Finance Bill

Baroness Keeley Excerpts

Monday 1st July 2013 Commons Chamber

[Cathy Jamieson]

I note that the hon. Gentleman showed no inclination to explain to that two-earner couple with children in his constituency why it is right for a millionaire to receive a tax cut at a time when they are set to lose a significant amount of money.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

I wonder whether my hon. Friend remembers two things. She may remember that, an hour before the beginning of the debate, we witnessed a lamentable performance by Ministers who failed to answer question after question about the Work programme, which is one of the worst and least successful programmes for the unemployed that we have seen for years; and I am sure that she remembers the future jobs fund, which was hugely successful in my constituency and returned hundreds of people to work. I think constantly about the people—nearly 1,000, including 195 young people—who have been unemployed for more than a year, and I fervently wish that we still had the future jobs fund, which was not only a successful programme but returned more than it cost.

[Cathy Jamieson]

My hon. Friend is right to mention the success of the future jobs fund. I still believe that, as we said at the time, the Government made a huge error in abolishing the future jobs fund. As I know from my own constituency, it gave young people an opportunity to get into the habit of going to work and learning skills, and gave the voluntary sector, the social economy, the third sector, call it what you like, an opportunity—

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[Cathy Jamieson]

I do not think that my constituents in Kilmarnock and Loudoun who are out of work and desperate to get jobs—including the 400 or so people across East Ayrshire and into neighbouring Lanarkshire who lost their jobs as a result of the collapse of Scottish Coal, the people who lost their jobs when Diageo moved out of the town of Kilmarnock and closed the historic bottling plant, which bottled Johnnie Walker whisky, and all the people who are out of work as a result of the squeeze on small local businesses—would believe that it is fatuous to suggest that a tax cut for millionaires is the wrong priority when cuts have also been made to working tax credit and when other things could be done to support people into work.

[Barbara Keeley]

I want to follow up on the points made by the hon. Member for Bedford (Richard Fuller) about the future jobs fund and to hark back to an impact analysis of the fund done for the Department for Work and Pensions, which found that society gained £7,750 per participant through wages, increased tax receipts and reduced benefit payments. Participants were calculated to have gained £4,000 and employers to have gained £6,850, with the cost to the Exchequer calculated at £3,100 a job. The figures the hon. Gentleman cited would cover the cost. Even better, two years after the start of their time with the fund, those former jobseekers were much less likely to go back to being on benefits. Is that not something we should be re-exploring?

[Cathy Jamieson]

My hon. Friend has made her point extremely succinctly and has put on the record why we feel that the future jobs fund was not only important but a successful initiative. I say again to Government Members who think that the proposal has no impact on the lives of ordinary people that all those who went through the future jobs fund programmes and who worked on them say that the fund was a valuable way of getting young people back into work. People in my area would certainly have liked it to continue.

Let me come back to the points about the new clause. As I said, the Government should be tackling tax avoidance—we will debate that further later—but that does not mean that we should compensate the wealthiest at the expense of those on middle and low incomes. I would have hoped, in the light of everything the Government proclaimed around the time of the spending review about fairness and ensuring that growth came back into the economy, that even at this stage they might have dropped the plan for a millionaires tax cut. That is a forlorn hope, however.

The decision to create that tax cut goes to the heart of the coalition’s political vision and beliefs—and by that I mean both sides of the coalition. We face a period of national upheaval at a time when resources are stretched. The Government criticise the Opposition when we take responsible decisions to think about the way forward while failing to explain their positions. At a time when resources are stretched, when people up and down the country are working harder and harder than ever before for less in their pockets and when public services are being cut so drastically, it is even more crucial that our Government should be a uniting force rather than a dividing one. In that context, I must ask again why on earth this is the time for a tax cut for the richest.

The Government try to talk a good game, but as I said at the outset, reality does not match their rhetoric. They do not seem to understand the need for a one nation approach to politics and they are not able to encourage a sense of national mission, no matter how much they talk about being “all in it together”. This Government will go down in history as the most divisive.

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[Barbara Keeley]

rose—

[Sir Edward Leigh]

Perhaps the hon. Lady also recognises it, but I fear not.

[Barbara Keeley]

I am surprised that the hon. Gentleman is not including the most obvious millionaires in this country. Does he really think that the risk-takers, the entrepreneurs and the wealth creators do not include football players, many of whom are earning multi-millions of pounds? Frankly, the notion that we need all these wealth creators—these people earning fantastic amounts in football—does not hold up.

[Sir Edward Leigh]

That is an absurd argument. I watched the Brazil match yesterday—did the hon. Lady? Millions of our constituents were watching it and enjoying it. I agree that these people are ludicrously overpaid, but they are men of 21 who have an amazing skill. What does it matter if they earn £1,000, £2,000, £3,000 or £100,000 a week or a month? It is none of our business; it does not matter. To claim that my argument is defeated because a few millionaires earn ridiculous sums of money and because there are footballers’ wives is such a ludicrous argument economically that it is barely worth answering.

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[Chris Evans]

Surprisingly, I agree with the hon. Gentleman on his last comment—work does pay. At the end of the day, we can have any Government scheme we want to bring people out of poverty, but there is only one way out, and that is work. The only way out of the current difficulty is for people in work to pay their taxes. If there are even more cuts to the public sector, there will be even more people out of work and the welfare bill will go up, defeating the object of the exercise. It will lead to a high welfare bill, which will have to be paid for, and a low tax yield because of people being out of work.

I say to the hon. Gentleman that we have to wake up to the fact that the social benefits that we want to enjoy will come only from businesses being successful. We must do all we can to ensure that we have a fair, simple and transparent tax regime. How can we stimulate the economy when it seems that those in the middle are being squeezed?

The hon. Gentleman asks whether I talk to my constituents. I do, and those in social housing or council housing are concerned about the so-called bedroom tax. Some 80% of social tenants in Caerphilly county borough are in two or three-bedroom houses. That is not their fault, because no one-bedroom flats or houses are being built. After the war, when Aneurin Bevan invested in social housing, he invested in family homes so that people could bring up children and go to work.

We have heard from the Government, and from hon. Members today, about how much the cut in tax from 50p to 45p will raise. Everybody seems to be able to predict the future—every Government Member who has spoken today has done so, and even the Exchequer Secretary will be guilty of it. They seem to think that they are some sort of latter-day seer, guru or wise man who can see that in future, it will be wonderful under the Tories whereas it would be terrible under the Labour party. However, we do not know what is next. We might be lucky—we might find gas, or we might find oil off the Pembrokeshire coast or more oil in the North sea, which will stimulate the economy. On the other hand, we might have another financial crisis. We do not know. When we talk about what the tax cut will raise, we are basically licking our finger, putting it in the air and wondering which way the wind is going to blow.

To get back to the new clause, it is important that we have a review of the tax cut.

[Barbara Keeley]

One thing that is predictable is that the bedroom tax, which my hon. Friend mentioned, is going to lead to a hit of about £4 million in Salford, which will be one of the worst hit places in the country. That money will be taken out of pockets and shop tills in our local communities. It is now predicted that the arrears that will be run up as a result will also run into the millions. In fact, it looks like it may well get to the point where it is not worth having made the change, because those arrears will not be counteracted and because of the £4 million taken out of our local economy. That situation is becoming evident as the weeks go by, and we can predict what the result will be in a few months.

[Chris Evans]

I thank my hon. Friend for that wise intervention. Welfare reform is a warm and nice thing to say, especially for those of a right-wing bent who want to take out the scroungers and make them pay. But when benefits start to be cut and people are kicked out of their houses, it is a serious concern—I do not want to be melodramatic—that we could see the return of the workhouse.

In constituencies such as mine and those of my hon. Friends, I am fearful that we will see homelessness on a wide scale. The Government may have thought it was a good idea at the time to cap benefits and introduce the bedroom tax, but when we have a huge homeless population and emergency schemes need to be introduced to sort that out, I am afraid that it will be the taxpayer who picks up the bill.

Does the squeeze on benefits motivate anybody to go to work? If someone has arrears or debt and is seeing more of their pay go down the drain, why would they go to work? The Government should be motivating people to go to work; they should be tackling worklessness. Instead of cutting welfare, they should be stepping in to stimulate people to go to work, and talking to those people individually.

We talk about economics all the time, but it is not a scientific discipline—it is about people and how they react to certain circumstances. If I found myself out of work, my needs would be different from those of someone with a lower educational attainment or problems with reading and writing. However, we should be able to say to that person, “What is stopping you going to work? What are the barriers?” What can we provide to get people into work? Yes, that will cost money up front, but in the long term the country will win because of it.

Let me return to my point about putting a finger in the air and wondering which way the wind will blow. It has been estimated that 267,000 people who earn more than £150,000—including 13,000 people who earn more than £1 million—will receive an average tax cut of £100,000, according to figures from HMRC. In contrast, child benefit will be frozen for a third year, and tax credits and other working-age benefits will increase by just 1%, and these real-terms cuts will affect a shocking 9.7 million households. Can we understand that? My constituency has 56,000 electors, but 9.7 million households will be affected by this measure and each person will have an individual story and will have struggled.

The figure of 9.7 million in relation to benefits might conjure up an image of worklessness, but 7.3 million of those households—75% of all households claiming benefits—are in work. That is the crux of the problem we face. We talk about welfare reform and so-called scroungers, but the people suffering most are those we are trying to encourage—those who work hard and play by the rules but who are locked in an economic theory that has clearly failed. Some 2.4 million families will pay on average £138 more in council tax in 2013 as a result of cuts to council tax benefit. That is the ultimate failure of Government—six in 10 working people are claiming benefits. For all the talk of work paying, for many people work is not paying.

Let me return to what I said about the new clause. We need a report. I sat on the Finance Bill Committee with the Minister—I feel sorry for him, as I would for anybody who sat through that. Every day he felt as if he was batting off different reviews. However, this is such an important issue, and the coalition Government have made it such a cornerstone policy, that it needs to be reviewed. We have heard so much about it being wonderful, but we must test the theory: is it stimulating the economy, bringing money through and making work pay? We will not know unless we have a review. That is why it is so important.

I hope the Minister listens. I have a lot of time for him. As I have said, I was in Committee with him: he is sensible and takes a rational view of these matters—[Interruption.] That is the problem—we judge a man by his friends. This is such a cornerstone policy that I hope the Minister will give us some prospect of monitoring it.

I do not want to go into the history of the 1980s and tax cuts again, because I have touched on it already. But I am deeply concerned that we again face a Government who believe in an economic theory that ultimately failed the country. It was not just that we lost heavy industry in the valleys: I think of all the people in the 1980s who were motivated by the dream of starting a business or buying their own homes. By the end, their businesses went bust or they were forced into rented accommodation because they could no longer afford the mortgage. For all that Government’s lauding of their control of inflation, it was through the roof and interest rates hit 15%. We have heard recently from the Governor of the Bank of England that interest rates will go up next year, and I am deeply concerned that this Government will blindly follow the theory of supply-side economics, of Karl Popper and of leaving everything to the market.

Governments have responsibilities. They have a responsibility to create the environment for businesses to flourish and for people to achieve their dreams. I came into politics because I wanted people to aspire to something better, but the Government are giving the very rich a tax cut and everybody else is losing out—660,000 people will lose an average £728 a year under the bedroom tax. Why are the people at the bottom—the people we should be helping—feeling the pain?

I have said before many times that I do not want to knock the bankers. I worked in banking myself and I know how difficult the industry is. I have met my fair share of bankers and they are not all bad, and banking is the cornerstone of this economy, so I always tread carefully when we talk about bankers, but any industry has people who are guilty of criminal activity. In this case, the guilty have not been punished for their criminal activity. It is the Government’s failure that has allowed people to walk away.