis Skinner (Bolsover) (Lab)]

The fuel duty escalator was introduced by the former Tory Chancellor of the Exchequer, the right hon. and learned Member for Rushcliffe (Mr Clarke). One of the first things that the Labour Government did on assuming office was to make sure that we did not pursue that policy. [Interruption.] Oh, yes. That is why, on several occasions in our 13 years, the Labour Chancellor of the Exchequer got rid of the fuel duty increase. That is the truth.

[Ms Eagle]

My hon. Friend fingered the right hon. and learned Member for Rushcliffe, but in fact the fuel duty escalator was introduced in 1993 by a person who is now in the other place, Lord Lamont—

[Charlie Elphicke (Dover) (Con)]

rose—

[Brandon Lewis (Great Yarmouth) (Con)]

rose—

[Ms Eagle]

Let me finish my sentence. It is absolutely the case that it was Conservative Chancellors of the Exchequer who first introduced the fuel duty escalator.

[Chris Ruane (Vale of Clwyd) (Lab)]

And it escalated.

[Ms Eagle]

It did escalate. It is also true that it escalated for one year when we came into government, but we had six years when we did not increase fuel duty at all—not even in real terms. Fuel duty escalators need to be applied sensitively.

[Charlie Elphicke]

rose—

[Ms Eagle]

I am more than happy to give way to the hon. Gentleman.

[Charlie Elphicke]

I thank the hon. Lady for her kindness and generosity in allowing me to intervene. To clear up the addling of some minds in the House regarding the history of this matter, will she confirm that in 1997 duty was 36.86p and today it is 57.19p?

[Ms Eagle]

One has to remember that the price of petrol at the election was £1.20 a litre, at a time when the Conservatives were promising to cut 10p off the price of a litre because petrol prices were too high. It is now £1.32 a litre.

[Brandon Lewis]

rose—

[Matthew Hancock (West Suffolk) (Con)]

rose—

[Ms Eagle]

I give way to the hon. Member for Great Yarmouth (Brandon Lewis), because he stood first.

[Brandon Lewis]

I thank the hon. Lady for being so generous in giving way. Will she confirm that, despite what has been said, my hon. Friend the Member for Dover (Charlie Elphicke) is right: there were 12 fuel duty rises under the Labour Government, and six more were set to come into force before they left office and would have done in the next few years?

[Ms Eagle]

As I said, we had six years when we did not even increase the price of fuel by inflation, so there were real-terms price falls. The number of increases in all sorts of duties tends to expand the more one is in government. We will see what this Government do in the Budget next week.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

The difference in our approach is that we are looking to help people across all parts of the economy. Surely the people at the Freight Transport Association who have been campaigning solely for a fuel duty rise not to be imposed, which would benefit them, should realise that they must build an alliance with other people by campaigning for the striking down of the increase in VAT to 20%, which is hurting everyone, including not only themselves as the people who deliver goods, but the people who have to purchase those goods.

[Ms Eagle]

It is clear that increases in fuel duty have knock-on effects on petrol prices, and that fuel prices in general have complex knock-on effects in an economy. The Government have to think about that as they approach the Budget.

[Rehman Chishti (Gillingham and Rainham) (Con)]

Will the hon. Lady give way?

[Ms Eagle]

No. I have given way a few times, and I am going to get on with my remarks.

It is absolutely clear that increased fuel duty costs are eating further and further into already stretched household budgets, making the squeeze on living standards even worse. Businesses are suffering from problems caused by inflating commodity costs, tighter margins and restricted access to credit from the banks. Many are anxious about how they will get by in the next few years, and the continuing rise in the price of fuel is adding to that worry.

[Claire Perry]

Will the hon. Lady give way?

[Ms Eagle]

I will get on with my remarks and give way to the hon. Lady shortly.

The cost of oil has been rising on world markets as a result of underlying increases in demand from Asia and uncertainty because of the unrest in the middle east. Just a week ago, petrol prices hit a new high at the pumps. The average price for unleaded fuel is, a week later, still £1.32 a litre. That means that the cost of fuel has risen 7p a litre since the beginning of the year. The AA pointed out that the £6 gallon has arrived for the first time, and that prices for diesel have soared even higher, currently averaging £1.38 a litre.

[Gordon Birtwistle (Burnley) (LD)]

I am grateful to the hon. Lady for giving way—[Interruption.] May I refer to an e-mail that I received—[Interruption.]

--- Later in debate ---

[Mr Speaker]

I am grateful to the hon. Gentleman,

[Ms Eagle]

That is nought out of two for the hon. Gentleman. Perhaps the next time he tries to intervene, he will manage to be in order.

[Gordon Birtwistle]

rose—

[Ms Eagle]

I am not willing to give way to the hon. Gentleman. [Interruption.] He can show me the e-mail afterwards.

The Conservative-led Government’s decisions to raise VAT to 20% may have been expertly disguised before the election so that the voters were kept in the dark about it, but we all know about it now. Increased VAT has added an average of £450 a year in extra cost to a family with children and has pushed the headline CPI figure to 4%, which is double the Bank of England’s target.

[Gordon Birtwistle]

rose—

[Ms Eagle]

I will not give way to the hon. Gentleman.

As we all know, VAT applies to petrol. The Library calculated that the Conservative Government’s 2.5% increase in VAT has added nearly 3p to the cost of a litre of petrol when people are least able to absorb that extra cost.

[The Economic Secretary to the Treasury (Justine Greening)]

Perhaps the hon. Lady will confirm and clarify her party’s position on—I think—fuel duty. I am not sure because on ITV’s “Daybreak” the shadow Chancellor said: “We’re saying today, as well as the duty thing, which I’ll think you’ll freeze”—I presume that he was not saying that explicitly to Christine Bleakley—“I think you should reverse the VAT rise.” Specifically on the “duty thing”, is the shadow Chancellor talking about freezing the 1p rise, the RIP rise—[Hon. Members: “RIP?”] Sorry, I mean the RPI plus one rise. Which is it? [Interruption.] I might have made a slip, but I was thinking about the Opposition and their policy.

[Mr Speaker]

Order. Before we continue, may I appeal to Members, including Ministers and other Front Benchers who are intervening, to do that economically? I remind the House that the Chair’s responsibility is to seek to protect the rights of Back-Bench Members who wish to speak. I put it to Front Benchers that Back Benchers will be not inconsiderably irritated if long speeches from the Front Bench stop them getting in.

[Ms Eagle]

I was trying to help hon. Members by giving way. Obviously, that extends the time that one’s remarks take, but I think that some exchange helps the debate.

I hoped that the Chief Secretary would be here today, but we have the Economic Secretary instead. Why will the Chief Secretary not turn up to one of his own debates? Where is he? Why has he not come to tell us about what he has been doing on all those issues?

[Mr Alan Reid (Argyll and Bute) (LD)]

The hon. Lady will recall that when she was a Treasury Minister, she received a delegation of highlands and islands Members of Parliament, including the Chief Secretary, and that we asked for a fuel duty derogation for remote rural areas. We had tea and sympathy, but no action. The Chief Secretary is now implementing that policy. Does the Labour party now support reduced fuel duty for the islands?

[Ms Eagle]

We want to do something that helps everyone in the country, not one third of 1%.

As we all know, VAT applies to petrol. As I said , the Library has calculated that the 2.5% increase in VAT has added nearly 3p to the cost of a litre of petrol when people are least able to absorb that extra cost. We all know that an extra fuel duty increase of 1p above inflation is factored into the Chancellor’s Budget arithmetic and due to be implemented next month. Taken with rising inflation, those changes could put 5p a litre on to fuel duty rates. The combination of sharp rises in world oil prices, ongoing uncertainty in the middle east and the self-inflicted rise in VAT is creating real hardship for many people. It causes higher inflation, lowers consumer spending power, which is already weak, and reduces both consumer and business confidence, thereby putting any prospect of growth at risk. The economy shrank by a shock 0.6% in the last quarter of 2010. People are getting increasingly desperate for some relief from the Conservative Government, but there is precious little sign of it.

[Several hon. Members]

rose—

[Ms Eagle]

I am trying to get on with my remarks, as the Speaker wishes me to do.

What help has been put in place to tackle rising fuel prices since the Government took power last May? The Business Secretary was reported as telling the Press Gallery over lunch recently:

“It’s quite likely that we are going to get a nasty period of high fuel prices”.

Top marks for observation, but most people would think that, at an average of £1.32 a litre, we already have a nasty period of high fuel prices. However, the Minister of State for International Development does not seem to think that they are high. As a former oil trader, he was unable to resist the urge to speculate. His irresponsible guesswork succeeded in generating front-page headlines in The Sunday Times on 6 March, when he announced that he thought that the record price of $147 a barrel for oil reached at the height of the oil price spike in 2008 would be smashed. He said:

“I’ve been saying in Government for two months that if this does go wrong, £1.30 at the pump could look like a luxury, $200 a barrel is on the cards”.

His words of wisdom, which were hardly calculated to bring calm to the international oil markets, were reported around the globe. His headline-grabbing antics succeeded only in making a bad situation worse, and, I would imagine, swift removal from No. 11 Downing street’s Christmas card list.

Meanwhile, total incoherence was breaking out in the oddly named “quad”, which, for those who do not know, consists of the Prime Minister, the Deputy Prime Minister, the Chancellor of the Exchequer and the Chief Secretary. Apparently, they are meant to be the ones who actually run the Government, and it seems that they are falling out over the Conservative manifesto promise to introduce a so-called fuel duty stabiliser, which would cut duty when prices were high but raise the tax when prices fall.

[Several hon. Members]

rose—

[Ms Eagle]

I will not give way. I am trying to get on. [Interruption.] I hope that the hon. Member for Devizes (Claire Perry) will stay in order. I have said that I want to get on with my remarks because the Speaker is trying to protect Back-Bench business, and I have given way a lot. She should now be patient if she wishes to contribute to the debate.

The fuel duty stabiliser relies on the view that increasing oil prices provide the Treasury with a windfall from North sea oil revenues that can be distributed to hard-hit fuel users. Where is the fuel duty stabiliser? In April last year—conveniently before the general election—the Prime Minister, after a huge song and dance on the issue, which we saw on the front pages, suggested that a Conservative Government would cut the cost of petrol by 10p a litre if oil prices remained high. At that time, petrol cost 12p a litre less than it does now. The Daily Telegraph reported that the Tory fuel duty stabiliser

“is expected to be launched within months if Mr Cameron is successful.”

As oil prices soar, voters who remember that promise are still waiting.

Since then, the Prime Minister has dropped lots of little hints about his pet policy, without actually doing anything about it. Every time he mentions it, he is quickly slapped down by the Chief Secretary. That happened in January just after a prime ministerial fuel price hint. Speaking on the BBC’s “Politics Show”, the Chief Secretary said of the stabiliser mechanism:

“It’s a complicated idea and it’s difficult to see precisely how we achieve it”.

Of course, that did not stop the Conservatives dangling the idea cynically before the electorate last April. In the same BBC interview, the Chief Secretary rejected calls to scrap the 1p rise in fuel duty that is due to be introduced this April, saying—

[Several hon. Members]

rose—

[Ms Eagle]

No, let me finish. The Chief Secretary rejected calls to scrap the 1p increase, saying that he was not prepared to “sacrifice income willy-nilly” to help motorists. That is the Chief Secretary who is not at this debate. Perhaps Conservative Members should be asking him their questions. He proceeded to champion the fuel derogation for remote islands, which will help just a third of 1% of Great Britain’s almost 34 million registered vehicles and 60 million people. To be fair to him, he has battled for 10 months to get that policy up and running and, showing the energy and drive for which he is famous, he has managed to get around to asking the EU for permission to think about doing it. That is a perfect example of a policy from this Government: it generates a satisfyingly large amount of headlines, helps virtually nobody and costs almost nothing.

Meanwhile, the Chancellor asked the Office for Budget Responsibility to undertake an assessment of the effect of oil price fluctuations on the public finances, in order to design a stabiliser mechanism. It produced that assessment last September.

[Brandon Lewis]

rose—

[Sajid Javid (Bromsgrove) (Con)]

rose—

[Ms Eagle]

I have given way to the hon. Member for Great Yarmouth (Brandon Lewis) already.

The Office for Budget Responsibility produced the assessment last September, and it failed to make the numbers stack up for the policy. It calculated that the overall effect on the public finances of a temporary oil price rise would be close to zero, and that a permanent rise would create a loss to the public finances. In other words, there is no windfall for the Treasury to redistribute using a so-called fuel duty stabiliser mechanism.

No one appears to have told the Prime Minister about that and he clearly has not bothered to read the OBR report, because at Prime Minister’s questions a couple of weeks ago, he promised a fuel duty stabiliser in the Budget:

“we will look at the fact that extra revenue comes to the Treasury when there is a higher oil price, and see if we can share some of the benefit of that with the motorist.”—[Official Report, 2 March 2011; Vol. 524, c. 300.]

The Daily Telegraph called that statement “misleading and economically illiterate”. I could not have put it better myself.

[Brandon Lewis]

rose—

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

rose—

[Ms Eagle]

I have given way to the hon. Member for Great Yarmouth.

That statement shows that this Government are run by a Prime Minister who does not do detail and who appears to be at odds with his own Chief Secretary. The OBR has shown that a temporary rise in oil prices generates a £100 million surplus in the first year for the Treasury, but that that turns rapidly to a net revenue loss of £700 million the year after. What the Government gain from higher oil tax revenues, they lose from the effects of higher prices on consumption and the requirement to spend more on indexing pensions and benefits. A permanent rise causes permanent losses to the public finances. The Prime Minister has to stop pretending that there is a windfall in rising oil prices that he can share out, because it simply does not exist. [Interruption.]

[Mr Speaker]

Order. I apologise for interrupting the hon. Lady. I say to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) that loud conversations in the middle of a speech are discourteous and must not happen. That is not a proper way to conduct debate. I am not having it, and that is the end of it.

--- Later in debate ---

[Ms Eagle]

I was saying that the Office for Budget Responsibility has given the lie to the view that a fuel duty stabiliser mechanism can be financed by the windfall that rising oil prices give the Government by revealing that that surplus does not exist.

The Secretary of State for Business, Innovation and Skills was caught recently saying that the Liberal Democrats are in a “constant battle” inside the Government, especially over tax proposals. They are obviously in a battle over the fuel duty stabiliser. In debates on the 2008 Finance Bill, he said that fuel duty stabilisers were “unbelievably complicated and unpredictable”. He also said:

“May I suggest that there might not be any net windfall at all?”—[Official Report, 16 July 2008; Vol. 479, c. 339.]

The OBR has since confirmed that there is not. The Liberal Democrat bit of the Government is saying one thing and its Tory masters another. Together, there is total inaction on fuel prices.

The Institute for Fiscal Studies has concluded that introducing a fuel duty stabiliser would inject more uncertainty into the public finances rather than less. Analysis by the Policy Studies Institute found that if a stabiliser had existed for the 12 months to last December, when the price of petrol rose by 13p a litre, it would have cost the Exchequer a staggering £6 billion. The Government’s flagship policy on fuel, which they used cynically before the election to generate so many favourable headlines and to gather votes, is not only late in arriving, but looks shambolic and incoherent.

[Andrew Bridgen (North West Leicestershire) (Con)]

rose—

[Charlie Elphicke]

rose—

[Ms Eagle]

It is clear that the policy can be introduced only at the risk of injecting huge and dangerous uncertainty into the public finances. I give way to the hon. Member for North West Leicestershire (Andrew Bridgen).

[Andrew Bridgen]

The Labour party’s apparent damascene conversion on fuel taxes will amaze and intrigue the bulk of the electorate. Will the hon. Lady confirm whether she supported the crafty action of the previous Chancellor of the Exchequer, who effectively excluded fuel from a VAT reduction in 2008 by raising duty, and then put the VAT on fuel back up to 17.5% in January 2010?

[Ms Eagle]

One minute Government Members say that we have no plan to deal with the deficit, and the next minute they complain that we had a plan that would have raised money. They really do try to have it both ways and are not remotely coherent.

The time for action is now. The Chancellor should take immediate action on fuel prices to ease the cost of living crisis in Britain. He does not even have to wait until the Budget. We are calling on him to reverse immediately the 2.5 percentage point increase in VAT on petrol that he imposed in January.

[Charlie Elphicke]

rose—

[Sajid Javid]

rose—

[Ms Eagle]

I have given way to the hon. Member for Dover (Charlie Elphicke).

The House of Commons Library has estimated that that reduction would cost £700 million and take nearly 3p a litre off the price of petrol.

[Jacob Rees-Mogg (North East Somerset) (Con)]

Will the hon. Lady give way?

[Ms Eagle]

I always give way to the hon. Gentleman.

[Jacob Rees-Mogg]

The hon. Lady is always enormously gracious and generous in giving way. The Labour party is now proposing tax cuts, and has not proposed any serious spending cuts. Does it just want the country to go bankrupt?

[Ms Eagle]

The hon. Gentleman should not believe the propaganda from Tory central office. Of course we do not want the country to go bankrupt. We had a plan that would have halved the deficit, rather than dealing with it in four years. If I were in the Conservative party, I would not be quite so proud of producing the third largest fiscal consolidation—public spending cuts in ordinary language—of the top 29 industrialised countries, beaten only by Iceland and Ireland. As the hardship and the squeeze on living standards in this country become clearer in the coming year, the Government will come to rue their decision to cut too far and too fast. People will suffer day in and day out as a result of that decision.

[Several hon. Members]

rose—

[Ms Eagle]

I want to get to the end of my remarks, and I have given way a lot.

[Mr MacNeil]

Will the hon. Lady give way?

[Ms Eagle]

I will give way to the hon. Gentleman before I finish.

[Mr MacNeil]

I am not sure what the hon. Lady thought about living standards in the Outer Hebrides when, time after time, she stood at the Dispatch Box as a Minister and said what she could not do and why she could not do it. Does she, in her quieter moments, regret not approaching the European Commission for a rural fuel derogation for the Hebrides and other islands in Scotland?

[Ms Eagle]

Why does the hon. Gentleman not want to help the whole of Scotland? Why does he want to help only a tiny bit of Scotland?

[Andrew George (St Ives) (LD)]

Will the hon. Lady give way on that point?

[Ms Eagle]

I must continue.

The Chancellor should use the Budget to look again at the annual fuel duty rise due in April, because of the price of fuel in world markets. At this time of instability and change in the middle east and north Africa, the Chancellor has to work with other Finance Ministers to try to keep oil supplies flowing and get world oil prices down.

At the weekend, the Deputy Prime Minister claimed that the Liberal Democrats were

“in the middle, for the middle”.

I say to them this afternoon: prove it. If they really cared about the struggles facing hard-pressed families in Britain, they would join us in the Lobby and vote for our motion. I for one look forward to seeing them.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

My hon. Friend has laid out clearly why a fuel duty stabiliser or regulator would not work in fiscal terms. The tragedy is that the wider UK public, on the back of the Fair Fuel UK campaign, have been sold the idea of a stabiliser while at the same time talking about a reasonable price. Does she have any idea what would be a reasonable price with which people would be satisfied? It would be quite unsustainable, I think.

[Ms Eagle]

I thank my hon. Friend for his observations, and he is quite right. The stabiliser mechanism relies on our having some idea of the price at which petrol ought to be stabilised, which means guessing right. A wrong guess could lose the Exchequer a lot of money. The question is, when is a rise in fuel prices a blip and when is it a trend? A stabiliser would require a judgment call on that point, too, and if the Government got it wrong it could cost a lot of money.

We have had nothing but delay and dithering on the issue from the coalition parties, despite their electoral promises, which were lavish in the extreme. The Government should be taking action now. Instead, just 10 months in, what do we have? A Foreign Secretary who is looking for his mojo, a Deputy Prime Minister publicly denying being taken hostage by the Prime Minister from inside his £2 million ring of Sheffield steel, and a Business Secretary who is so full of self-importance that he claimed he could bring the Government down single-handed if he was pushed too far. Millions of Britons struggling in the middle of the largest squeeze in living standards for 80 years are hoping and praying that somebody will push him, and push him fast.

Families are crying out for help now, but the Government are cutting too far, too fast and pursuing a dangerous and extreme experiment on the UK economy. Since they came to power, growth has stalled. Today’s unemployment figures are the worst since 1994, and inflation is double the Bank of England’s target. They need to recognise that families need help now, and they need to forget the dogma and join us in the Lobby to vote for this cut.

--- Later in debate ---

[Justine Greening]

I shall not pre-empt next week’s Budget, but the hon. Gentleman knows that both parties in the coalition Government spoke in opposition about the effect of fuel duty on motorists. Conservatives spoke in opposition about how the oil price fed through into fuel prices at the pump, and Liberal Democrats talked about the impact of fuel prices on people living in remote rural areas. The coalition Government are now looking at how to tackle both those problems, but I cannot pre-empt the Budget.

[Ms Angela Eagle]

Will the Minister now admit that although before the election the Conservatives said they would reduce fuel by 10p a litre if petrol prices were high, they have actually increased fuel duty twice—once in October and once in January—since getting into power?

[Justine Greening]

Listening to the Opposition is stunning. The outgoing Chief Secretary’s message to the incoming Government was that there was no money left. Worse than that, the previous Government had pre-planned increases, which were due to come in now, as the hon. Lady just pointed out. The bottom line is that it is outrageous for the Labour party to cry crocodile tears about tax increases that it had planned—it is disingenuous in the extreme, and shows that it has no credibility and no leadership on the issues that matter to people, such as motoring, which we are debating today. The audacity of the motion is stunning.

Let me turn—as I was about to—to the Opposition’s proposal to cut VAT on fuel. [Interruption.] The shadow Chancellor is hectoring from a sedentary position, and I think the reason is that he is worried that we are about to talk about his policy—a policy that unravelled within hours of his announcing it. He has come late to the debate on motoring. Obviously he spent many years being driven around in a Government car that the taxpayer paid for. I understand that it was reported in the papers that he used to use it for journeys of just 100 yards. Perhaps he was not aware at that point of how much it cost people to fill up their cars, but perhaps he knows now, and perhaps that is why he has suddenly realised that this is an issue, as we did in opposition. He has come to this debate late, but his policy-making suggestions are, to put it bluntly, illegal under EU law.

It is quite an achievement to make a proposal along those lines. As I said to my hon. Friend the Member for Gillingham and Rainham (Rehman Chishti) , the shadow Chancellor is quite wrong to say that we can reverse the VAT rise on fuel, because doing so would be illegal under the EU VAT directive. However, if the right hon. Gentleman thinks that the UK operates under a different VAT directive, perhaps he would like to intervene on me right now. [Interruption.] I think we have established that there is only one EU VAT directive, and his proposal is illegal under that directive. The other big flaw in his argument—[Interruption.] Does he want to intervene?

--- Later in debate ---

[Geraint Davies (Swansea West) (Lab/Co-op)]

rose—

[Ms Angela Eagle]

rose—

[Sheila Gilmore (Edinburgh East) (Lab)]

rose—