Oral Answers to Questions

Lord Hanson of Flint Excerpts

Tuesday 24th April 2012 Commons Chamber

[Danny Alexander]

I agree with my hon. Friend. I am sure that he would agree with me that the Vickers report on the banking sector does precisely the first thing he mentioned, and that our approach to corporation tax—reducing headline rates year by year to the lowest level in the G7 and one of the lowest levels in the G20—precisely achieves the objective that he set out.

[Mr David Hanson (Delyn) (Lab)]

Will the Chief Secretary tell the House whether he read the explanatory notes on his VAT on caravans proposal? If he did read them, why on earth did he support a proposal that reduces demand in manufacturing by 30% and hits tourist industries, such as those in my area, 100%? Will he now review it?

[Danny Alexander]

Of course I did read the explanatory notes. The right hon. Gentleman will know that we have listened to the representations in favour of extending the consultation period and have extended the deadline to 18 May to enable individuals such as him, and his constituents, to make representations as part of that consultation.

Finance (No. 4) Bill

Lord Hanson of Flint Excerpts

Wednesday 18th April 2012 Commons Chamber

[Peter Aldous (Waveney) (Con)]

I am grateful to be called to speak. I shall restrict my comments to new clause 6 and the proposed application of VAT to the sale of static holiday caravans from 1 October. My interest is a constituency one, as I fear that the impact of the measure will be far greater than HMRC has estimated.

I have received representations and expressions of interest from a variety of parties. These include Hoseasons, one of the largest holiday providers in the UK, which is based in Lowestoft in my constituency; and five park operators, including the chairman of my own constituency Conservative association, who has herself written to the Treasury and a number of other Members. Small and medium-sized enterprises, including painters and decorators, and a bank are also concerned about the impact of the proposal on business viability.

Let me make three observations. First, I fear that HMRC’s assessment of the impact of the change takes full account of neither the whole supply chain serving the industry, nor the fact that the industry is concentrated in specific geographical areas that will be hit very hard. Some of those areas are pockets of deprivation and unemployment, and many are coastal communities such as my constituency, where tourism is a vital component of the local economy.

The supply chain includes manufacturers who are located almost exclusively in the UK—mainly in the Humberside area—wholesalers, and park operators. In recent years, the sale of static caravans has become a vital part of park operators’ businesses. Without such sales the future of some businesses will be at best uncertain, while others will cut both staff and the reinvestment in facilities that is so important if they are to continue to attract customers and ensure their own financial viability. Trading conditions have been very difficult for those operators in recent years, and the introduction of the new tax on 1 October, following so soon after the imposition of VAT on pitch fees, rates, and water and sewerage bills on 1 January, would contribute to a double whammy.

I am especially concerned about the fact that HMRC’s assessment takes no account of the numerous SMEs that work in the parks. There are builders, decorators, plumbers, electricians, people who fit carpets and curtains, and people who service plant and equipment. We should also bear in mind that many of those who work in the parks—admittedly on a seasonal basis—are young people gaining their first experience of work. An unintended consequence of the measure could, in some cases, be the removal of that vital first rung on the employment ladder.

[Mr David Hanson (Delyn) (Lab)]

In my part of north Wales, the projected 30% drop in sales shown by the Government’s own figures will have an impact on new purchases. Those who come to north Wales do not just buy static holiday homes; they buy cars and go to restaurants, pubs and shops, and their income and expenditure help to boost our economy. That will hit the hon. Gentleman’s constituency as well.

[Peter Aldous]

I shall come to that issue in a moment.

My second point is that HMRC’s analysis fails to take account of the vital role played by static caravan owners in a local economy such as that in Waveney. They are, in many respects, the “anchor tenant” for the whole tourism industry. They come to stay in the area for most weekends, and they do not limit their visits to the summer season. They spend money in local shops, restaurants and pubs, visit the many day attractions in my area such as Pleasurewood Hills and Africa Alive, or spend a day on the beach or boating on the Broads. A reduction in their numbers would have a significant knock-on effect on the many businesses in the area.

Finally, I believe that the rationale for the introduction of the tax is flawed. It is claimed that it addresses an anomaly, as touring caravans are subject to VAT while static caravans are not. However, the industry has come a long way since 1973, when the VAT exemption was first made, and I believe that today’s static caravan has more in common with a holiday home than with a mobile caravan. Static caravans are more like second homes in terms of their facilities and the nature of the accommodation, the investment that their owners have made in them, and the way in which they are used—not just for once-a-year holidays, but for regular visits throughout the year.

Tax Avoidance

Lord Hanson of Flint Excerpts

Tuesday 17th April 2012 Ministerial Corrections

[Mr Hanson]

To ask the Chancellor of the Exchequer how many promoters HM Revenue and Customs (HMRC) has required to disclose tax avoidance schemes since May 2010; how many such schemes have been (a) investigated and (b) closed (i) since May 2010 and (ii) in each year since 2005; and how many schemes are under investigation by HMRC.

[Official Report, 19 October 2011, Vol. 533, c. 967-8W.]

Letter of correction from David Gauke:

An error has been identified in the written answer given to the right hon. Member for Delyn (Mr Hanson) on 19 October 2011.

The full answer given was as follows:

[Mr Gauke]

Since 1 May 2010 78 promoters have disclosed tax avoidance schemes under the Disclosure of Tax Avoidance Schemes legislation.

To remove any doubt about a scheme's effectiveness, legislation has been changed in relation to the following numbers of disclosed schemes in each year since 2005:

Amendment of the Law

Lord Hanson of Flint Excerpts

Wednesday 21st March 2012 Commons Chamber

[Diana Johnson (Kingston upon Hull North) (Lab)]

As usual, the hon. Members who speak later in the debate will have the advantage of having been able to study the Budget more as it starts to unravel. I will make some initial comments about what is clear so far from the Chancellor’s speech. I think that it is hugely discourteous to the House of Commons that almost everything that was announced in the Budget has appeared in the papers and on other media in the past few days.

Unfortunately, I do not believe that this is a Budget for growth in areas such as Hull, which I represent, nor that it is fair for people in my constituency. On 23 June 2010, after the first coalition Budget, I said in the House that

“wealth creation and enterprise will suffer in Yorkshire.”—[Official Report, 23 June 2010; Vol. 512, c. 326.]

It did suffer. On 23 March 2011, after the second coalition Budget, I said:

“this is not a fair Budget; neither is it a Budget for growth.”—[Official Report, 23 March 2011; Vol. 525, c. 1024.]

It was not a Budget for growth. The growth that was starting to return under Labour in 2010 was snuffed out by 2011. We have now had a year of flatlining. In Yorkshire and the Humber, 40,000 private jobs have gone in a year. We are supposed to be gaining private sector jobs, not losing them. Private sector jobs were supposed to replace the public service jobs that are being slashed, to create the growth that is needed to cut the deficit. We all, of course, want to see that.

Just outside Hull, there are 845 long-standing, skilled employees at BAE Systems, working in the strategically vital defence manufacturing industry, who will probably lose their jobs this year because of BAE’s decision. Taxpayers will have to meet costs of up to £100 million because of those redundancies. Those skilled jobs will be exported to countries that have Governments who are willing to nurture their industries for the long term. It is worrying that the defence White Paper, which was produced just a few weeks ago, indicated that the British Government would not necessarily buy defence equipment from British companies, but they certainly want other Governments to buy from British companies. What kind of message does that send out to support exports?

Hull’s future is as a national hub for green technology. Thanks to the local efforts of businesses, councils and others, Siemens will we hope be bringing offshore wind turbine manufacturing to Hull shortly. That would open up a wealth of opportunities for the city and the sub-region. Hull would have been an ideal location for the green investment bank, but unfortunately that has gone to Scotland. In one sense, squandering the chances to attract new jobs in sunrise industries to Hull is more damaging than losing existing local jobs. Recently, 100 jobs were under threat at Warmsure in Hull because of the Government’s decision in the solar feed-in tariff debacle. We know that there is strong overseas competition in renewables. We cannot afford to export jobs in these growth industries. We need to export our products, not our jobs. I was concerned that the Chancellor did not give a clear message today about the Government’s commitment to renewables.

Hidden in the Budget is the announcement that VAT will be charged on caravans. That will have a real impact on the economy in Hull, because we manufacture a great deal of this country’s caravans. I understand that it could reduce demand by almost 30%, which would be another hammer blow.

[Mr David Hanson (Delyn) (Lab)]

My hon. Friend may not know that only two weeks ago, I opened a new caravan park in my constituency in north Wales with caravans supplied by manufacturers in Hull. The proposed VAT on caravans will have a dramatic impact, and as she has just said, it will reduce demand by 30%. Is it good practice to reduce demand for the manufacturing industry in the UK through a tax that will damage our economy?

[Diana Johnson]

My right hon. Friend makes a very good point and indicates, again, that this is not a Budget for growth—the very opposite, it seems.

The latest official statistics show that there are 5,447 jobseeker’s allowance claimants in Hull chasing 177 vacancies. That is 30.8 people after each job, which is the 10th worst rate in the country. The overall claimant count across Hull was up by 12.4% in the latest period. Kingston upon Hull North’s long-term youth unemployment among 18 to 24-year-olds has gone up by 155% in the year to February, which is shocking. Hull needs a determined focus on specialist vocational education and training, to equip our youngsters to get the jobs in green industry that could be important to the economy of Hull and the region.

Engineering qualifications are very important, and I was disappointed that the Secretary of State scrapped the diplomas scheme, particularly for engineering diplomas. As I asked the hon. Member for City of Chester (Stephen Mosley), why is information and communications technology not part of the English baccalaureate to show how important ICT skills are for our future?

The Government have talked a lot about rebalancing the economy, but people in the north who are seeking work—the north’s jobless—are being told to move to the south for work, and those in the south who are looking for affordable homes are being told to move to the north. Is that rebalancing the economy? The Government have to think again. They should ensure that there are enough jobs and homes in each region to make the whole country work together effectively.

I wish to focus on some of the key announcements in today’s Budget, starting with the raising of the personal allowance to £9,000 next April. Citizens Advice has already put out a quote on the matter, stating:

“Raising the personal tax allowance is an empty gesture to struggling families on low wages.”

That blows a hole in the argument that the Liberal Democrats try to put forward about the Budget promoting fairness.

Like cuts to income tax rates, raising the personal allowance could be part of a plan to boost demand and growth, provided that it was part of a group of measures such as those outlined in Labour’s five-point plan. In a time of scarcity, the Government’s plan, costing about £3.3 billion, is an inefficient way of helping the poorest in our society. It is clear that middle and upper earners will benefit most from the change. I understand that they will get about an additional £175 each year.

We must consider that against the losses that individuals and families will experience. For instance, the average family is due to lose £530 from 1 April because of the changes to VAT and benefits, including child benefit freezes. This April’s changes to the working tax credit requiring couples working part time to do a 24-hour week rather than a 16-hour week, at a time when a lot of people’s hours are being cut and jobs are disappearing, will affect 212,000 families across the country, including nearly 450 in my constituency. They will lose nearly £4,000 a year, and they are families that are struggling just to get by. What help was announced for those families? There was nothing. If the Government were serious about fairness, they could have done something about that.

Research by the Child Poverty Action Group shows that two thirds of the families who are about to lose tax credits are already in poverty, so I dread to think what will happen to them now. They are punished for doing the right thing and for trying to hold down a job at a time when it is so difficult to get a job or to get further hours of work.

To make matters worse, the coalition is now moving ahead with regional pay in the public sector, with the Liberal Democrats’ support. That is not surprising, because the Liberal Democrats have often advocated a regional minimum wage. Regional pay is more evidence-free policy making by this Government, based on free market dogma. There is no real evidence that national public sector pay crowds out the local private sector. Indeed, public sector workers, living and spending locally, are a vital part of supporting the private sector in Hull’s local economy. We already have London weighting to help workers with the extra costs of living in the south, so there is no reason for different pay rates between the regions.

Local or regional public sector pay could drive down wages in some of the poorest areas, taking billions more out of local economies and accelerating the growing north-south divide. So much for rebalancing the economy.

--- Later in debate ---

[Mr David Hanson (Delyn) (Lab)]

It is a pleasure to speak on the first day of the Budget debate. I feel a slight sense of déjà vu, because although the debate has been going for about six hours since the Chancellor began his statement, I feel that I have known for a little longer than that about Sunday trading, the regional pay cap, the 50p tax rate, stamp duty and other matters in the Budget. Perhaps it is because I am from the north and we are in a different time zone up there, but those measures seem to have been around since at least Sunday, probably Saturday or before. Hugh Dalton resigned as Labour Chancellor for less, and I hope that Mr Speaker and you, Mr Deputy Speaker, will make a really serious examination of the issue in future.

The Deeside industrial park enterprise zone that the Chancellor announced today was in fact announced by the Labour Welsh Government before Christmas. It was brought to us today as a brand-new initiative, but it is one of a range of issues in the Budget that have been around for much longer than just today.

The devil is in the detail, and the difficulty on day one of the Budget debate is examining that detail and deciding which are the important matters. I know that the devil is in the detail because I shared many a Finance Bill debate with the Exchequer Secretary, who is in his place, until I moved to a different position as a shadow Home Office Minister at the end of last year.

The details of today’s Budget are worth focusing on. We have already seen that among them is the fact that 14,000 people who earn £1 million or more will get a £40,000 tax cut. Whatever the arguments for or against that, at a time when the Government are asking people to tighten their belts, giving a £40,000 tax cut to the richest people in our communities strikes me as the wrong priority. Much has been made of stamp duty compensating for that, but I remind the Exchequer Secretary that a £40,000 tax cut is a year-on-year measure whereas people do not move house every year. If they do, perhaps they deserve to pay the higher level of stamp duty, but mostly it is a one-off payment.

At the same time, families earning £20,000 stand to lose £253 this year, along with the rise in VAT that the Opposition voted against, which will cost them about £450 a year. Whatever pleasures the Liberals have brought to the debate, they have said the rise in the income tax threshold means that there will be a tax cut. However, there will not be a tax cut overall, because there will still be rises in indirect taxation.

The devil is also in the details of a £3 billion tax raid on 4.41 million pensioners, who will lose about £83 in 2013-14 through the changes to the higher allowances. I am sure that will come back and bite the Government in Committee and beyond. Also, 65-year-olds will lose £314 next year, which is another devil in the details.

I have noticed only during the debate—the Chancellor did not mention it in his speech—a major issue for me and my constituents in the details of the tax on holiday caravans. I represent a constituency in north Wales where holiday caravans are part of the local economy. Unbeknown to us from the Chancellor’s speech, he has announced on page A101 of the “Overview of Tax Legislation and Rates” that VAT will be levied on static holiday caravans from 1 October. According to the Treasury’s own figures, that will have an impact on some 50,000 individuals a year and, crucially, reduce demand by about 30% if the VAT change is fully passed on. The document states:

“This change is likely to adversely impact on all businesses that manufacture, buy or sell static caravans, from the very smallest to the very largest.”

Only two weeks ago, I opened a brand-new caravan park extension in my constituency, providing 12 new caravans manufactured by Willerby, near the constituency of my hon. Friend the Member for Kingston upon Hull North (Diana Johnson). It is creating jobs and tourism spending in the community. People who come to north Wales do not just stay in the caravan: they go by car to buy food and drink and go to restaurants. The caravans will now be taxed at 20%, which will have an impact on manufacturers. How will that help to grow the economy, given that the impact assessment shows a 30% fall in manufacturing and selling capacity? How will it help when we have 2.67 million people unemployed; when the number of people unemployed in my constituency rose by 34 last month to a figure 169 higher than last year; when youth unemployment is at its highest ever; when my constituency has its highest level of youth unemployment since 1992; and when 49,000 young people have been unemployed for more than a year?

The priorities are wrong when a 45p tax rate is introduced to benefit 14,000 millionaires, but the Government’s changes to working families tax credit will affect part-time workers to the tune of £3,870 if they cannot increase their hours from 16 to 24. My trade union, USDAW, and the Child Poverty Action Group recently indicated that around 200,000 couples will lose nearly £4,000 a year, and a further 35,000, with 80,000 children, will fall below the poverty line if they cannot find extra work. Again, that is a wrong priority from a Government who are concerned more about giving money back to millionaires than helping people who are working hard, trying to increase their hours and facing unemployment challenges.

On top of that, the Government propose to introduce regional pay in areas such as mine in north Wales, thereby affecting the north-west and north Wales economy. It has already been estimated that £1.25 billion will be lost to the Welsh economy if regional pay is introduced. That strikes me as an invitation to people to do the same job for poorer pay. It will drive down those poorer regions, which, by chance elect Labour Members of Parliament and have lower pay. The changes will have a dramatic impact on Northern Ireland, Wales, Scotland and the north.

There is an alternative. We believe that there should be investment in tax breaks for small firms and a VAT cut, which would have an impact on fuel and goods and services. There should be a guarantee for young people who are out of work for more than a year.

I want to end on a positive note because I like to be positive with the Government and the Treasury. I welcome the tax break in the Budget for the video games industry. I particularly welcome it because it mirrors exactly an amendment that we tabled to last year’s Finance Bill. It was discussed on the Floor of the House and the Government voted against it. They argued that it was not practical then. I am pleased that they have seen sense and followed the Labour party’s lead. I now hope that they will look again at the National Insurance Contributions Act 2011. The Exchequer Secretary and I sat through the proceedings, and the Opposition argued that the measure would fail. The 97% failure of take-up vindicates what we said at the time. I hope that he will consider changing the regime for the future.

As a Member of Parliament representing the north, I will oppose the Budget because it is unfair, helps the rich and does nothing for working families in this country.

Oral Answers to Questions

Lord Hanson of Flint Excerpts

Tuesday 24th January 2012 Commons Chamber

[Mr Hoban]

The key thing is to have a credible fiscal and economic policy. The Conservative party and this Government have that credible economic policy, whereas the Labour party has no idea where it wants to take the economy. The measures we are taking to tackle the deficit which keep interests rates low are providing the biggest benefit we can give to businesses to help them grow in future.

[Mr David Hanson (Delyn) (Lab)]

13. What assessment he has made of the likely level of economic growth in 2012.

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

The Office for Budget Responsibility forecast 0.7% economic growth in 2012 and that the economy would grow every year after that within the forecast.

[Mr Hanson]

With unemployment at a 17-year high, with growth having flatlined over the past 12 months, and with targets for future growth having been missed in every month so far to date, may I gently suggest to the Minister that she should look positively at some of the alternative suggestions that have been made, such as for a cut in VAT on construction, which is supported by the Federation of Small Businesses, to help growth in the next 12 months?

[Miss Smith]

Like recoveries from all deep recessions, this one has been choppy, and we are facing subdued growth, as the Office for Budget Responsibility has laid out. There are many reasons for that, one of which is that the Labour party simply turned on the taps when it came to spending and left them running. What the right hon. Gentleman has to recognise is that in policies that deal with business we do not pick ones that have an extra £20 billion price tag that cannot be sourced. Perhaps it is his leader who needs to take a lesson in understanding business, as his adviser has said that he

“doesn’t understand business…there was always something missing.”

The Economy

Lord Hanson of Flint Excerpts

Tuesday 6th December 2011 Commons Chamber

[Mr David Hanson (Delyn) (Lab)]

rose—

[Mr Osborne]

And the right hon. Member for Delyn (Mr Hanson) was a Minister in that Government.

[Mr Hanson]

Will the Chancellor give us some idea of how many bank employees’ salaries of over £1 million will not be disclosed because of his failure to implement legislation enacted by the Labour Government?

[Mr Osborne]

Anyone listening to Opposition Members would believe that under the mythical Labour Government that apparently existed, all that information was disclosed. But was it disclosed? There was no disclosure whatsoever. I suggest to the shadow Chancellor—the former City Minister—and others that they back the unilateral measures that we are taking, which will make the financial centre here in London the most transparent in the world.

The advice of the Financial Policy Committee is clear. Banks should consider limiting bonuses this year and using profits to strengthen their balance sheets in the face of the eurozone debt storm. Let me make this plain: stronger banks, not larger bonuses, should be the priority this winter, and money that is earned should be used to build balance sheets and not to enhance payouts. That is the advice from the Bank of England, and that is the advice that the Government now expect to be followed.

European Union Fiscal Union

Lord Hanson of Flint Excerpts

Wednesday 14th September 2011 Westminster Hall

[Mr David Hanson (Delyn) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Brooke.

I pay tribute to the hon. Member for Stone (Mr Cash), who is nothing if not consistent in his arguments. The holding of today’s debate reminds me of the fact that I have been in the House for 19 and a half years and that the bags under my eyes started to appear when I was up all night listening to the hon. Gentleman in the debates on the Maastricht treaty in 1992 and 1993.

[Mr Jenkin]

Which way did you vote?

[Mr Hanson]

On many occasions I voted differently, because the purpose of the Opposition was to keep the Government on their toes and divided—as, indeed, we see today in the interactions between Back Benchers and the Minister.

I pay tribute to other Members who have spoken. The consistency of my hon. Friend the Member for Luton North (Kelvin Hopkins) is unparalleled, although his approach has differed from that of Labour Front Benchers. The hon. Members for Northampton South (Mr Binley) and for Witham (Priti Patel) hold strong convictions on this subject, which does not come as a surprise to hon. Members or to their constituents.

I confess that I feel like an onion in a strawberry patch, as I take a different view of the benefits of our relationship with Europe and with the European Community. I want the Government to engage positively, not within the potential framework of withdrawal—the tone that percolates through the comments of the hon. Member for Stone and his colleagues and of my hon. Friend the Member for Luton North—but in tackling deep and serious issues of economic policy, and ensuring growth, stability and fairness across the European Community.

As I said, I feel like an onion in a strawberry patch because I hold positive views about Europe and the European Community. Our EU membership gives British companies full and direct access to 500 million consumers —the single market that Governments of all parties have supported. The 3 million jobs in the United Kingdom—10% of the work force—linked directly to the export of goods and services to the EU exist partly because of the structures of the European Community.

Our EU membership makes the UK an attractive place for investment from Europe and creates stability for the emerging countries in the east, the growing markets. Furthermore, the EU brings democracy to countries that when I was first elected were still under dictatorships and were not the positive members of Europe that they are becoming today.

[Dr Julian Lewis (New Forest East) (Con)]

I thank the right hon. Gentleman for giving way, but this really will not do. He is making a general defence of the European Union in a debate on fiscal union, and the fact remains, as many of us have argued for many years, that there cannot be a single currency without a single economy, there cannot be a single economy without a single Government and there cannot be a single Government without a single state. That is why the Eurofederalists want fiscal union, and regardless of whether it works or fails they say we should have more union. The reality is that it is failing and we must disentangle ourselves from this mess, not have a general debate on trade in the European Union.

[Mr Hanson]

If the hon. Gentleman allows me, I shall cover some of those points in a moment. It is important to record the fact that we have economic growth partly because of co-operation, because of the single market, because of the widening of the European Community to the east and because of EU investment in this country.

[Mr Shepherd]

I am sorry that the right hon. Gentleman has repeated the old canard about 3 million jobs, but perhaps he will comment on the other side of the equation. How many jobs on the European continent depend on trade with Britain?

[Mr Hanson]

I believe that the single market and the European Community have contributed to growth and jobs in this country and throughout mainland Europe. The hon. Member for Stone touched on the potential difficulties with the euro and Greece, Portugal, Spain and Italy, but the argument that he advanced about renegotiation does not fly and would not be a starter in relation to the positive policies that I hope I share with the Minister on engagement and the future of Europe.

We need to look at three issues. The economic growth strategy for Europe is key to economic growth as a whole. When we look at what we are doing in reducing public spending—in achieving a balance between public spending and private expenditure—we see that the growth strategy is missing in Europe and that the collective strategy of reducing public spending will not lead to economic growth.

Given the potential collapse of the euro, it is important that we look at the current stability mechanism, and I am sure that the Minister will speak about the future stability mechanism for 2015. We must consider negotiating an earlier end to the temporary European financial stability facility, of which the UK is a member. The UK’s exposure is too high and is a risk, and if the euro collapsed now we would face severe difficulties with the funding mechanism.

My right hon. Friend the Member for Edinburgh South West (Mr Darling) negotiated the facility—with, I believe, all-party agreement, although there is dispute about that—before the general election, and it is key to stability with the euro. It is not in this country’s interest for Greece to fail, for the euro to break up or for other countries to default. As my right hon. Friend the Member for Oxford East (Mr Smith) said in an intervention on the hon. Member for Northampton South, one of the reasons why the Prime Minister and the Chancellor are looking to develop an EU fiscal policy to follow the current agreement is to ensure that a collapse is avoided, that the currency is strengthened and that a positive Europe, geared to growth in the future, is maintained.

[Mr Binley]

Will the right hon. Gentleman explain how that policy might be policed to ensure that nations properly abide by its dictates and do not act as they do in many other instances with the other regulations imposed on them?

[Mr Hanson]

One of the hon. Gentleman’s points that struck me most forcefully is that some countries do not play by the same rules as this country on tax evasion, tax avoidance and other issues, but that is not a reason to say that we should leave the pitch. It is our job to work responsibly within the structures of the European Community—with our Members of the European Parliament, with the European Commission and with national Parliaments—and to make the case for a single market, properly regulated, in which tax evasion and other issues are dealt with firmly.

We cannot walk off the pitch and withdraw from the European Community, although that is the ultimate aim of Members who have supported the hon. Member for Stone today. We must ensure that the replacement mechanism in 2015 is strong and stable but oriented solely on the eurozone, where the UK Government’s liabilities are limited.

Honourable, determined and consistent though the hon. Member for Stone is, and difficult though the challenges are in relation to countries, such as Greece, that should not have joined the euro in the first place, the failure of the currency and our failure to act to help to maintain stability in Europe would ultimately lead to lower growth, further unemployment and the UK being distanced from potentially successful markets.

There are many issues ahead of us about which there is clear disagreement between Labour Front Benchers and Members who have supported the hon. Member for Stone today, but I look forward to hearing the Minister’s response.

Oral Answers to Questions

Lord Hanson of Flint Excerpts

Tuesday 6th September 2011 Commons Chamber

[Justine Greening]

My hon. Friend is absolutely right. The action that we took, which was part of a £1.9 billion package to support motorists, means that fuel duty was 6p lower than it otherwise would have been under the previous Government’s proposals.

[Mr David Hanson (Delyn) (Lab)]

The Minister will know that the rise of several hundred pounds in energy costs will hit businesses hard, and that on top of VAT and price and pay freezes it will particularly hit consumers and pensioners. What is her assessment of the level of that price rise? How many meetings has she had with energy companies about the price of energy? What does she intend to do about the price of energy other than freezing the level of winter fuel payments for pensioners?

[Justine Greening]

I think I have answered those questions already; and perhaps the right hon. Gentleman should speak to his Back Benchers about their asking his question before he does. I know that it is his wedding anniversary today, and I hope that I do not upset him too much before he has dinner with his wife tonight. I can again assure him that we are absolutely committed to making sure that the Warm Homes discount scheme will support the most vulnerable people in our country so that they can afford to heat their homes.

Finance (No. 3) Bill

Lord Hanson of Flint Excerpts

Monday 4th July 2011 Commons Chamber

[Sir Robert Smith]

The purpose of the amendment is to keep the spotlight on this issue by ensuring we get updates from the Government, and that the Government can give a signal on the investment climate showing that they understand the concerns and are willing to take them on board so we can build a long-term future.

There is another gap apart from the time gap as these contracts unravel. We are a mature province so we must ensure that the infrastructure to get the next investments off the ground is still in place in years to come. That infrastructure must not be decommissioned prematurely, and so the investment must not be withdrawn. The owners of the infrastructure need to know that there is a long-term future for investment as more production will be brought in through those platforms. That is another reason why these constructive talks are so important.

I encourage the Government to do all they can to restore confidence and the positive investor climate that will unlock the full potential that exists in this country, build on the skills we already have, and maximise the benefit to the taxpayer in the long run and to our security of supply.

[Mr David Hanson (Delyn) (Lab)]

I am grateful to the hon. Member for Amber Valley (Nigel Mills) for kicking off this wide-ranging discussion on a number of important tax issues. He certainly enlightened me when he revealed that the Minister is tax personality of the year. I missed that; despite all my “Gauke” Google alerts, I missed the fact that he was tax personality of the year. May I offer the official Opposition’s wholehearted congratulations to him on that?

The hon. Member for Amber Valley gave a number of Ronald Reagan quotes and he said today was the 100th anniversary of Ronald Reagan’s birth. That was on 6 February, in fact, but this is the 100th year since Ronald Reagan’s birth. As you will know, Mr Deputy Speaker, today is the day on which we shrank the UK tax base by giving away America 200-odd years ago, and I hope that, as part of his plans for simplification, the hon. Gentleman will recall that.

New clauses 12 and 14 were proposed by the hon. Gentleman and he may be surprised to learn that I am not averse to his suggestion in new clause 14, because there are grounds for discussing the simplification of UK corporation tax returns for multinationals. It is worth while considering the review that he suggests, provided that it examines whether such a simplification will decrease, rather than increase, tax evasion—an increase is always the worry with such a simplification. New clause 14 potentially has merit and although I do not expect the hon. Gentleman to push it to a vote, I hope that the Minister will consider the issue.

New clause 12 proposes to review, or possibly even remove, capital allowances and asks the Office of Tax Simplification to report on replacing them with a different form of relief. The hon. Member for Amber Valley will know that Labour Members had substantial concerns about reducing capital allowances for firms, which explains why I cannot support the new clause. My hon. Friends and I tabled a number of amendments in Committee to oppose the reduction in the capital allowances. I realise that the reduction was tied up strongly with the decision to cut corporation tax to 24% by 2014-15—shortly thereafter it was decided to cut it to 23%— which was one of the flagship growth measures in the June Budget. However, that was paid for by slashing investment and capital allowances, which encourage businesses to take a long-term view by providing tax relief on the purchase of equipment and machinery. The view that I expressed in Committee has not changed, although I know that it will cause disagreement: companies that invest, particularly in manufacturing—car industries in my own area of north Wales, advanced manufacturing, wind turbine manufacturing, plane makers and so on—will benefit from capital allowances, whereas the tax cuts are, unfortunately, aimed at financial services.

At the time of the June 2010 Budget, manufacturers expressed concern at what this approach will mean for industry. More recently, the engineering manufacturers association warned that the Government risk moving to a tax system that contains “a bias” against big manufacturers. Members on both sides of the House are trying to encourage manufacturing growth, and I believe that the review that the hon. Gentleman seeks in the new clause could be damaging to the growth of capital investment and, therefore, to the growth of manufacturing industry.

[Nigel Mills]

I wish to clarify something. My aim in new clause 12 was not to do what the right hon. Gentleman fears will happen, but to do the opposite. I was aiming to ask the OTS to consider simplifying or replacing the capital allowances regime with one that would match the tax relief more closely to the life of the assets being invested in. My concern was that an 18% reducing balance was giving tax relief over a far longer period than the actual useful life of those assets. I felt that having a simpler system, where a shorter “life” meant that the tax relief would be obtained much faster, would incentivise investment, not discourage it.

[Mr Hanson]

That is an interesting argument, and I bow to the hon. Gentleman’s detailed knowledge of these matters, which goes back to his professional experience before entering the House. My worry has been placed on the record on Second Reading, in Committee and on several other occasions. For the moment, it is best that we keep our arguments to the effectiveness of capital allowances, and I will, thus, still be unable to support the new clause.

My hon. Friend the Member for Hayes and Harlington (John McDonnell) tabled amendments 15, 20 and 17. I suspect that he was even more surprised than me to hear the hon. Member for Wycombe (Steve Baker) offer his unflinching support for my hon. Friend’s suggestions on this matter. I thank him for tabling his amendments because they make an extremely important contribution to the debate. We face a real issue in how we collectively address what is now a cross-party concern and shed light on the remuneration of executives, who are ultimately paid by the companies for which they work and by us as consumers of those goods in our society at large.

[John McDonnell]

I had better correct the record. As someone who still sees the relevance of Trotsky’s transitional programme, I am attempting not to salvage capitalism but to expose its weaknesses.

[Mr Hanson]

Far be it from me to engage with my hon. Friend on the benefits or otherwise of Trotsky’s theory, because I am sure that he would win that discussion hands down.

The key point is that we all seek transparency in remuneration. My hon. Friend the Member for Hayes and Harlington will be aware that there is already legislation on the statute book that means that banks must have transparency in their remuneration. The Government should enact that legislation and should also push for a wider European agreement on transparency, an act of faith that they have so far failed to push for.

The previous Government, in our Financial Services Act 2010, allowed the Treasury to issue regulations that forced banks to disclose in bands the number of staff earning more than £1 million a year. That legislation has so far not been pursued with any vigour by the Government. The Act, which gained Royal Assent in April 2010—just before the general election—gave the Treasury the power to regulate on this issue. It is an issue that my hon. Friend the Member for Hayes and Harlington has raised and for which the Government must account today. The Opposition will continue to consider it in the future. Indeed, my right hon. Friend the Leader of the Opposition made a clear speech to the Coin street neighbourhood centre on Monday 13 June in which he committed the Opposition to ensuring that we had such transparency and that chief executives were accountable not just to their shareholders but to the wider community.

[Kate Green (Stretford and Urmston) (Lab)]

Does my right hon. Friend agree that an important feature of exposing those very high bonuses to public scrutiny was to make it clear that other lower paid workers in the banking sector receive some bonus payments? It is very important that we distinguish between the excessive bonuses at the top and the bonuses that top up relatively modest wages for the bank clerks, who are feeling quite attacked personally when the banking crisis was none of their making.

[Mr Hanson]

My hon. Friend makes a valuable point. She will know that the legislation passed by my right hon. Friend the Member for Edinburgh South West (Mr Darling) in the last Parliament allowed salaries of more than £1 million to be open to scrutiny, which would address the issue she mentions.

There is some merit in bringing this issue to the attention of the House, and I am grateful to my hon. Friend the Member for Hayes and Harlington for doing so. He will know that there are some issues to do with his amendment delaying corporation tax cuts, but I am grateful that he has addressed the issue and I hope the Minister will respond in due course.

Amendment 17 is about the enterprise investment scheme, which we support. In Committee, we asked the Minister whether he had state aid approval for the EIS and I would welcome an update on whether he has since made progress on that.

I have some sympathy with amendment 51, tabled by the right hon. Member for Gordon (Malcolm Bruce). On Second Reading and in the Committee of the whole House, we tabled amendments that mirrored his amendment in many ways, asking the Chancellor to produce before the end of September an assessment of the impact of taxation on ring-fenced profits, business investment and growth, including an assessment of the long-term sustainability of oil and gas exploration in the North sea. For the reasons mentioned by my hon. Friend the Member for Aberdeen North (Mr Doran), the way that the proposal was brought forward contained elements of surprise for the industry. There was a lack of consultation and there have been consequences. The right hon. Member for Gordon and the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) both mentioned Statoil and the great impact that the decision has had on that company’s potential $10 billion—or £6.1 billion—investment in the North sea.

It is important that the Economic Secretary has had discussions—some potentially very exciting and energetic—with oil companies on these matters as part of her initiation into her role in government. I hope that she will ensure that she reports back. I also hope that the Minister will accept amendment 51, or at least accept an amendment in principle for the future.

Finally, although my hon. Friend the Member for West Bromwich East (Mr Watson) is not present today because of other matters, I very much welcome his amendment 9, which is part of this group. We raised the issue of video games tax relief in debates on the Finance (No. 2) Bill. However, we need to look at the issue again in detail, if only because the hon. Member for Wantage (Mr Vaizey) said when in opposition:

“We are committed to a tax break along the lines of the video games tax credit. We have been calling for tax breaks for the video game industry for the last three years.”

He said that during the general election, on 13 April 2010. He is now the Under-Secretary of State for Culture, Olympics, Media and Sport, yet he has been sat on by the Chancellor of the Exchequer, who said in his Budget statement last June:

“In the current climate, with the deficit the size…all those reductions in tax must be more than paid for by other changes to business taxation, so we will not go ahead with the poorly targeted tax relief for the video games industry.”—[Official Report, 22 June 2010; Vol. 512, c. 175.]

My hon. Friend’s amendment 9 asks the Government to look again at the issue. I simply put on record the fact that, yet again, those in government said one thing during the election and something else afterwards. We need to encourage the video games industry so that we can compete on a global scale.

In summary, there are some useful amendments in this group. I cannot accept everything that the hon. Member for Amber Valley said, but the other amendments before us have some merit. I look forward to hearing what the Minister has to say.

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

We have had an interesting and wide-ranging debate on this group of amendments, which propose a number of changes to the taxation of business. Let me start by reiterating our position on business tax. The first step in the Government’s plan for growth is a competitive UK tax system. In fact, the Government’s aim is to create the most competitive corporate tax regime in the G20, and we have been clear about how we intend to achieve that. Last November we published our corporate tax road map, setting out our plans for reform over the next five years and the principles underpinning those reforms. I am quite clear that if we are to provide business with the certainty that it needs to invest in the UK, tax reforms need to maintain stability, avoid complexity and ensure a level playing field for taxpayers.

Let me deal first with the amendments tabled by the hon. Member for Hayes and Harlington (John McDonnell), and in particular amendment 15, which deals with directors’ pay, and on which we saw an unlikely alliance between him and my hon. Friend the Member for Wycombe (Steve Baker) in defence of the interests of capital versus workers—if I can phrase it in a way that will please my hon. Friend but not the hon. Gentleman—albeit the highest paid workers. It is worth noting that both hon. Members have made many declarations of independence, and today was no exception. As I have said, a competitive tax regime is the foundation of our plan for growth, and the consequence of amendment 15 would be to delay the reduction in corporation tax.

The Government take the essence of the hon. Gentleman’s concern—directors’ remuneration—seriously; indeed, my right hon. Friend the Secretary of State for Business, Innovation and Skills raised it on 22 June in a speech to the Association of British Insurers, asking how we can ensure that directors’ remuneration is effectively linked to company performance. To help answer that question, the Government already have plans to consult in two relevant areas. In July, the Department for Business, Innovation and Skills will look at the narrative aspects of reporting directors’ remuneration, examining the provisions dealing with the disclosure of directors’ remuneration and making the link to company performance much clearer. In the autumn, the Department will explore other policy options related to the role of remuneration committees and company accountability to shareholders.

Turning directly to the proposals made by the hon. Member for Hayes and Harlington, let me first remind him that UK-quoted companies are already required to publish a directors’ remuneration report. That includes full individual details of each director’s pay, including salary and bonuses, share schemes and all other forms of remuneration. His proposal to make the remuneration vote binding in nature would raise difficulties, as such a vote would inevitably cut across contractual arrangements already entered into between the company and the director. That is why the vote is currently advisory in nature.

--- Later in debate ---

[Nigel Mills]

My purpose in moving the new clause was to encourage the Government down the route of tax simplification, which I hope I have achieved tonight. Therefore, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Clause 1

Charge and main rates for 2011-12

[Mr Hanson]

I beg to move amendment 10, page 1, line 9, at end insert—

‘(3) By 31 March 2012 the Office of Budget Responsibility, in consultation with HMRC, will report to Parliament on the revenue of the 50 per cent. rate of income tax and its impact on the UK economy.’.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

Amendment 14, page 1, line 9, at end insert—

‘(3) A report on the impact of the current rates of income tax on inequality in the United Kingdom, also taking into consideration all other direct and indirect taxes including duties and excises, council taxes and mandatory charges for the use of cars and televisions and making specific reference to the overall tax rate of taxpayers grouped by decile in the United Kingdom and by each individual constituent country shall be prepared by HM Treasury and laid before the House of Commons not later than 1 December 2011.’.

Amendment 30, page 1, line 9, at end insert—

‘(3) All public sector employees whose earned income does not exceed £21,000 shall be entitled to a £250 reduction in tax liability for the tax year 2011-12.’.

[Mr Hanson]

I do not intend to detain the House for long on these amendments, although they are important. I particularly welcome amendment 30, which stands in the name of my hon. Friend the Member for Hayes and Harlington (John McDonnell) and my right hon. Friend the Member for Birkenhead (Mr Field), and which I will touch on briefly. Clause 1 deals with rates of taxation and, if approved, will set the rates for the next financial year at 20%, 40% and a special rate of 50%. Amendment 10, which is simple and straightforward, has been tabled by the shadow Treasury team because we want to shed a little light on how the Government will report on their future plans for the 50% rate of tax.

We already know certain key facts. We know that the Chancellor has asked HMRC to collect tax receipts for this financial year and that he has assessed the revenue levels of the 50% rate for this year. In Committee, the Exchequer Secretary said:

“The Chancellor’s Budget statement to the House on 23 March simply highlighted the fact that he has asked Her Majesty’s Revenue and Customs, as part of that ongoing work, to see how much the additional rate actually raises. HMRC will look at all the available evidence about the impact of the 50% rate, including data from the 2010-11 self-assessment returns, which will become available next year.”––[Official Report, Finance (No. 3) Public Bill Committee, 10 May 2011; c. 22.]

My concern, which I will put directly on the table, is that the Government have already prejudiced any decision on the 50p rate of tax by stating clearly that they believe it will do lasting damage to the economy. We want further explanation of the methodology that they will use to consider the 50p tax rate for future Budgets, and I think that the best organisation to do that is the Office for Budget Responsibility. The Government set up the OBR and gave it a number of key roles, one of which I have helpfully drawn from its own website. Under the heading “What we do”, it states:

“We scrutinise the Treasury’s costing of Budget measures: During the run-up to Budgets and other policy statements, we subject the Government’s draft costings of tax and spending measures to detailed challenge and scrutiny.”

All the amendment would do is formally recognise that role in relation to the Government’s forthcoming review of the 50p additional rate.

The Chancellor has said to the House of Commons, the public and anyone who will listen that he sees this as a “temporary measure” and that it will do “lasting damage” to the economy. He has signalled that he will abolish the 50p rate as soon as he can, in line with Conservative thinking before the election. However, the timing remains uncertain. I believe that the Chancellor has pre-empted the review. When HMRC undertakes the review, it will do so on the assumption that at some time around 2013 the Chancellor of the Exchequer will abolish the rate on incomes above £150,000.

[Charlie Elphicke (Dover) (Con)]

May I congratulate the Opposition on submitting the amendment on time and on its being selected? In relation to this report, I ask the right hon. Gentleman whether it is fair, right and proper that in 1978 the top 1% of earners paid 11% of all tax and that they now pay 25%.

[Mr Hanson]

I am grateful to the hon. Gentleman. I presume that he does not support the 50p tax rate, whether it raises revenue for the Treasury or not. We do not want HMRC to do a private report for Ministers, and for Ministers then to make political judgments about the 50p additional rate. Through the OBR’s involvement, we want there to be a public report on the impact of the rate which is open to scrutiny.

The hon. Member for Dover (Charlie Elphicke) will know that about 308,000 people are affected by the 50p rate. I am not surprised that he supports its abolition and a lower rate, because he knows that it is paid less in my region in Wales, in the north-west region of my right hon. Friend the Member for Birkenhead and my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) and in the north-east region of my other hon. Friends. The benefit of this tax cut, if it happens, will predominantly affect south-east and east England and the wealthier parts of London, although it will not particularly affect the constituency of my hon. Friend the Member for Vauxhall (Kate Hoey). I understand why the hon. Member for Dover wants to get rid of the rate. If he does, there will be a tax benefit for the richest people in our society and for certain parts of the United Kingdom.

All I am saying to the Minister is that we want to see the evidence on whether the additional rate raises money. If it does not raise money, we want to see it openly scrutinised. If it does raise money, we want to expose that, so that if the Minister and his hon. Friends cut the rate, it will be clear that they are doing so for political reasons and not because it is ineffective.

[Charlie Elphicke]

The right hon. Gentleman should know that in Dover there is a lot of deprivation. My case is not that we should get rid of the 50p tax rate tomorrow, but that we should do so at the right time. My question was simply whether it is safe and sensible for so much of the tax base to depend on so few people in this country?

[Mr Hanson]

I just say to the hon. Gentleman that in south-east England, which I recollect covers Dover, some 67,000 people pay the additional rate, whereas in north-east England, which is represented by some of my hon. Friends who are present, only 5,000 people pay it. Clearly, there will be a regional imbalance if this tax cut goes ahead. We will consider those issues in due course. I know that there are areas of great poverty and deprivation in Dover, where people do not pay the additional rate, but the hon. Gentleman has imposed value added tax on those people through votes in the House of Commons, and that is an unfair tax.

The simple point I make to the Minister is that we want open scrutiny of the decisions he takes on the ending or otherwise of the 50p additional rate. The leader of the Labour party has said that we would maintain that rate for the duration of this Parliament. The Minister and his colleagues have indicated that they want to do away with it. They are now trying to produce the information to show why that should be done. I believe that the Office for Budget Responsibility would provide greater scrutiny of that decision than—dare I say it?—the Minister in an in-house decision. We will test the matter tonight, and I hope that the Exchequer Secretary will accept the amendment. It relates to a core role and duty of the OBR, which is on its website, and I cannot see why he would not wish it to review the Government’s decision formally.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Is it not important that the matter is subject to scrutiny, because the Government continue to tell us that they are looking after everyone in the community, including the less well-off? A review would show whether they have plans to reduce the burden on the highest paid.

[Mr Hanson]

That is true. My hon. Friend will know that “We’re all in this together” is one of the Government’s refrains, and a review would show whether that is true. I want to know that preferably from the OBR, as suggested in the amendment, but otherwise from the Exchequer Secretary. The Government need to set out why they have decided to reduce the 50p rate in 2013, if that is their decision; what it will cost; what the forgone income will be; and who will benefit. There should not just be internal discussions—the decision should be open to public scrutiny through the OBR.

I am grateful to my right hon. Friend the Member for Birkenhead for tabling amendment 30, which highlights an extremely important issue. Again, I wish to hear the Exchequer Secretary’s response today. I do not wish to steal my right hon. Friend’s thunder, but he will know that the Conservatives pledged in their manifesto to freeze public sector pay, but to exclude from that 1 million of the lowest-paid workers. It stated that they would

“freeze public sector pay for one year in 2011, excluding the one million lowest paid workers.”

Through great effort, he has used parliamentary questions to uncover the fact that that is not the case, and that the Conservative Government have yet again broken a promise in their election manifesto. I believe that he will make a strong case that we need some explanation from the Government of what they are doing about the impact on low pay of the public sector pay freeze that has been put in place.

My right hon. Friend will know that there are issues to consider about the applicability of his amendment to clause 1 and its workability, and indeed its fairness. However, he has highlighted an extremely important issue, and I want the Exchequer Secretary to explain why the Conservatives’ words about ensuring that low-paid workers were not disadvantaged have proved to be weasel words.

[Charlie Elphicke]

Is the right hon. Gentleman’s position and that of the official Opposition that they support amendment 30?

[Mr Hanson]

I have not yet heard what my right hon. Friend the Member for Birkenhead has to say about it, but the hon. Gentleman might be interested to know that we have discussions not just in the Chamber but outside it as party colleagues. My right hon. Friend will make his case in a moment, and I will listen to it and respond in due course. There are some issues that we need to consider, but it is not for me to respond to amendment 30; it is for the Exchequer Secretary to say why he has let down low-paid workers across the United Kingdom through his promises before the elections and his actions in the Budget. I look forward to hearing my right hon. Friend in short order.

My hon. Friend the Member for Hayes and Harlington has yet again tabled an amendment that has a great deal of merit. Although I do not expect it to be pushed to a vote, I want to hear what he says about it, because he has important points to make. The key point on all the amendments is that the Government need to provide clarity. We need clarity about what they are doing on the 50p tax rate and on low-paid workers, and on the points raised by my hon. Friend’s amendment. I look forward to hearing my hon. Friend, my right hon. Friend the Member for Birkenhead and the Exchequer Secretary in due course.

[Mr Frank Field (Birkenhead) (Lab)]

I shall not press amendment 30 to a Division tonight, because we will return to the subject in greater detail later in the Parliament. However, I want to address some questions to those on the Treasury Bench. I accept that there are problems with the amendment, but it was the only way that I could find to debate the matter in the House.

I wish to remind the Minister that in the Budget debate of 2010, the Chancellor said that

“the Government are asking the public sector to accept a two-year pay freeze, but we will protect the lowest paid…They will each receive a flat pay rise worth £250”—[Official Report, 22 June 2006; Vol. 512, c. 171.]

He said that the cut-off point would be not £18,000 but £21,000 a year, and he, not the Opposition, estimated that 1.7 million people would receive that pay increase.

A number of Opposition Members, including those who put their names to amendment 30, and many hon. Members, have constituents who believed what the Government said. They believed that they would be protected. The Chancellor’s announcement was a crucial part of protecting those workers, but it was also a crucial part of selling to the wider public the pay freeze that the Government announced. However, those people have so far received no £250 pay increase.

I should therefore like to ask the Minister two questions. First, of the 1.7 million whom not I, but the Chancellor, said would be eligible, how many have received the £250 across-the-board pay increase? Next year’s earnings figures show that the numbers eligible will rise to 2.2 million. Therefore, my second question for those on the Treasury Bench is this: how many of that 2.2 million will receive their £250 pay increase?

I conclude by merely trying to express, perhaps inadequately, a sense of how low-paid workers in my constituency feel. They feel that they have again been let down. The previous Labour Government did not do too well by that group, with the 10p tax rate abolition, and this Government have done not too well by them. Many are women coming up to retirement age who now learn that they must work two years more. They thought they would get £250 as a lump sum to protect them against rising prices and a general wage freeze, but many now find that no such increase is forthcoming. I would therefore be grateful if the Minister could give us answers to those two questions.

--- Later in debate ---

[Mr Gauke]

I have given way to the right hon. Gentleman on a number of occasions, and I think it is time to conclude.

I have explained why the assessment of the additional rate of income tax requested by my right hon. Friend the Chancellor must be prepared by Her Majesty’s Revenue and Customs. I have explained that the analysis the hon. Member for Hayes and Harlington seeks already exists, and I have explained why the Government’s approach to assisting the lowest-paid public workers is the right one. There is no need for these amendments, so I ask for them to be withdrawn.

[Mr Hanson]

What is clear is that my right hon. Friend the Member for Birkenhead (Mr Field) has exposed completely the fact that the Chancellor of the Exchequer promised one thing at the election and one thing in his Budget, and has not delivered on that promise completely. I know that we will return to that issue during the next few weeks and months.

On the issue of the Office for Budget Responsibility, I wish to press amendment 10 to a Division and I urge my right hon. and hon. Friends to support me in the Lobby.

Question put, That the amendment be made.

Finance Bill

Lord Hanson of Flint Excerpts

Tuesday 28th June 2011 Commons Chamber

[Ian Swales]

No, I do not accept that, because of the long list of items that are VAT-free. If everything had VAT applied, I would agree with the hon. Lady.

We have had no view about how the Opposition would fund the proposed cut in VAT. If they wished to borrow, which presumably is the answer, there are many options which are fairer to pensioners and the less well-off and more likely to encourage economic growth. Reducing VAT would be a flawed policy, just as it was last time, and I urge the House to reject new clause 6.

[Mr David Hanson (Delyn) (Lab)]

I shall speak to new clause 10, but before I do so, may I remind the hon. Member for Redcar (Ian Swales) that he fought an election on the Tory tax bombshell? I remember pictures of the Deputy Prime Minister, the right hon. Member for Sheffield, Hallam (Mr Clegg), standing in front of a poster that referred to a Tory tax bombshell—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am sure the right hon. Gentleman would want to speak through the Chair.

[Mr Hanson]

I remember the hon. Member for Redcar standing with the Deputy Prime Minister in front of a poster that said “Tory tax bombshell”. I find it amazing to hear the hon. Gentleman speak this evening as an apologist for the Conservative Government’s imposition of VAT on people in Britain.

New clause 10 calls for a review of the assessment of the impact of VAT on UK economic growth over the next three months. As Members know, last Tuesday we voted on a Labour motion, which was opposed by the Liberal Democrats, to cut VAT on a temporary basis to 17.5% while economic growth is restored. The Conservative party voted against that motion, which would have ensured that we had the VAT cut proposed today.

[Mr Gauke]

The right hon. Gentleman will be aware that tax law is made in Finance Bills. Given that we are debating such a Bill, will he explain why the official Opposition have not brought forward their own proposals, in a form that could be selected, to cut VAT on a temporary basis, or have they abandoned that policy?

[Mr Hanson]

The policy is clear. If the Exchequer Secretary looks at new clause 10, he will see that we want an assessment of the impact of VAT that looks at how we should deal with the question of VAT across the whole UK. Let me start by saying that we have a deficit reduction plan, as he knows, and a plan to save resources to tackle the deficit, and we have a plan to ensure that we meet the needs of this country. He will know that we have consistently supported opposition to the Government’s VAT rise since they brought it forward.

[Alun Cairns]

I note that the right hon. Gentleman is speaking to new clause 10, which is very different from the proposal made to the House only a week ago. Is this yet another shift in official Opposition policy?

[Mr Hanson]

The hon. Gentleman cannot get away from the fact that he has imposed a VAT rise on businesses, families and hard-working people in Vale of Glamorgan and elsewhere in the UK, and he could have avoided that tax in different ways. On the same evening that the Conservative party has proposed tax relief on support for private medical insurance—[Interruption.] Well, I may be mistaken, but I believe that the hon. Members for Christchurch (Mr Chope) and for North East Hertfordshire (Oliver Heald) are Conservative Members of Parliament. The hon. Member for Vale of Glamorgan (Alun Cairns) has imposed a VAT rise on his constituents that is unfair, damaging business and will damage the UK economy.

[Christopher Pincher]

We all feel very sorry for the right hon. Gentleman, sitting there having to speak to new clause 10. Last week he proposed cutting VAT, but this week he simply wants to assess it. What will his policy be next week?

[Mr Hanson]

The policy is exactly the same week in, week out. We have opposed the VAT increase and the hon. Gentleman has voted for it. Last week we supported a temporary cut to help the economy and he opposed it. We are calling for a review of the impact of VAT on businesses and families, and tonight he will oppose it. This is an important debate and we have an opportunity tonight to assess the impact of VAT and look at the issues that affect constituents.

[Harriett Baldwin (West Worcestershire) (Con)]

New clause 16, which is on the amendment paper in the right hon. Gentleman’s name, has not been selected for debate. Will he explain why it was late and unable to be selected?

[Mr Hanson]

The hon. Lady will know that we have tabled several amendments to the Finance Bill. Mr Speaker chose not to select new clause 16, but he did select new clause 10, which calls for a review of the impact of VAT on things that are important to my hon. Friends’ constituents and hers: family incomes, businesses and jobs. If she looks at what the leader of her party said during the general election—[Interruption.] Perhaps the hon. Member for Chelsea and Fulham (Greg Hands) should listen to this, because during the general election the then Leader of the Opposition said during the Cameron Direct campaign in Exeter:

“You could try, as you say, to put it on VAT, sales tax, but again if you look at the effect of sales tax, it’s very regressive, it hits the poorest the hardest.”

I agree with the Prime Minister. Does the hon. Member for Chelsea and Fulham agree with his right hon. Friend?

[John Hemming]

On the point about hitting the poorest hardest, does the right hon. Gentleman not accept that the poorest people, those on means-tested benefits, receive an up-rating for the cost of living, which is in fact in excess of the extra VAT, and so benefit by 1% in excess of the extra cost of VAT?

[Mr Hanson]

I am afraid that every Labour Member believes that VAT is a regressive tax that hits the poorest hardest. When the Conservative party—

[Mr Gauke]

rose—

[Mr Hanson]

Wait. When the Conservative party—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Mr Hemming, you have had one intervention. If the shadow Minister is not giving way, you should respect that.

[Mr Hanson]

When the Conservative party, supported by Liberals who at the general election opposed VAT increases, imposes VAT increases, it does so on businesses and on jobs and hardest on the poorest people in our society. I will now give way to the Minister so that he can explain that.

[Mr Gauke]

The right hon. Gentleman says that every Labour Member opposes the increase in VAT. Will he explain, first, why so few of them voted against it last year and, secondly, why the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), according to Peter Mandelson’s memoirs, was in favour of raising VAT to 19%?

[Mr Hanson]

I have great respect for my right hon. Friend the Member for Edinburgh South West (Mr Darling), and he is a very good friend of mine, but the issue tonight is that no Labour Government increased VAT above 17.5%. Indeed, the same Chancellor of the Exchequer, my right hon. Friend, in similar circumstances to those that we face now, when there is pressure on jobs, on businesses and on incomes, temporarily reduced VAT to help hard-working families to cope.

[Andrew Gwynne]

My right hon. Friend is absolutely right to draw the House’s attention to new clause 10. All it asks for is an impact assessment of the rate of VAT on UK economic growth. Is it not the case that, since the VAT rate was increased, consumer confidence has flatlined and retail sales have fallen?

[Mr Hanson]

It is very interesting that my hon. Friend makes that point about the VAT increase, because following that reckless gamble, inflation, which was 3.1% in September, was 4.5% in April and May, hitting savings, pensions, incomes, jobs and people’s livelihoods. He will know that confidence is important and that consumer confidence is now at minus 31%. Overall confidence was three points lower in April than in March, and lower than at any time since spring 2009.

[Stephen Williams (Bristol West) (LD)]

Confidence is a measure of sentiment and opinion, but spending power is a fact, so will the right hon. Gentleman explain how in January, February, March and April consumer expenditure went up?

[Mr Hanson]

The hon. Gentleman will know that the Office for Budget Responsibility and every independent forecaster have already shown that growth in the economy has flatlined over the past 12 months, following the impact of the Labour Government’s measures at the end of their time in office at the beginning of 2010. Since then, growth has flatlined and unemployment is projected to increase by 200,000 over the next year.

[Stephen Williams]

I thank the right hon. Gentleman for giving me a second chance to pose my question to him. The Library’s statistics show that, in the four months since VAT was increased, consumer expenditure in shops increased month after month, so how can he say that consumer confidence has declined? That is not about economic growth, which is how he answered my first question; it is about consumer confidence and spending. Will he deal with that point, please?

[Mr Hanson]

I suppose that is why the Federation of Master Builders only today—[Interruption.] Just for the record, on my uttering “Federation of Master Builders”, Conservative Members fell about with laughter, but the FMB’s members build houses and employ people in the construction industry. Only today—in a brief dated today—it stated:

“The situation for small construction firms has been made more perilous by the VAT increase at the start of the year,”

and that we risk

“11,400 construction job losses and 34,000 total potential job losses”

because of the VAT increase. The hon. Member for Bristol West (Stephen Williams) and his colleagues may recall that the OBR expects some 200,000 additional people to become unemployed this year. The lack of consumer confidence, the impact of VAT and the lack of consumer spending will be critical to those potential job losses in the community.

[Kelvin Hopkins]

The Tories have a track record on this. My right hon. Friend may recall that in 1979 they raised VAT from 8% to 15%, massively deflating the economy. Unemployment rose by 2 million and a fifth of manufacturing industry disappeared, and it was all down to that policy.

--- Later in debate ---

[Mr Hanson]

I remember that very well. The Conservatives said at that general election that they would not double VAT. They did not double it, but they increased it by 7%. Perhaps the Liberal Democrats have learned some lessons about breaking election promises.

[Alun Cairns]

I seem to remember that Labour opposed all those increases in VAT, but not once did it reverse them. Is that true?

[Mr Hanson]

No, I think we did. I have been here quite a few years now, and I recall that in 1993 the Conservative Government increased VAT on fuel and had to reduce it because of measures supported by the Labour party in opposition. The hon. Gentleman may not remember that.

[Ben Gummer (Ipswich) (Con)]

Will the right hon. Gentleman give way?

[Mr Hanson]

In a moment. Let me try to return to some of the key points of the debate.

[Ian Lucas]

Government Members seem to view the British construction industry with some levity. In a debate this morning on the crisis in the construction industry, no Liberal Democrats turned up and one Tory Back Bencher turned up 20 minutes late. The increase in VAT has had a massive impact on the construction industry, as one will hear from any representative group and anyone involved in the sector. Government Members are in complete denial about the madness of the policy that they are pursuing and the firms that they are driving into bankruptcy.

[Mr Hanson]

I am grateful to my hon. Friend for those comments. He will know that the Conservative party’s VAT increase alone will cost the average family with children £450 this year—far more than they will gain through any increases in tax thresholds.

[John Hemming]

rose—

[Mr Hanson]

If the hon. Gentleman will allow me, I should like to try to make some progress. I have been very generous in giving way so far.

Although unemployment has fallen by a couple of hundred thousand in the past few months, and that is very welcome, the OBR has said that the lack of consumer confidence, the impact of VAT increases and the long-term lack of economic growth will hit employment hard. Average UK unemployment at the moment is about 7.7%, but for those of us who represent seats in Wales, the east midlands, Scotland, the north-west, London, Yorkshire and Humberside, the west midlands and the north-east, it is well above that level. That is partly because of the impact of the VAT increase on retail sales and manufacturing in our communities. When the Government introduced the increase in January this year, the chairman of the Federation of Small Businesses, John Walker, said:

“A recent FSB survey shows that 70% of businesses are worried about the VAT increase, with almost half of respondents going to have to increase prices as a result and 45% believing it will decrease their turnover”.

The situation with regard to jobs is very important.

[Diana Johnson (Kingston upon Hull North) (Lab)]

In my constituency, 85 claimants of jobseeker’s allowance are chasing every vacancy. Would not a reduction in VAT assist those people?

[Mr Hanson]

My hon. Friend’s region of Yorkshire and Humberside has a 9.2% unemployment rate overall, compared with 5.7% in the south-east of England. For someone who is unemployed, the figure is 100% wherever they are. Nevertheless, there are regions of the United Kingdom where many people are chasing jobs, there is a lack of consumer confidence, traditional manufacturing and the retail industry are being hit by a lack of demand, and growth is not occurring, and the VAT increase has been damaging to all those things.

[Ian Swales]

I have listened carefully to the right hon. Gentleman’s speech and that of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). Neither has contained details of the cost of such a reduction in VAT. Once we know that figure, we will be able to give many ways in which our economy could be stimulated with such an amount of money. We are still not sure where it is coming from. Reducing the price of Italian sports cars and round-the-world cruises is only one option.

[Mr Hanson]

The hon. Gentleman shows his complete ignorance of the impact that value added tax has on ordinary working people and their families. The rise in VAT is costing ordinary working people in Redcar and every other constituency an additional £450 each this year. Low-paid people will bear the brunt of that. I look forward to going back to Redcar with hon. Friends from the north-east and explaining what the hon. Gentleman is doing about those concerns.

[Malcolm Bruce (Gordon) (LD)]

The Labour party is keen on cutting taxes and on opposing cuts in expenditure. Consequently, it would widen the deficit, which is already at record levels. The consequence of that would be an increase in interest rates. Does the right hon. Gentleman not think that the retail trade and consumers would be more concerned about an increase in interest rates than a rise in VAT?

[Mr Hanson]

At the beginning of my speech, I said that we had a deficit reduction plan at the last election. When I was a Minister at the Home Office in the previous Government, we forwarded plans for £1.5 billion-worth of expenditure cuts. The Conservative-led Government are cutting £2.5 billion in that Department, which is why we are losing police officers and police community support officers, and why I fear that crime will go up. There was a plan. There were certainly issues that we had to tackle, and we will tackle them. The way in which the Government propose to tackle the deficit goes too far, too fast and too deep. It is being done in an unfair way that hits the poorest people hardest, and it will damage the long-term business interests of the United Kingdom.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Does my right hon. Friend agree not only that the coalition Government’s policies will deflate the economy, but that they are missing their own deficit reduction targets? They are so far from meeting them that they will have to borrow £46 billion more than it forecast, although they have not yet corrected the figure.

[Mr Hanson]

My hon. Friend is absolutely correct. The Conservative-Liberal Government are missing their borrowing targets and will have to increase borrowing by £46 billion because unemployment will rise over the next year and because we have lower growth. There is lower growth, in part, because of a lack of confidence, which has happened, in part, because of the rise in value added tax. It is an unfair tax that hits the poorest people hardest.

[John Hemming]

rose—

[Mr Hanson]

Before I let the hon. Gentleman intervene, I ask him whether he will contradict the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), who said:

“I hope we don’t have a VAT increase because it is the most regressive form of tax, it penalises the poor at the same rate as the rich.”

Perhaps the hon. Gentleman will agree with his right hon. Friend.

[John Hemming]

I agree with my hon. Friend the Member for Redcar (Ian Swales), who is an accountant, that on the basis of expenditure deciles VAT is a mildly progressive tax. I ask the right hon. Gentleman, whose name appears above unselected new clause, 16, which would put VAT up to 20% once things improve, why the Labour party, having opposed VAT at 20%, now believes that it should be at 20% in the long term.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We are not going to get bogged down in the VAT figures. We need to talk about the new clauses in the group. We are drifting into parts where we should not be.

[Mr Hanson]

I remind the hon. Member for Birmingham, Yardley (John Hemming) that new clause 10 calls for a review of the impact of value added tax on businesses and families over the next three months. Labour Members voted last week for a temporary reduction in VAT. Labour policy is to have a temporary reduction to tackle the real issues that we all face in our constituencies in relation to jobs, living standards and the future of our businesses.

[Toby Perkins]

I am listening to the debate with tremendous interest. There is a determined gaggle of Liberal Democrats here, arguing in the strongest possible terms that the manifesto that they have just fought an election on was totally wrong. Has my right hon. Friend ever known such a passionate rejection of a policy by Members who told us only a year earlier that we should be voting for it?

[Mr Hanson]

The most passionate rejection that I have seen in recent years was in Chesterfield, of my hon. Friend’s predecessor. He stood just next to where I am now before the election, when I was Police Minister, calling for more police and more expenditure. Yet now, the Liberal Democrats are saying that we should have had less expenditure.

I accept that I am going slightly wide of the issue of VAT, Mr Deputy Speaker, so I will return to it. VAT hits not just families or businesses but public services. The national health service in England will be hit by an extra £250 million a year because of the rise in VAT. A CT body scanner that cost £700,000 before the rise in VAT will now cost £17,500 more. A fully equipped ambulance that would have cost £225,000 will cost an extra £5,500. There is about £3 million a year of expenditure by each NHS trust on locum doctors, which will increase by £75,000. A Government who want to cut public spending are levying additional costs on the health service in England.

In my own region, in Wales, the actual cost of the increase in VAT to NHS budgets since 1 January is estimated at £13.2 million. For colleagues in Scotland, I add that Scottish health boards have been saddled with an extra £71 million of costs because of the VAT increase. At a time of decreasing public spending and squeezed budgets, we need to review the matter over the next few months and consider whether the VAT increase is causing even more difficulty.

[Bill Esterson (Sefton Central) (Lab)]

My right hon. Friend is explaining in incredible detail the danger that the VAT increase is causing. I wish to bring to his attention the effect that it is having on pensioners in my constituency, one of whom wrote to me to express his outrage. I cannot repeat what he said, because he swore in his e-mail, but he said that

“if these costs were not so damaging it could be laughable.”

Does my right hon. Friend agree?

[Mr Hanson]

I do agree with my hon. Friend’s concerns.

Time is pressing, so I will move on. I know that we have a lot of time, but I want to ensure that my right hon. and hon. Friends have an opportunity to speak.

[Ian Lucas]

There is another sector that is being hit extremely hard by the VAT increase—the third sector, the charitable sector. Government Members regularly profess to support hospices, but hospices in my constituency are having to raise more money to pay the extra costs that that lot have imposed upon them.

[Mr Hanson]

My hon. Friend is absolutely right. It is not just charities and the voluntary sector that are affected, but Welsh and other universities. In Wales alone, there will be £3.5 million extra VAT for universities to pay this year. Housing associations are affected, and the chief executives of the National Housing Federation and of the Homes and Communities Agency have said that the rise will cost an additional half a million a year in VAT.

[Roger Williams (Brecon and Radnorshire) (LD)]

Does the right hon. Gentleman agree that the problem for charities, which the hon. Member for Wrexham (Ian Lucas) mentioned, would exist whether VAT was 17.5% or 20%? The Labour party did not attend to the problem when it was in government.

[Mr Hanson]

Not just Labour MPs are concerned about this increase. The hon. Member for Colchester (Bob Russell), a Lib Dem MP, said in a debate last year that he wants to help charities that have been hit by this move.

We all accept that VAT is a difficult issue for charities, but it has been made more difficult by an extra 2.5% increase at a time of squeezed budgets, and when the Government are asking more of the charitable sector by cutting public sector spending generally. That issue of great concern was highlighted by my hon. Friend the Member for Wrexham (Ian Lucas).

[Nic Dakin]

Further education and sixth-form colleges will also be hit by that additional cost, but in this very Bill, the Government are taking measures to protect academies from the same sort of penalty. Does my right hon. Friend think that that is a little rich?

[Mr Hanson]

I do. My hon. Friend spent many a happy hour in Committee discussing those very issues.

If the Government are not interested in master builders and the voluntary sector, and if they are not interested in the impact on public sector operations such as hospitals, schools and universities, perhaps they will listen to the British Retail Consortium, which states:

“Increasing the VAT rate to 20 per cent would cost 163,000 jobs over four years and reduce consumer spending by £3.6 billion over the same period.”

Only today, there were job losses at Jane Norman. There have been job losses at Habitat, Focus DIY, HMV, Mothercare, Comet and HomeForm.

[Chris Ruane]

And Thorntons.

[Mr Hanson]

There have also been job losses at Borders. There have been job losses across the board in the retail sector as a result of the impact of the VAT increase.

[Stephen Williams]

I thought I heard the right hon. Gentleman say Borders, but Borders went bust under the previous Labour Government. Would he like to retract that?

[Chris Ruane]

I said Thorntons.

[Mr Hanson]

I misheard my hon. Friend the Member for Vale of Clwyd (Chris Ruane). I thought he said Borders, but he said Thorntons, which has today lost 10,000 jobs. It may be of some interest to the hon. Member for Bristol West (Stephen Williams) that those jobs have been hit, as has the confidence in the retail sector, by VAT increases.

My hon. Friend the Member for Wrexham mentioned charities. Earlier this year, Sue Ryder, the charity, stated:

“Today's rise in VAT to 20% will cut the amount of social care that charities can deliver”.

That has an impact.

What is the impact on fuel of the VAT rise? People with a typical family car will pay £1.35 more to fill up their tank, as will people moving goods around the country. The VAT increase has hit the retail sector and we see job losses across the board, but there is also concern from the tourism sector. Just recently, on 6 June, the British Hospitality Association stated that the high level of UK VAT is a deterrent to tourism growth. Once again, those are the impacts on growth, jobs and public services.

[Mark Durkan (Foyle) (SDLP)]

My right hon. Friend refers to the impact of the higher rate of VAT on the tourism sector. Of course, in Ireland, from next week for 18 months, VAT in the tourism sector will be reduced to 9%. It has already been reduced to 7% in Germany and 5.5% in France. Is that an argument for taking a more sector-targeted approach to VAT reductions? Will the assessment proposed in new clause 10 allow for consideration to be given to a more articulate way of applying VAT, rather than having general, standard reductions across the board on all products, regardless of whether they are imports or the products of home businesses?

[Mr Hanson]

If my hon. Friend looks at new clause 10, he will see that it calls for a general review of VAT and the impact on the economy. Out of that review could come, for example, a temporary reduction to 17.5%, as was called for by my right hon. Friend the Member for Morley and Outwood (Ed Balls), or there could be changes for certain sectors. The review could look at a range of issues to assess the impact of the increase on growth, jobs and living standards.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

Given the arguments that the right hon. Gentleman is making, how does he intend to vote on the new clause moved by the hon. Member for Caernarfon?

[Mr Hanson]

The hon. Member for Caernarfon has not moved a new clause—the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) moved it. However, we will not be supporting it because it does not give an end date for the potential VAT reduction. It would be a permanent reduction. We want a review of the impact of VAT on business, jobs and living standards.

[Mr Gauke]

I am trying to understand the Labour party’s position. If it believed in the policy announced by the shadow Chancellor a week or so ago, it would want first to reduce VAT, and then to make a decision on when to increase it. I do not understand, therefore, why it is not supporting the new clause, which takes that first step—it does what the Labour party want to do.

[Mr Hanson]

I will try again, slowly. The new clause calls for a permanent cut in VAT to 17.5%. It does not do what my right hon. Friend the Member for Morley and Outwood wishes to do—what we voted on last Tuesday—which is to implement a temporary cut in VAT until we secure strong growth.

[Christopher Pincher]

Will the right hon. Gentleman give way?

[Mr Hanson]

In a moment. The new clause does not do what we said we would do, which is implement a temporary reduction. We have tried, through new clause 10, to ensure that we have a review of all the issues I have mentioned—of tourism, business, jobs and families—so that we can come to conclusions about sectoral reductions and a temporary reduction to help employment.

[Jonathan Edwards]

May I clarify my position? I have a note from the House of Commons Library to me:

“NC9 finds an alternative way of doing the same thing as NC6 (i.e. decreasing the rate of VAT), only on an exclusively temporary basis. It does this by means of the Economic Regulator, which is a mechanism that allows for changing the rate of excise duties like VAT on a temporary basis without having to use primary legislation.”

Surely, it cannot be clearer than that.

--- Later in debate ---

[Mr Hanson]

Unfortunately, we are making legislation, not just research notes, and unfortunately what the hon. Gentleman’s new clause states is not what he believes he said just now.

[Christopher Pincher]

The right hon. Gentleman says that new clause 10 will make the VAT cut permanent. Is he saying, therefore, that there will never be another Budget before this House? Not only does he seem to have no policy, he does not understand parliamentary procedure.

[Mr Hanson]

With due respect to the hon. Gentleman, you and I, Mr Deputy Speaker, have been here 19 years and three months. I have been here long enough to understand a few matters of parliamentary procedure. The hon. Gentleman needs to go back to Tamworth and explain to his constituents why, by increasing VAT, he is adding £450 to people’s annual VAT bill; why he is hitting retail sales and retail shops in his constituency; why he is impacting on businesses in his constituency; and why the VAT increase in his constituency will put up the cost of the health service, education, housing and jobs. He needs to reflect on those issues as part of this debate.

In conclusion, we have today an opportunity to vote for new clause 10, which would give us a chance to consider the impact of VAT, to come to conclusions on the points I have made today and to ensure that we can properly assess the best way to implement our VAT reduction so that it helps create jobs, build growth and not stifle our economy. This Conservative-Liberal Democrat Government have not only broken their promises on VAT to the electorate, but put at risk growth, jobs and family living standards. Most abominably of all, however, with this rise they have hit the poorest hardest. We have consistently opposed the rise to 20%, and we want it reviewed. We ask hon. Members to vote for new clause 10 tonight, and I look forward to my right hon. and hon. Friends joining me in the Lobby at the end of the debate.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I want to outline my support for new clause 10, and for reviewing the impact of VAT within three months of passing the Bill. The increase in VAT is having a real impact on the spending power of people in my constituency, many of whom are really feeling the pinch of inflation, pay freezes, and rising energy and food bills, and for thousands of people across the north-east, this all comes at a time when many of them are facing redundancy.

The previous Labour Government’s decision to reduce VAT temporarily to 15% was judged by the independent Institute for Fiscal Studies to be an effective stimulus, putting additional money into people’s pockets, and helping to support an increase in consumer confidence, a return to economic growth and a fall in unemployment, all of which are needed now. Of course we must reduce the deficit, but I do not accept that the right way to do so is on such a scale and at such an intensity that ideological deficit reduction is delivered at the expense of economic growth and job creation. Indeed, there is widespread and well founded concern that this will only make it harder to get the deficit down in the long term. Finding ways to kick-start economic growth must therefore be a priority. It is therefore vital that the impact of VAT be kept under review.

Finding a means of kick-starting growth is vital, particularly for regions such as the north-east, where I fear we risk a lost generation of young people if new economic and employment opportunities are not created, and created quickly. A key concern in my region remains the level of youth unemployment, with around 19% of 16 to 24-year-olds in the north-east not in education, employment or training, compared with the national rate of around 15%. Of particular concern is the fact that over the last 12 months the north-east has seen a 10% increase in the number of 18 to 24-year-olds claiming jobseeker’s allowance. Only Northern Ireland, Scotland and London have also experienced such rises over the same period, and then only to a maximum of 4%. With measures such as the previous Government’s future jobs fund axed by the coalition and nothing lined up to take its place specifically to support the long-term unemployed into work, we need to consider as many steps as possible to kick-start economic growth and increase employment opportunities for young people. Keeping VAT under review is vital to ensuring that.

The coalition’s decision to increase VAT to 20% in January has hit many businesses hard, particularly as that VAT hike helped to push fuel prices up to record levels. Let me take just one example from my constituency. The owner of a small electrical services company in Gosforth has made clear to me the impact of high fuel prices on his firm, which he says have hit the small business sector hardest. From its base in Newcastle upon Tyne North, his company carries out most aspects of domestic electrical work and small commercial work, travelling across the Tyneside, Northumberland and Durham areas.

--- Later in debate ---

[Nia Griffith]

Absolutely. I shall say more about that shortly.

[Mr Hanson]

My hon. Friend, like myself, is a Welsh Member of Parliament. May I draw her attention to a press release last year entitled “Welsh Lib Dem MPs want VAT rise impact to be assessed”. The hon. Member for Brecon and Radnorshire (Roger Williams) said:

“we are worried about the proposed increase in VAT. … We need to carry out this work so that we can lessen the impact of any increase in VAT.”

The hon. Gentleman said that they were

“particularly concerned about the impact on the voluntary sector”

and on hard-pressed rural areas.

[Nia Griffith]

That is an extraordinary statement, especially as I can remember the most surreal experience of being in a studio in Cardiff and the hon. Member for Brecon and Radnorshire (Roger Williams) popping up on a screen from some distant place to defend the increase in VAT. So what is the position of the Liberal Democrats? I really do not know. One minute they say one thing about an assessment, the next minute they pop up on a screen defending to the hilt every statement in the Budget last June. I do not know what the position of Welsh Liberal Democrat Members is.