Economic Growth

Charlie Elphicke Excerpts

Wednesday 15th May 2013 Commons Chamber

[Ed Balls]

As I said in my opening remarks and as our amendment says, we need a stimulus now. We, the International Monetary Fund, the Business Secretary and The Economist all agree that taking action now to kick-start our recovery is the right thing to do. We should borrow now to get growth moving, so that we get our deficit down.

I have to say to the hon. Gentleman that that very question was asked of the Business Secretary on the “Today” programme just a few weeks ago. He was asked by John Humphries, “So, should you borrow more?” Guess what the Business Secretary said? He said:

“Well we are already borrowing more”.

That is the truth—£245 billion more. I will tell you what I want to do—[Interruption.] I will answer the hon. Gentleman’s question. I want to get the borrowing down. Under this Chancellor, the borrowing has flatlined—the same last year, this year and the year after. That is the reality.

[Charlie Elphicke (Dover) (Con)]

Will the right hon. Gentleman come clean with the House: how much more would he borrow?

[Ed Balls]

As I said, I want to see the borrowing coming down, and it is not coming down because this Chancellor has flatlined the economy. We have had almost no growth since 2010 and the result is that he is borrowing £245 billion more.

I have made speeches in the last two Queen’s Speech debates: I have said that there should be a temporary VAT cut, which would cost £12 billion. I have called for a national insurance cut, VAT at 5% and for infrastructure investment to be brought forward. If those things had been done, borrowing would be coming down now; under this Chancellor, it is not. The economy has flatlined and the deficit reduction plan has flatlined as well.

With the IMF here in town, what the Government should do is listen to the IMF chief economist, who says they are “playing with fire”. The IMF has said they should slow the pace of deficit reduction, stimulate the economy and get growth moving to get the deficit down. That is what the Government should do.

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[Mr Osborne]

The euro preparation unit was shut down by this Government in 2010, but the shadow Chancellor does not seem to know what Labour policy is. The Labour party is committed in principle to joining the euro. [Interruption.] The shadow Treasury team do not know what the monetary and currency policy of their own party is—that is absolutely ridiculous.

[Charlie Elphicke]

The Government have set out a clear and costed economic policy, which they are pursuing. Does the Chancellor share my concern that the Opposition cannot set out their costings, cannot say how much they would borrow and cannot even say whether they would back a referendum? The shadow Chancellor has been completely unable to answer any questions put to him in any straight way whatever.

[Mr Osborne]

The shadow Chancellor could not answer the simple question of how much the amendment he is asking us all to vote on this evening would cost. Surely he must reflect a little and realise that each year his appearance in these debates is a source of consolation and comfort to the Government. He must wonder why each year he makes the same arguments for borrowing but there is no improvement in Labour’s economic credibility. He does not seem to understand that the public think that Labour spent too much, wasted their hard-earned money and would do it all again. Does he not feel that he owes it to the British people to apologise for the mistakes he has made and the damage he has inflicted on their living standards? Should he not stand up and say, “I’m sorry, we got it wrong and we won’t do it again”?

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[Charlie Elphicke]

One of the things my right hon. Friend drew attention to was the problems facing our European neighbours and the challenges posed by their welfare states. Our action in getting on top of the problems of welfare, reforming welfare and making sure that work pays is key to dealing with our place in the world and making this country competitive. I draw a distinction between that and the attitude of the Labour party, which has opposed every welfare reform proposed by this Government.

[Mr Osborne]

My hon. Friend is right. There was a ludicrous remark—I do not know whether anyone noticed it—from the shadow Chancellor when he said that Labour supports tough welfare reform. Labour Members have voted against every single welfare proposal put to the House. The shadow Chancellor thinks the benefits cap is “too low” and that it is not set at the right level at £26,000. That is the problem. Any view of Britain, and any view of western nations, is that they need to do more to constrain the growth of entitlement spending and more to make sure that welfare pays, and to spend the money that they save on things such as infrastructure in Northern Ireland, broadband, high-speed trains and the Crossrail project under London—the vital economic infrastructure that our country needs.

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[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to take part in the debate. This Queen’s Speech is important, sandwiched as it is between the Budget and Red Book, which we already have, and the forthcoming spending review, the details of which we do not have but which still casts a shadow over the potential for growth and recovery in the UK. The Prime Minister mentioned growth in his speech on the opening day of the debate, stating that the measures in the Gracious Speech would “grow the economy”. He also said that they would

“deliver a better future for our children…win the global race”—[Official Report, 8 May 2013; Vol. 563, c. 28.]

and “cut the deficit”. Given the austerity programme so far, it looks like it will lead to 300,000 more children being in poverty by the end of next year, and the forecasts are that there will be up to 4 million children in poverty in a few years’ time. It is difficult to see how any of the measures in the Queen’s Speech can possibly live up to the billing that the Prime Minister gave them.

Given that the balance of trade has been in deficit to the tune of more than £100 billion for the past two years, and that the gap in the total balance of trade has risen by more than £10 billion in the past year, it is difficult to see how anything in the Queen’s Speech can live up to the Prime Minister’s description and do anything to allow us to “win the global race”, whatever that means.

Bringing the deficit down was another of the Prime Minister’s claims, but as the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke) said, net borrowing was forecast at £92 billion but ended up being £121 billion. The cumulative deficit—the net debt—was forecast to rise to about 92% of GDP in a couple of years, but it is now forecast to hit more than 100% of GDP and about £1.6 trillion. There is a great deal of Government rhetoric about what the measures in the Queen’s Speech are supposed to do, but very little real evidence.

However, it is not as though the Queen’s Speech contained no growth measures. There was one potentially significant one—the national insurance employment allowance—but that was not altogether new. It was in the Red Book and budgeted to cost the Government £1.3 billion next year. It is welcome, but because the impact of the Budget policy decisions is to be fiscally neutral over the five years from 2013-14, the overall impact on economic growth of that one meaningful measure will be muted to say the least. It is worse than that, because any beneficial effect on growth of that sensible policy will be wiped out entirely by the additional cuts to expenditure that are anticipated in the forthcoming spending review.

[Charlie Elphicke]

If Scotland became independent, which currency would it use?

[Stewart Hosie]

It would use sterling. We have answered that question many times. We are speaking about the UK Government’s Queen’s Speech and how their programme for the Session will fail to deliver growth not just for Scotland but for everybody throughout the UK.

Let us be clear that the impact of the one good thing in the Queen’s Speech, the employment allowance, will be wiped out entirely if the economy is supposed to absorb the anticipated £11.5 billion of new cuts. That is the figure most commonly used for what is likely to be in the spending review. That will take the UK to discretionary consolidation—tax rises and cuts—somewhere in excess of £155 billion a year, every year, from 2015-16 onwards. Indeed, the Institute for Fiscal Studies has helpfully provided some information stating that it believes the real level of discretionary consolidation could reach £172 billion a year by 2017-18.

The Government plan to cut £11.5 billion, in addition to the cuts so far. To return to the point made by the hon. Member for Dover (Charlie Elphicke), that will be added to the 8.7% real-terms departmental expenditure limit cuts and 25% capital DEL cuts in Scotland. It seems extraordinary that when we are looking for real growth, the Government seriously propose stripping consumption out of the economy to the extent of about 8% of GDP and putting an additional £11.5 billion on top of the £140 billion or so of discretionary consolidation that is already planned, and replacing it with only a single sensible measure, the employment allowance.

What the Government are trying to do is not doable. They are trying to cut their way to growth, which cannot be done. They are ignoring all the evidence that austerity is hurting across the board, and I urge them even at this late stage to think again about their plan. They should rethink not just the contents of the Queen’s Speech or what we are likely to see in the spending review in June but the measures that we have already had in this and previous Budgets. Those measures will lead, as Olivier Blanchard from the International Monetary Fund has said, to the Government “playing with fire” if they allow the economic stagnation to continue.

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[Charlie Elphicke (Dover) (Con)]

It is a pleasure to follow the hon. Member for West Bromwich West (Mr Bailey) who is the true voice of the Labour party, particularly in his refreshing directness—we do not hear enough these days of the Labour party’s belief in open-door, unchecked migration to this country. My constituents in Dover and Deal raise migration on the doorstep time and again and say they are concerned.

[Mr Bailey]

Will the hon. Gentleman give way?

[Charlie Elphicke]

I will give way in a moment. My constituents know that 5 million people in this country could work but do not—

[Mr Bailey]

Will the hon. Gentleman give way?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am sure the hon. Gentleman will give way very shortly after he has made those comments.

[Charlie Elphicke]

I will give way to the hon. Gentleman in a moment.

My constituents feel that 5 million in this country could work but do not. They ought to have more investment and opportunity, and more chances to fulfil their potential. That is why the reforms to welfare to make work pay, the reforms to the skills agenda, the reforms to control migration, and the reforms to control, police and secure our borders are important—they give our fellow citizens more of a chance to do well and succeed in life, and to see their potential unleashed.

[Mr Bailey]

I thank the hon. Gentleman for belatedly giving way. His response to my speech—he has attempted to put words in my mouth that I did not say—demonstrates the exact problem within the Government. They are prejudicial and damaging to the carefully constructed and reasoned debate on immigration that we need in order to get a policy that suits our economy.

[Charlie Elphicke]

I thank the hon. Gentleman for his intervention. I have set out my concerns on behalf of my constituents, who raise immigration on the doorstep time and again. They simply say to me, “I want my sons and daughters to have a chance. I want to be able to get a job, do well and succeed in life.” The Conservative party is the party of aspiration and success, and the party of realising the potential that each and every one of us has. I support the Government’s reforms.

I also support the Government’s reforms on tax avoidance and evasion. Let us imagine the Labour party’s response if the Government doubled income tax and let “their chums” in big business off the hook. There would be howls of rage, and accusations that the Government are on the side of the rich and attacking the poor—accusations that they are latter-day sheriffs of Nottingham—but that is exactly what happened in 13 years of Labour government. Income tax receipts went up by 81%. The working people of this country were soaked with Labour party taxes. Meanwhile, leaving aside oil duties, corporation taxes went up by only 6%. Such is the legacy of the prawn cocktail offensive, representatives of which are in the Chamber.

The Labour Government sold the pass on fair and open competition for smaller businesses in this country in favour of large multinationals. People who work hard for a living were hit with high income taxes while large businesses were allowed to avoid taxes on an industrial scale. That is the legacy of 13 years of Labour. I am delighted that the Chancellor and the Queen’s Speech rightly take action on that.

YouGov polls show that 62% of the public consider legal tax avoidance—it is all perfectly legal, is it not?—to be unacceptable. A ComRes poll has found that 84% agree that the Government should crack down on tax avoidance by businesses operating in the UK. Indeed, 60% are prepared to call the bluff of every large corporation that threatens to disinvest from the rich, highly vibrant and successful UK market, saying that the Government should crack down on business tax avoidance even if it caused unemployment and caused some companies to leave the UK.

That is how strongly the British people feel. I feel strongly, and I was delighted to hear that my hon. Friend the Member for Redcar (Ian Swales) does, too. The Government are right to deal with the legacy of tax avoidance on an industrial scale. They are right to tackle the problem as an international problem, requiring international action. I therefore welcome the Chancellor’s use of the UK presidency of the G8 to take collective action to deal with tax avoidance and evasion.

In particular, we need to reform tax presence. The idea that Amazon is based in Luxembourg defies reality to the ordinary person. They look askance at Amazon warehouses from the motorway and just do not buy the idea that Amazon is based in Luxembourg. The rules need to be updated to cope with the globalised, competitive, internet-enabled world in which we live.

[Mr Dominic Raab (Esher and Walton) (Con)]

My hon. Friend is making a powerful speech. As well as welcoming the Government’s initiative on tax evasion and tax avoidance, will he join me in lamenting the fact that criminal convictions for tax evasion plummeted to 107 in the last year of the previous Government?

[Charlie Elphicke]

Absolutely. We need to send a clear message that everyone should pay a fair share of taxes. We have had too much unfairness for too long.

It is also important to reform the rules on transfer pricing. Starbucks has been the whipping boy for something that is done on a consistent basis by all large international businesses—accountants call it “supply chain optimisation”. Action to tackle it would be fiercely resisted, but it is something we should do. It is not right that profit parking by international tax planners means that our Exchequer does not receive its fair share.

Part of the agenda must be a positive, engaging discussion with the European Union where we say, “Look, these are the reforms we need.” I am pleased to see that the Chancellor has been getting the Germans on board and talking to the French. Indeed, he should talk to the US, because it too is losing tax revenues. Profits that should go back to the States get parked in tax havens, so Uncle Sam loses out as well. This is an international problem that needs to be dealt with internationally.

In Europe, a key reform must be to look again at the parent subsidiary directive, which a German MEP recently described as the heartland of tax avoidance, and which is too often abused. We need to ensure that the EU works positively with member states to help to secure their tax bases. The public finances of every member state in the EU are under pressure. Every member state in the EU should see it as in their interest to take effective, international co-operative action to deal with this problem that we all face. It is high time we stood up to large international businesses and said, “We have to secure our tax base.” We have to secure a fair deal for each individual who is living in this country, so that they pay a fair share of income tax while large international corporations pay a fair share of corporation tax. We must ensure that there is a level competitive playing field for home-grown businesses, just as much as there is a level competitive playing field for international businesses. That would be the right settlement and tax framework for the UK and all our European neighbours.

Oral Answers to Questions

Charlie Elphicke Excerpts

Tuesday 14th May 2013 Commons Chamber

[Mr Gauke]

This is the Government who have raised the personal allowance that has taken millions of people out of income tax and resulted in tax cuts for some 26 million people. A tax rate that does not bring in revenue is a flawed tax rate, which I assume is why, despite everything we hear from the Opposition, they will not commit to returning to a 50p rate of income tax. They know that it does not raise revenue.

[Charlie Elphicke (Dover) (Con)]

Q25. Can the Minister confirm whether, all things considered, the richest people in this country are paying a greater or lesser proportion of their wealth in tax than they were under the previous Government?

[Mr Gauke]

They are paying a greater proportion of their income. If we look at what the Government have done across the board, including stamp duty, capital gains tax and the cap on reliefs, we see we are ensuring that the wealthy are paying more. The reality is that there are better ways to ensure that than the 50p rate of income tax, which was uncompetitive and failed to raise revenue.

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[Mr Gauke]

The CFC regime is designed to protect revenue for the UK, but we can do a great deal to help developing countries through exchange of information, new global standards and capacity building. The Government are doing a huge amount on those fronts.

[Charlie Elphicke (Dover) (Con)]

If the Government were to go out and borrow £28 billion as some suggest, what would the effect be on fiscal stability and interest rates for homeowners?

[Danny Alexander]

My hon. Friend rightly draws attention to the figure of £28 billion—the extra borrowing in the alternative Queen’s Speech put forward by the Opposition. It confirms yet again that their approach is to borrow more and more, taking no account of the consequences. Perhaps that is one reason why the Leader of the Opposition, in a well-known radio interview, refused to accept that his party would increase borrowing and why his proposals have rightly been dubbed a “Milishambles”.

Finance (No. 2) Bill

Charlie Elphicke Excerpts

Wednesday 17th April 2013 Commons Chamber

[Chris Leslie]

I can tell the Minister that in this financial year it would be necessary for us to repeat that bank bonus tax. We will set out our tax and spending proposals when we write the manifesto for the general election. Heaven knows what kind of mess we will have to untangle after a further two years. It would be invidious to make decisions at this point in the cycle when the Minister will not tell us what is in the spending review in just two months’ time. We will make an assessment in two years’ time. I can certainly tell him that, from our point of view—this is a serious policy distinction—a bank bonus tax would be necessary now, particularly to help fund a compulsory jobs guarantee for young people. That is a necessity, given the unemployment figures we saw earlier today.

[Charlie Elphicke (Dover) (Con)]

Can the hon. Gentleman tell the Committee exactly how much extra he wants his proposal to raise?

[Chris Leslie]

We feel that £2 billion could be raised this year from a repetition of the bank bonus tax. That would be an important contribution from those who are doing particularly well. I do not know whether the hon. Gentleman moves in those circles and whether he has seen, as though nothing much has changed in the world, how high bonuses continue to be. Yes, changes from the European Union and elsewhere are being forced on to the bonus culture, but bonuses are still excessively generous to the very lucky few. There are a number of reasons why the bank bonus tax would be good not just for the taxpayer, but in changing the culture in the sector itself. The tax raised £3.5 billion when it was last tried in 2009.

[Chris Leslie]

I was anticipating that question from the Minister. This is the Minister who has tweaked and changed the rate, I think, five or six times in various Finance Bills, all to fit the £2.5 billion figure that he has totally failed to address. We need to go back to the drawing board on the bank levy and find a way of calculating it so that it properly yields the sums that we envisage. Of course, the bank levy has to be thought through, so that we get that resource in. It is totally unacceptable to have lost nearly £2 billion for the taxpayer in the past two financial years. Just think what that £2 billion could have achieved in that period. This is not small money. There is the classic chancellorial phrase, “A billion here, a billion there and very soon it starts to add up to real money”, but this is significant resource. It is to the great shame of Ministers that they have allowed that money to slip away from them.

[Charlie Elphicke]

I thank the hon. Gentleman for giving way again; he is being generous with his time. I just want to understand one thing. If, say, he raised £2 billion in the way he proposes, what would he say to the person who finds it harder to get finance for the borrowing that they need, because of the regulatory requirements on banks and because he had taken a whole load of money out of the banking system, reducing the ability of the banks to lend money?

[Chris Leslie]

Why should a constraint on the bonus pool have a constraint on the lending capacity of banks? The hon. Gentleman seems to be suggesting—this is the classic Conservative attitude to banking—that the one inviolate part of a bank’s balance sheet is remuneration, or “compensation” as they sometimes like to call it: “Do what you like to the banks, but for goodness’ sake don’t affect that bonus pool and don’t change that compensation pool.” Well, I am sorry, but we take a totally different point of view. In fact, if there is one area of bank finance that needs a culture change, and which proves that stronger capital adequacy is not anathema to bank lending, it is management remuneration. It is too bloated and needs to change.

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[Chris Leslie]

Well, that is still more than we normally get in one intervention. You are very generous in the Chair, Mr Amess. I do not think there was any evidence of the bonus tax being passed on to customers before, because regulation can ensure constraints on how the remuneration pool works. The Bank of England itself, through the Financial Policy Committee, is now sending the strong message that banks should stop prioritising that bonus pool and level of compensation. The world has changed, and the banks have to recognise that their behaviour also has to change.

We want specifically to target the highest-paid individuals in the banks, not the clerks or ordinary staff. The tax would be aimed at large, discretionary bonuses above £25,000, which continue to be paid out even in the state-owned banking sector. RBS and NatWest paid out bonuses worth £607 million in 2012, despite making a £5 billion loss. Of course, it was the Prime Minister who promised to ensure that any state-owned bank did not pay out a bonus of more than £2,000.

[Charlie Elphicke]

Will the hon. Gentleman give way?

[Chris Leslie]

I am sure that the hon. Gentleman remembers that promise from his great leader.

[Charlie Elphicke]

The hon. Gentleman is right: we all want to see pay restraint on the part of banks and the banking system. However, that is a separate argument from the issue of imposing taxation. If he took £2 billion out of the banking system at this time, it would mean less finance or pricier finance, which would be bad for the economy and bad for the recovery.

[Chris Leslie]

We are repeating the intervention and the response I gave earlier. I just disagree with the hon. Gentleman. I do not think it is an inalienable right of bankers to continue to receive multi-million pound bonuses. The world has changed, as even many Government Members recognise. Defending the indefensible will not do him any good.

Oral Answers to Questions

Charlie Elphicke Excerpts

Tuesday 12th March 2013 Commons Chamber

[Mr Speaker]

That was very wide of the subject of public sector net debt falling as a share of GDP in 2015-16. The hon. Gentleman needs to do his research and have another go. Go back to the drawing board. We are grateful to him.

[Charlie Elphicke (Dover) (Con)]

Would it ever be a credible policy to borrow more in order to borrow less, or would it simply increase our debt, damage our credit rating and ensure that the country would be in even greater difficulties than it already is thanks to the Labour party?

[Sajid Javid]

My hon. Friend makes a good point. If the country were now following the Labour party’s plans, independent assessments show that the country would be borrowing £200 billion more: more debt, more deficit. As we bring the deficit under control we will be able to invest in things such as broadband plans in Swansea and help growth in this country.

Economic Policy

Charlie Elphicke Excerpts

Monday 25th February 2013 Commons Chamber

[Mr Osborne]

We are confronting the problems that the hon. Lady’s party left this country. If she is seriously trying to blame us for the fact that there was an 11.5% budget deficit, or for a financial crisis that was brewing while the shadow Chancellor was regulating the City, she needs to read her history books.

[Charlie Elphicke (Dover) (Con)]

Is not the priority to preserve the record low interest rates that have helped hard-pressed families and businesses in an extremely difficult time? Would it not be madness to panic and borrow billions more? Would that not put those low interest rates at great risk?

[Mr Osborne]

My hon. Friend is absolutely right. As I have said before, the Institute for Fiscal Studies says that the Labour plans would add £200 billion extra to borrowing. In the end, the clue is in how one answers the questions, and the shadow Chancellor was asked six times on the radio—many will have heard it—whether borrowing would go up under a Labour Government. He did not want to give a clear answer. Why is that? It is because Labour does not want to admit that borrowing would go up. Finally, on the seventh question, he was forced to admit it, but it is the policy that dare not speak its name.

Banking Reform

Charlie Elphicke Excerpts

Monday 4th February 2013 Commons Chamber

[Greg Clark]

I have explained on a number of occasions why we have not done so. One reason is that the regulator does not want that power, and a second reason is that it seems to us more appropriate that individual banks feel the consequences of their breach. The system itself does not have a mind to breach the rules; it is individual banks that do so. It is thus appropriate for the sanctions to apply to individual banks.

[Charlie Elphicke (Dover) (Con)]

In addition to the electrification of the ring fence, has the Minister considered adding a bit of barbed wire on top? We should look at depositor preference, so that deposits rank above the bondholders to give extra security. What are the Government’s thoughts on that at the moment?

[Greg Clark]

We agree with my hon. Friend, and that will form part of the Bill.

Oral Answers to Questions

Charlie Elphicke Excerpts

Tuesday 29th January 2013 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

7. What progress HM Revenue and Customs has made in closing loopholes in the tax system.

[Charlie Elphicke (Dover) (Con)]

9. What plans he has to tackle corporate tax avoidance and to close the tax gap.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

Over this Parliament, we have introduced 31 measures to tackle tax avoidance, including loophole closures. This year, our work will focus on strengthening the disclosure regime, consulting on new sanctions for avoidance promoters and introducing the general anti-abuse rule. HMRC will also increase its risk assessment and specialist transfer pricing resources to target multinationals. Combined, those measures will strengthen our commitment to tackling tax avoidance and reducing the tax gap associated with it.

[Mr Gauke]

My hon. Friend is right to raise that point. The Prime Minister has said that he wants to use the G8 for this purpose and to have a serious debate about tax avoidance. The OECD is looking at this matter. We are encouraging it to do so and have provided it with additional resources. It will report back on solutions that could be developed to tackle profit-shifting by multinationals and the erosion of the corporate tax base.

[Charlie Elphicke]

May I say how welcome it is that the UK is using the presidency of the G8 to tackle international tax avoidance, after a decade in which the Government of this country stood by while industrial tax avoidance was allowed to run rampant? I urge the Government to focus on the issue of tax presence, particularly for companies such as Amazon, which we all know are in this country and should be paying tax in this country, but are playing the rules to avoid it.

[Mr Gauke]

I will not get into individual cases. As I have said, the OECD, at the urging of my right hon. Friend the Chancellor, is looking at these issues. We want to ensure that there is an international tax system whereby economic activity is taxed where it occurs. That has been overlooked for too long and we are determined to address it.

Corporate Tax Avoidance

Charlie Elphicke Excerpts

Monday 7th January 2013 Commons Chamber

[Ian Swales]

That is an interesting idea and I thank the hon. Gentleman for the suggestion. HMRC needs to look much more closely at companies that have that type of business model. I agree that we need to start making some presumptions.

[Charlie Elphicke (Dover) (Con)]

Is it not the case that for physical goods, Amazon would have to account for VAT in the UK? The issue is that for electronic goods, it accounts for VAT in Luxembourg, so Luxembourg is eating our VAT lunch.

[Ian Swales]

That could well be the case, and I shall speak about that later, too.

The person who wrote to me saying that they could not get a VAT number for the iPad they bought for business purposes was told that Amazon was unable to provide one. Had that been made clear to the buyer, they would have gone elsewhere to get a lower net price. Who knows, they might even have gone to Comet.

Amazon’s turnover in Europe is €7 billion. The gross VAT on that, even at Luxembourg’s lower rate of 15%, would be more than €1 billion. Where is it paid? That would be €2,000 a head for every man, woman and child in Luxembourg, but I would guess that is not paid at such a rate. I would also guess that Amazon’s UK order fulfilment subsidiary pays little or no VAT. I ask the Minister urgently to investigate how the business model operates.

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[Charlie Elphicke (Dover) (Con)]

It is a pleasure to speak in this debate, and I congratulate my hon. Friend the Member for Redcar (Ian Swales) on securing it. I wish to discuss an area that has not been so deeply explored this evening, although it is the area where we are not as powerless as we are in so many areas of this debate because of international obligations. I wish to focus on companies in receipt of money from taxpayers under Government contracts.

I have undertaken a study of technology companies that benefit from taxpayers’ money under Government contracts and have found that Oracle, Xerox, Dell, CSC and Symantec paid no corporation tax whatsoever last year, despite earning more than £474 million from Government contracts and having a UK turnover of £7 billion. Overall, my study of 10 technology companies in receipt of more than £1.8 billion of taxpayers’ money found that they paid just £78 million in taxes on UK earnings of just over £17.5 billion of turnover. On the basis of group profitability—we are looking at the consolidated international group here—the 10 technology companies would have made more than £3.3 billion in profits in the UK, resulting in a tax liability of £879 million. The UK tax actually paid was just £78 million, so, according to my research, the tax gap was £801 million.

We are seeing big business tax avoidance on an industrial scale. To me, it is unacceptable, unethical and irresponsible. Hard-pressed families are struggling to get by and to pay their taxes—and they do pay their taxes—so it is quite wrong that highly profitable businesses abuse our tax system. We urgently need reform. No Government contracts should be awarded to businesses that are fleecing our tax system, and the Government should examine how much UK tax companies pay when deciding who gets plum Government contracts. If taxpayers’ money and a Government contract are being awarded, we should look at the taxpayers’ money we are paying out and the tax money that we get back when we assess the value for the nation of awarding a particular contract. If, for example, a Government contract for £500 million is awarded to a computer company, it should be asked what tax it pays. If it pays zero tax in the UK, and another company is paying £40 million in tax in the UK and says that it will do the work for £520 million, the balance of best value shifts. We should consider the question holistically, rather than simply thinking about how much the contract should be let for.

[Ian Swales]

The hon. Gentleman refers to a point that I made. Does he agree that if we are asked to give a Government contract to a company that makes no profit, we should take a view about that company’s long-term future? We should play it at its own game and ask whether, if it does not make any money, it will be around for the long term.

[Charlie Elphicke]

My hon. Friend makes a powerful point, but we all know the reality. We all know that companies are using Luxembourg sandwiches and parking profits in Bermuda while claiming that they are sending them back to the States, as the IP suddenly is not in any intellectual property territories outside the United States. I find that unacceptable.

Let us take Oracle as an example. The company had a turnover of about £1.4 billion and a global operating margin of 32%, so its UK projected profits should have been about £446 million. Its declared profits in the UK, however, were basically nothing and it did not pay any tax whatsoever. I regard that with concern, because its Government contract earnings were about £42 million.

Even more concerning was the fact that a small amount of tax was paid by Microsoft, which is interesting as it has about £700 million from Government contracts and paid £19 million in the UK on a turnover of £2.35 billion. It has a global operating margin of 40%, so if we apply the consolidated operating margin to the UK we can see that its projected profits in the UK would be about £945 million. Its projected tax would have been about £246 million. I am not saying that Microsoft should not have some wriggle room for the fact that its IP was generated outside the UK, but when we award Government contracts we should take into account how much tax will be paid in the UK by the person to whom it is awarded. There are difficulties with that under European procurement rules, but we could have a box on the procurement form asking how much corporation tax and how much in PAYE the company anticipated paying in the UK in relation to that contract. That would enable us to assess best value in awarding Government contracts. We could and should consider that.

I am particularly concerned about IBM, which turns over about £4 billion in the UK but has a global operating margin of 16%, which means that its UK projected profits should have been about £642 million. Its declared profits in the UK, however, were about £327 million. Again, the tax gap is substantial and rather than the projected UK tax take of £167 million, only £41 million of tax was paid. We have a shifting and sliding in that the amount of tax we are getting is rather less than one might expect, even if we take into account the question of IP being based elsewhere and not being generated in the UK. We need to consider that more deeply and should consider the whole question of royalties paid for IP as well as licensing fees.

We should see how we can make the corporation tax system in this country flatter and much simpler by getting rid of a lot of the deductions that enable our tax system to be flouted. That would bring the rate down and give the UK a system with even lower tax than we already have.

I pay tribute to the work that the Government have done; I am merely trying to advance the argument, the discussion and the debate. We have a Chancellor who has started to take real and positive action in the OECD to start the discussion on how to change the international rules. We have a Prime Minister who is leading an international summit in Northern Ireland and making tax, including international tax, a key priority. The Government have taken tax very seriously, and rightly so. Over the past 15 years, the amount of income tax paid by the working nation has gone up by about 80% whereas the amount of tax paid by business has gone up by just 6%.

The previous Government were very keen on the whole prawn cocktail circuit; they were keen to be close to big business and to let it off the hook. It is well known that the former Prime Minister and his adviser, now the shadow Chancellor, were keen that the Revenue took a softly, softly approach to big business. I think we all feel that it has gone too far, and it is time to take international as well as domestic action and to be much firmer on big businesses that do not pay their fair share.

We have a deficit to clear. We need the revenue, so we need to be firmer, but we also need a system that has a level playing field, where there is a lower, more globally competitive rate that makes it more attractive for businesses to set up and trade in Britain whether they are domestic or foreign. The way forward is to start an honest and open debate about bringing in a flatter tax system in the UK and taking the rate of corporation tax right down, so that hopefully it will be even lower than in Ireland.

--- Later in debate ---

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

This has been a really good debate. I pay tribute to my hon. Friend the Member for Redcar (Ian Swales) for going to the Backbench Business Committee and persuading it, with the support of some of us, that this is a debate we ought to have. We are on the centre court at the beginning of a new year, and I think that the Exchequer Secretary and his colleagues will be aware that this issue will remain an important one for the Treasury and the Government for the second half of this Parliament.

We have heard valuable contributions from among others my hon. Friends the Members for Bognor Regis and Littlehampton (Mr Gibb), for Stevenage (Stephen McPartland) and for Dover (Charlie Elphicke) and the right hon. Member for Oldham West and Royton (Mr Meacher), who is not currently in his place. We have paid tribute to others who have been part of the culture change, such as ActionAid’s tax justice campaign, people such as Richard Murphy and journalists such as Ian Griffiths and others who have ensured that we confront the issue.

My constituents, like yours, Mr Speaker, and others, will see posters reminding them that they have until 31 January to complete their tax returns if they have not done so already—MPs included. We all understand that there is a civic obligation to pay tax as individuals, but we all expect, particularly in times of austerity, that there should also be a corporate obligation to pay due tax, and that is what the debate is about. If we are encouraging people to be entrepreneurial and to start their own businesses, it is not a great encouragement for someone who wants to set up a coffee shop, a book shop or a garage, for example, to think that they will have to pay tax while some great international company might put them out of business or prevent them from gaining a foothold in the market by avoiding paying. It is about justice between small and medium-sized enterprises and big international enterprises.

There is a UK obligation, because some of the companies that offend most use tax havens that are UK Crown dependencies. Bermuda, the British Virgin Islands, the Cayman Islands, the Turks and Caicos Islands, Guernsey, Jersey and the Isle of Man feature regularly as places where the system is abused. There is clearly both a national obligation—we can do things ourselves—and an international obligation to act, and I am grateful that the Prime Minister understands that, as do others, and that it will be on the agenda for the G8 summit in Fermanagh later this year.

As I made clear earlier, when intervening on the right hon. Member for Oldham West and Royton, it was not really fair to criticise this Government on corporate tax, because all recent Governments have been very weak on it. The right hon. Gentleman conceded that new Labour had been poor and criticised it equally. I compliment the Government on their investment in additional effort in the Treasury on this issue, on the commitment to implement the anti-abuse rule later this year, on putting the subject on the international agenda and on making the UK more competitive for business to provide a disincentive for trying to fiddle the system. In particular, I congratulate my right hon. Friend the Chief Secretary to the Treasury on picking up on an idea I have lobbied him about a great deal: making sure that the Government look at those companies with which they, and local government, do business and ensuring that we do not give Government money to those who do not pay their taxes properly; it is exactly the right principle that they should not get contracts from the Government either. Of course, there have also been bilateral agreements with other countries.

Let me flag up one main area and one subsidiary area —in relation to the tax treatment of interest payments—which I ask Ministers to look at. Traditionally, interest has been seen as the cost of doing business while dividends are seen as the distribution of profits. For that reason, under accounting rules, interest payments are deducted from operating profits before corporation tax is paid, while dividends are distributed after tax has been paid. Debt can be used to strip out cash generated by companies and to move it offshore before it is taxed. There is also a large problem with private equity funds buying companies, making those companies take on a lot of debt, and using the cash to pay off the loans that they took out to buy them in the first place, so that they can end up owning a company for a fraction of its real price. Companies receive a huge tax advantage from the ratcheting up of debt.

In the finance sector, that is called creating a more efficient capital structure, and people will say that they are just working within the structure put in place by the Government. However, it has a huge effect on the businesses concerned and on the economy as a whole, as well as on the Treasury. It is not about efficiency, because the companies affected are often left seriously weakened and at risk. Many operate on the margins and are unable to withstand any financial shocks. That magnifies the impact of recent downturns. Comet is a recent example of the consequences of excessive borrowing. The increase in debt gives companies far less freedom to invest in new machinery or to make other capital investments, and that holds back growth.

[Charlie Elphicke]

If we believe in deleveraging the economy and deleveraging business, should we not put equity and debt on a similar footing?

[Simon Hughes]

That is a valid point.

As well as tax treatment of interest payments being an unfair incentive to avoid paying due taxes, shareholder loans are a particularly iniquitous example of these practices. That is my second and subsidiary point. Where owners of a company are receiving interest payments, they can manipulate the interest rates in order to remove their tax liability. The current transfer pricing rules are supposed to stop that, as they prevent a company from lending to a subsidiary at a higher rate than the market rate, but what is the market rate in a negotiated transaction between two parties that are, as it were, two sides of the same coin?

I want to give three examples of companies involved and then conclude with some proposals to add to those of my hon. Friend the Member for Bristol West (Stephen Williams) and others. I have often cited in this House the water industry in general and Thames Water—the local water company here, and a monopoly—in particular. In 2012, it paid £500 million in interest, which accounted for the vast majority of its operating profit of almost £650 million. In the same year, it paid no tax and instead received a tax credit of £38 million. In the previous year, it paid just £500,000 in corporation tax despite showing an operating profit of £600 million. Half its debt has been issued through its finance subsidiary in the Cayman Islands. Put simply, Thames Water raised the debt and gave the cash to Macquarie, which is based in Australia, so that that company could pay off the loans that it took out to buy Thames Water. The level of debt in the company is now equivalent to 90% of its value. Arqiva, which has Government contracts, receives annual revenues of about £1 billion a year, holds £3 billion in debt, and has an interest rate of 13%, which is extraordinarily high for a monopoly infrastructure provider. Boots, now Alliance Boots, has escaped paying £500 million in tax through a complex arrangement of companies.

I hope that in the forthcoming Budget Ministers will look at the tax treatment of interest payments and, specifically, do what countries such as Germany do in limiting the amount of interest payments that can be deducted before tax, adopting the earnings-stripping rule which applies there and elsewhere. I also ask them to consider whether that should be further dealt with if the company uses a tax haven, to address the question of UK dependencies, and to have an annual debate, as part of the Budget, on how to avoid such abuses of the tax system.

Oral Answers to Questions

Charlie Elphicke Excerpts

Tuesday 11th December 2012 Commons Chamber

[Sajid Javid]

The right hon. Gentleman was a senior member of the previous Government, who, over 13 years, presided over an increase in the number of workless households to a record 3.9 million. In his constituency, in the last Labour term, the number of youth jobseeker’s allowance claimants increased by 148%. I hope that he will join me in welcoming the fact that such claims are down by 19% under this Government.

[Charlie Elphicke (Dover) (Con)]

May I ask the Minister to confirm that the previous Government’s child poverty targets were missed by 600,000, that according to the latest figures child poverty fell last year by 300,000 and that universal credit will reduce child poverty further, by up to 350,000?

[Sajid Javid]

My hon. Friend is absolutely right. The Government are relentlessly focused on eradicating poverty and the measures he has talked about, such as universal credit, increase work incentives and help people back into work.

The Economy

Charlie Elphicke Excerpts

Tuesday 11th December 2012 Commons Chamber

[Rachel Reeves]

Let us see what the rating agencies have to say in the new year. Of course we are on negative watch, but it was not we who said the rating agencies should be the be-all and end-all. Indeed, they were giving Lehman Brothers a triple A rating until that company crashed and almost took the global economy with it. It was the Chancellor who said that a triple A rating would be the watchword of his chancellorship, so if it were to go, it would be a damning indictment of what this Government have presided over.

What was the Government’s response to all the bad economic news last Wednesday? Let us give credit where it is due. The Chancellor now agrees with us that we should not go ahead with the fuel duty increase in January; he agrees with us that introducing regional pay in our public services would be costly and impractical; he agreed with us that we should reverse the relaxation of restrictions on pension tax relief for the very rich; he agreed with us that it was a mistake to implement deep cuts to capital programmes such as Building Schools for the Future; and he agreed with us that cutting investment allowances risked damaging incentives for long-term wealth creation. We propose the creation of a British investment bank to support small businesses, and the Chancellor has produced a pale imitation of that, but I am afraid that all these measures are too little, too late—robbing Peter to pay Paul. Smoke and mirrors will not hide the lack of a real, purposeful growth strategy.

The chief executive of British Airways summed it up yesterday when he said:

“I don’t see an agenda for growth.”

I agree, and so does the Office for Budget Responsibility. Taking into account all the Government’s measures from the autumn statement, the OBR has concluded that they will add just 0.1% to UK GDP over the next five years. The economy is shrinking this year. Growth next year—forecast at 2.9% just two years ago—is now forecast at just 1.2%. Indeed, we have seen downgrades not just this year and next, but the year after.

[Charlie Elphicke (Dover) (Con)]

Why does the Institute for Fiscal Studies say that there would be £200 billion more borrowing under Labour’s plans?

[Rachel Reeves]

There is £212 billion more borrowing under this Government’s plans.

Families will continue to feel the Chancellor’s failure in their wallets and their homes. Average earnings will not outpace inflation until the second quarter of 2014. It will take even longer for families to recover the loss to their living standards that this Government’s economic failure has cost them.

The lack of growth and the increase in borrowing under this Chancellor have meant that he has had to come back and ask the country for more. And who are the Government asking to bear the brunt of the past two and a half years of failure? Luckily, Andrew Neil asked the Chief Secretary to the Treasury that question on BBC1 last Wednesday. He asked him whether

“those who are on ordinary incomes are suffering a lot more than most”.

The Chief Secretary to the Treasury replied: “That is absolutely right.” That was the only sense he spoke all day. It is no surprise that he is increasingly described as the Conservatives’ favourite Liberal Democrat in the Cabinet. Apparently, they regard him as easier to deal with and more persuadable. The Chancellor’s favourite Liberal Democrat has finally told the country what we have known for a long time: that this Government are asking ordinary families to foot the bill for their economic mess.

The facts speak for themselves. Analysis by the House of Commons Library shows that a one-earner family on £20,000 with two children will lose £279 a year from next April. Slide 24 of the Institute for Fiscal Studies report shows that a two-income family with children will lose £534 as a result of the changes, including all the measures in the autumn statement. Slide 17 of the IFS assessment shows that middle and lower earners will lose most as a result of the autumn statement, with the poorest 40% losing more than the richest 10%. How can that be fair? And this is all to pay for the Government’s £212 billion of extra borrowing. They are hurting those who are trying to get on and do the best for themselves and their families. That cannot be fair.

Mothers across the country will be worried about the real-terms cut in maternity pay, worth £180, that the Chancellor announced last Wednesday. That comes on top of other deep cuts that will hit pregnant women on low incomes, such as the abolished Sure Start maternity allowance and the health in pregnancy grant. This is further proof that the Government are out of touch and simply do not understand the pressures families are facing, day in, day out.

[Rachel Reeves]

My hon. Friend is right. It is a false economy to cut the incomes of the lowest paid, because they will have less money to spend in their communities. What really matters, however, is the real impact that the changes will have on their living standards and those of their children.

The Resolution Foundation has said that 60% of the cuts to benefits and tax credits will hit working households—that is, those who are trying to get on in life. Given that the welfare bill is forecast to be £13.6 billion higher in this Parliament than the Chancellor thought it would be—another target tossed aside—perhaps it is time for the Government to concentrate on getting people back to work in order to reduce the welfare bill. In February this year, the former employment Minister, now the Secretary of State for Justice, said:

“The Work Programme is doing a good job and is on track. It is helping long-term unemployed people into work.”

And only today the Chief Secretary to the Treasury said that the scheme was going well, but we now know that for every 100 people who are unemployed, the programme has seen only two people back into work. If that is the Government’s idea of a programme that is on track, I would hate to see one that is not.

It is not surprising that OBR documents released last week showed that the number of people claiming jobseeker’s allowance was set to rise from 1.58 million this year to 1.69 million in 2014, and that the number forecast for 2016 had been revised up by 340,000. That will be a third of a million more people receiving JSA compared with the number forecast in March this year.

Let us not forget that the Prime Minister dismissed the last Labour Government’s future jobs fund, which helped 120,000 young people back into work, yet an impact analysis for the Department for Work and Pensions found that we all gained £7,750 per participant through wages, increased tax receipts and reduced benefit payments. This Government ditched a plan that worked for one that has failed, so we will not be lectured by them on welfare or on job creation.

At the same time, one group of people continue to gain from the Chancellor and the Chief Secretary’s policies. If someone earns more than £1 million a year, next year they will receive an average tax cut worth £107,000. It beggars belief that while taking from families on low incomes with one hand, the Chancellor gives to millionaires with the other—there is one rule for the very richest, another for everyone else.

[Charlie Elphicke]

The hon. Lady talks about the Government favouring the richest, but if we look at the distributional impact of tax and benefit reforms on the IFS slides to which she has referred, we can see very clearly that the richest 10% lose £260 in net income whereas everyone else is far less disadvantaged. Does she not agree that the richest are shouldering more of the burden?

[Rachel Reeves]

If the hon. Gentleman thinks that those on average incomes being worse off by £534 year is not very much, it is up to him to justify that to the people of Dover and Deal. Page 17 of the IFS analysis shows that the poorest 10% are 1.6% worse off, the second decile are 1.7% worse off, the third 1.3%, the fourth 0.6% and the top only 0.5%. The four lowest deciles—those on the lowest and modest incomes—are being hit hardest by the changes in the autumn statement, while those at the top get off relatively unscathed. That is the reality and if he wants to put that slide in his leaflets in Dover and explain it to his constituents, I am sure that they would appreciate it.

As I have said, it is one rule for the richest and another for everyone else. The poor are expected to work harder or else they will be made poorer, but apparently the rich will work harder only if they are made richer. It is the same old out-of-touch Tories and their Liberal Democrat accomplices.

There are some who think that the Chancellor is a master of political strategy; his autumn statement was clearly delicately put together. He said that borrowing was down this year, but that is only by using money from the sale of 4G contracts, which has yet to happen. He said that his cuts were targeting the workshy, when in reality they hit working people. He said that austerity was necessary for us to compete with our global competitors when, after two years of austerity, we have fallen further behind. He lived up to his reputation as a part-time Chancellor, because it was a statement that worried more about tomorrow’s headlines than the economic reality. For all of the Chancellor’s cynical political games and for all the smoke and mirrors, the real story is being felt across the country. Living standards are being squeezed, long-term unemployment is rising, borrowing is up, growth is flatlining: it is a story of a failed Chancellor and his Lib Dem accomplice desperately trying to find a way out of the mess their economic failure has got them into.

--- Later in debate ---

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I hope that the hon. Member for Macclesfield (David Rutley) will forgive me if, in the time available to me, I do not follow him down the road of bulldozers or anything else. I should begin by drawing the House’s attention to my entry in the Register of Members’ Financial Interests.

I am sorry that the Chancellor is not present, partly because he used to kick up a real fuss whenever I did not appear in the House or was slightly delayed. It would have been nice if he had been here: I am sure that plenty of us would have liked to press him on the question of how on earth he can claim abject failure as success, which is what he was trying to do last week.

Two years ago, it was not meant to be like this. Two years ago, the new Government said that they would be able to balance the books by the end of the current Parliament, and that debt would be falling as a proportion of national income. In 2010, they said that all the problems we faced were entirely home-grown. They compared this country mendaciously with Greece, and said that we would lose our credit rating, which they may yet regret. In other words, they set about trashing confidence and blaming the last Government for everything. That is despite the fact that the Conservatives supported every single penny of our spending until December 2008, and the Liberals were doing exactly the same until the evening of 10 May 2010, when they changed their minds.

The new Government’s position was that it was all the fault of the previous Government. How much has that changed? Last week, they began saying that this was an international crisis. They said that it had been caused by the eurozone; by the United States fiscal cliff; by inflation. However, all three of those things were around in 2010, and were known about. The problem that we have at present is that we simply do not have the growth that we were expecting, with the result that the Government have missed their debt reduction target and are experiencing serious difficulties in relation to borrowing. I shall say more about that shortly.

The Chancellor’s problem is that the growth profile that is presented in the report from the Office for Budget Responsibility, which was published last week, is remarkably similar to the profile that was published two years ago, but it is now running at least between two and four years late. If we do not achieve the growth profile that is set out in the report, both our borrowing and our debt will be higher, because the two are completely interlinked. I see no evidence for believing that the figures will be any more right this time than they were two years ago.

It is interesting to note that the OBR assumes, just as the Treasury modelling used to assume, that somehow we will always return to a 2.5% trend rate of growth. That theology was being questioned when I was in the Treasury, and I think that we will have to look at it again now. The Japanese are apparently contemplating what would be the fifth recession in 15 years. I honestly do not think that those of us in the western world—and Japan is, economically, in the same position—can assume that everything will bounce back as if nothing had happened. This will have a profound implication for all the political parties in the House, as well as further afield.

However, it is in relation to borrowing that I would have taken the Chancellor to task had he been here. During his speech last week, he made great play of how transparent he was being in taking into account the money that he had managed to find as a result of quantitative easing at the Bank of England and from the Royal Mail’s pension funds. What he did not say was that he could claim that borrowing was falling this year only because he had banked the sale of the 4G auction, which will bring in a very handy £3.5 billion—and, furthermore, will have to bring it in before the end of March if it is to score properly. That is the only reason why he could claim that, because the figures show that although borrowing has a downward profile, we are in fact borrowing £212 billion more than the Chancellor intended to borrow. We are borrowing much more, therefore.

The OBR report contains a number of findings that ought to worry those on the Treasury Bench as well as the rest of us. For example, over the next few years a very handy cumulative total of £73 billion will come in from the asset purchase facility—quantitative easing by the Bank of England. That money is not being created because of increased revenues or increased economic activity, however. It is basically a financial transaction that the OBR has said is okay to put in the books in this way, as opposed to scoring things differently which would have left a large hole in the economic figures.

[Charlie Elphicke]

The right hon. Gentleman is making a typically thoughtful speech. If he were the Chancellor, would he pursue the five-point plan the shadow Chancellor has proposed, given that it would cost £20 billion? Does he think there is the capacity to do that, and does he think it would be a sensible policy to pursue?

[Mr Darling]

I will address that point later. It is an important point, and I do not believe we should just sit back and hope that growth returns. The shadow Chancellor and many others both inside and outside the House also do not believe that the Government’s approach is right.

We are heavily dependent on money that is coming in from a financial transaction. In addition, the OBR has now found that by 2016-17 our revenues will be £30 billion less than it forecast in March. That is a huge gap, which will have to be filled.

What should we do? Whenever the Opposition suggest that perhaps the Government could do a little more, the Government parties—the Conservatives and Liberal Democrats—always say, “That’s all about borrowing more.” This Government are borrowing £212 billion more than they said they would not because we are spending money on projects and so forth, but because of failure—because our revenues are down. That is why we have got this gap.

When we eventually have a recovery, this country will need infrastructure. Over many years, we spent a lot of money on transport and energy. That was the sort of spending the Government say should not have been made, but we now know it was desperately needed, and we need to invest more in infrastructure, as well as get debt and borrowing down. We must invest in education, too.

On energy, the Government’s policy is completely contradictory. We are getting different signals every day of the week. On transport, I say again that it is not good enough to have no airport policy until halfway through the next Parliament, when we will not be able to do anything as another election will be coming up. That is not the right signal to send to our country, let alone the outside world.

Investing more in infrastructure projects would be one way to get confidence back. Confidence was trashed two years ago. If anyone were running a business now, would they hire more people or open a new production facility? No, they would not, because it appears that the economy will be bumping along the ground for another five years or so. I again remind Members of what has happened to Japan. People say, “We would never be like that,” but Japan has had non-existent growth for 15 years.

--- Later in debate ---

[Kwasi Kwarteng]

I can answer the hon. Gentleman very directly. With reference to our public finances, we have been borrowing money every year—every single year. It is likely that even if we are able to eliminate the structural deficit by 2018, this country will have seen nearly 20 years of continual deficits. This is an appalling legacy that Labour has left the country. Since the end of the second world war, we have never run 20 years of continual deficits, which we will do as a consequence of Labour mismanagement and old-fashioned incompetence.

[Charlie Elphicke]

In his praise for the former Chancellor, has my hon. Friend noticed that the right hon. Gentleman said in his memoirs not only that the Labour Government overspent, but that they ran a parallel Treasury operation while he was Chancellor trying to sort it all out as a night-watchman, undermining his work while he was trying to stabilise the ship?

[Kwasi Kwarteng]

That is right. Many historians will be needed fully to plumb the depths of the goings-on of that Administration—the level of incompetence, the level of secrecy, the high spending, the culture of fear that prevailed in the Treasury for much of that time. It will need many people to investigate that.

It was always the function of the British Treasury, as my hon. Friend well knows, to have a very conservative approach to public finances. It was always the tradition that we in the British Treasury tried to match expenditure to income.