Charter for Budget Responsibility
Lord Barwell Excerpts(9 years, 11 months ago)
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The Lord Commissioner of Her Majesty's Treasury (Gavin Barwell)
Which taxes are you going to put up?
Ed Balls
We are going to put the top rate of tax back to 50% for people earning over £150,000, and if the hon. Gentleman wanted to win his seat, he would support it.
Instead this Chancellor is taking an increasingly unbalanced and extreme approach. Let us look at what he has failed to put in the charter. He has not included asking those with broader shoulders to make a greater contribution, as I just said. He has not said that we need to strengthen the underlying growth of our economy and improve living standards. Instead, he has made up for all that loss of tax revenue by imposing even bigger spending cuts in the autumn statement than he was planning.
Let me outline the facts to the House. More than 61% of planned departmental spending cuts are still to come in the next Parliament under this Chancellor. There is a further cut for unprotected Departments of 26.3% over the next four years, which is a third bigger than in the previous Parliament. There will be the biggest fall in day-to-day spending on public services in any four-year period since the second world war. That is what is in the Chancellor’s prospectus for his manifesto. We are talking about cuts that the Institute for Fiscal Studies has called “colossal” and that the OBR says will take spending on public services back to the level of the 1930s as a percentage of GDP. That is the Chancellor’s extreme and unbalanced plan, and that is what we are opposing.
Living Standards
Lord Barwell Excerpts(11 years, 3 months ago)
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Rachel Reeves
Two thirds of children growing up in poverty have parents who are in work. I think that goes to the heart of the issue of low pay and its impact on families. It is no wonder that payday lenders are among the fastest growing businesses on the high street. Some of them charge interest rates as high as 7,000%. Families, desperate to pay the rent and provide for their children, are being dragged into debt because they are not being paid enough.
The use of food banks—I am not sure whether the Minister has visited one—continues to rise. In my constituency the main food bank is struggling to find larger premises because demand has outstripped all expectations. St Bartholomew’s church in Armley in my constituency is now distributing food parcels to many desperate families. Its work, and that of St George’s Crypt, is a wonderful example of the active citizenship and community spirit in Leeds, but food banks are damning evidence of the Government’s record on living standards.
Gavin Barwell (Croydon Central) (Con)
The hon. Lady is right to focus on the issue of low pay. Will she tell the House what has happened under this Government to the level of income tax paid by someone working full time on the minimum wage?
Rachel Reeves
I will tell the hon. Gentleman what the IFS says: the average family is £891 worse off as a result of changes to taxes, tax credits and benefits. That takes into account not only the change in the personal allowance, but the cuts to tax credits and all the other changes, such as the VAT increase, that have put pressure on families. Taken in the round, that is the impact on ordinary working families. The Prime Minister says that he is trying, but that is not enough for a family struggling with the bills and the rent and worrying about the increasing gap between what they take home in pay and the cost of some of the basics.
Greg Clark
I congratulate my hon. Friend’s council. We know that council tax is an important bill that people face. That is why when we came to office, knowing the pressures faced by ordinary working people and families, we froze it.
The same is true of the Labour party’s record on fuel duty. Its fuel duty escalator meant that what working people paid to fill up their car rose by more than inflation every year. Petrol would be 13p a litre more if Labour had stayed in office.
Energy prices for the home escalated under Labour. Between 1997 and 2010, the average domestic gas bill doubled. These matters were raised in our earlier exchanges, but the hon. Member for Leeds West omitted to say who the Energy Secretary was in the last Government. It was the current Leader of the Opposition. When I shadowed him across the Dispatch Box, these issues were not addressed, despite our urging him to do so.
In its 13 years in office, the Labour party failed to safeguard pensions. In one notorious year, it increased the state pension by 70p. This Government have restored the link to earnings. Labour presided over the biggest fall in the number of homes being built since the 1920s, with the consequence that rents have risen and, for the first time in 100 years, the proportion of people who own their own home has fallen.
Gavin Barwell
My right hon. Friend is doing a very effective job of comparing the record of Labour in office with the rhetoric that we have heard today. The shadow Chief Secretary talked about priorities. Will my right hon. Friend tell the House what was the effect of the Labour Government’s abolition of the 10p rate of income tax? Which sections of society were made worse off by that decision?
Greg Clark
My hon. Friend makes a very good point. Of course, it was the ordinary working people who were struggling to get by who were penalised by that change. We have not had an apology for that. [Interruption.] The hon. Member for Nottingham East (Chris Leslie) talks about raising VAT. It would be interesting to hear from him whether the Labour party would reverse the rise in VAT.
Greg Clark
The hon. Lady is an experienced and effective campaigner on debt issues, but she will know that the explosion in debt happened under the last Labour Government. The reforms that we have made in financial services, the line-by-line scrutiny of which the hon. Member for Nottingham East participated in, have improved the regulation of such matters. She is right in the sense that the only way of ensuring that people can confidently earn enough to support themselves and their families is for them to be in work and in a good job. That is the purpose of our reforms.
Gavin Barwell
The hon. Member for Walthamstow (Stella Creasy) is right to identify low wages as a problem. They are a particular problem in the parts of the country that have the highest living costs because we have a national minimum wage. The second part of the problem is the high level of tax that the Government levy on people who are in low-paid work. Will my right hon. Friend therefore answer the question that the shadow Chief Secretary ducked and tell us what has been the change in the income tax bill for somebody who works full time on the national minimum wage?
Greg Clark
Of course, the amount of income tax that is paid by somebody on such modest earnings has been halved. That is the purpose of our reforms. Those people are better off.
Every Member of the House wants the standard of living enjoyed by the people of this country to rise. That is the purpose of economic policy. Let us therefore have a serious analysis of how that can be achieved.
Kwasi Kwarteng
What I will tell the hon. Lady is that it is particularly nauseating to listen to Labour Members talk about increased living costs when under their Government fuel duty was increased 12 times. It is not right for members of the public and people listening to this debate to look on those remarks, when Labour increased fuel duty 12 times without any respite.
Gavin Barwell
The hon. Member for East Lothian (Fiona O'Donnell) makes a perfectly fair point about wages, but does my hon. Friend think there is some hypocrisy there, given that just about the only cut that those on the Opposition Front Bench have supported is the freezing of public sector pay over a number of years? It is clear that even under Labour, many people would have seen a real-terms reduction in wages.
Kwasi Kwarteng
Absolutely right. My hon. Friend mentions hypocrisy, and I think that has framed the approach of Labour Members on this issue. They have spoken really from either side of their mouths. On one hand they decry the difficult measures that we have had to implement and, on the other, they refuse to apologise or accept any responsibility for the appalling fiscal situation that they bequeathed to this Government.
Mr Russell Brown (Dumfries and Galloway) (Lab)
Like other hon. Members, I congratulate my hon. Friend the Member for Leeds West (Rachel Reeves) on returning to her Front-Bench duties, although I appreciate that she has had to leave the Chamber for the time being.
When I first came to the House 16 years ago, people throughout the country and not just in my constituency, and especially women, were holding two or even three part-time jobs to make ends meet. The history is that 1997, when Labour came to power, was not a good time. It is true—I suspect Government Members would agree—that people were looking for a change, which is what happened in 1997.
Individuals and families were looking for some security and certainty in their lives. In all honesty, that is no different from what businesses were looking for. Businesses were looking for confidence. At the end of the day, if there is confidence in the business world, businesses will in turn believe that they can take that little gamble and create jobs. That is what happened over a sustained period when Labour came to government. Here we are in 2013. Despite what the hon. Member for Spelthorne (Kwasi Kwarteng) has said, the country is looking again for those things. The country and businesses are looking for confidence, and families and individuals are looking for security and certainty, to take them forward through these difficult times.
I do not deny that the prospects are very good in some parts of the country, but that is not true of many areas. The situation in communities is patchy. Back in ’97, there was a rapid reduction in unemployment. Department for Work and Pensions staff at the time were able to assist individuals who had been long-term unemployed. People who suspected that they would never find a job were finding work.
Where are we on living standards? We can talk about incomes, but income is not the only aspect of a living standard. The equation must include what people need to spend regularly. That is why people’s living standards in many areas are falling. I regret to say that we are returning to people, especially women, having to hold down two and three part-time, low-pay jobs to make ends meet.
Gavin Barwell
Is the hon. Gentleman seriously saying that, in his opinion, between 1997 and 2010, many hard-working people did not have to hold down multiple jobs to make ends meet?
Gavin Barwell (Croydon Central) (Con)
Beneath the narrow partisanship and complete lack of penitence over Labour’s record in government lies a profound point in this motion about the challenge for public policy in our time: how do we improve the standard of living for people in low-paid work? This Government have done an awful lot to end the obscenity of people out of work being better off than people in work, but there is much more to do to ensure that being in a low-paid job actually pays for people. Government Members should not allow our anger at the hypocrisy of those on the Opposition Benches to cloud the fact that there is a real problem.
Gavin Barwell
I would like to make a bit of progress first.
I want to talk about two things: how the problem arose, and what we can do to solve it. I would argue that there are four causes of the problem. The first was the deficit built up under the last Government, which was partly the fault of the collapse in the banking system, but partly the fault of Labour for having a deficit before the recession started. Let me quote from something written by the Institute for Fiscal Studies before the last election:
“With government borrowing at its highest level since the Second World War…the key domestic policy issue for the next parliament will be how best to implement a combination of spending cuts and tax raising measures to return it, over the medium-term, to appropriate levels.
This will be painful…families”
will be made
“directly worse off”.
That was the view of the IFS, no matter who was going to win the last election. That is the logical consequence of having the deficit, and voters understand that. I spent the summer knocking on more than 5,000 doors in Woodside and South Norwood in my constituency. The electorate understand that tough decisions have to be made.
The second cause is the international economic climate, which has led to lower than expected growth across the developed world. The third and fourth causes have nothing to do with Government: they are rising commodity prices and long-term changes in the labour market, which have led to a lower value being placed on low-skilled work. My hon. Friend the Member for West Worcestershire (Harriett Baldwin) referred to a quotation from the shadow Secretary of State for Work and Pensions identifying the problem back in 2004.
Ben Gummer (Ipswich) (Con)
My hon. Friend said that the third reason, rising commodity prices, had nothing to do with Government. I would respectfully demur. One of the biggest pressures on families is energy prices, and the reason we have high energy prices in this country is because no one built anything in this country in the 13 years that Labour was in power.
Gavin Barwell
There are certainly some commodity prices that Government can influence—my hon. Friend is quite right to pick me up on that—but there are others, such as the prices of basic foodstuffs, that are beyond national domestic control.
How do we solve the problem? I would like to suggest five possible solutions. The first is economic growth. It is not a solution on its own, because part of the deficit is structural.
Gavin Barwell
I will give way once more, to the hon. Member for Gateshead (Ian Mearns), because I promised I would.
The OECD forecast shows that our economy is projected to grow in quarter 3 by 0.9%, which is more than any other country in the G7 other than Canada, and in quarter 4 by 0.8%, which is the best projected rate in the G7. Unemployment in my constituency of Croydon Central is 6% lower today than it was when Labour left office, while youth unemployment—which the hon. Member for Wigan (Lisa Nandy), who spoke before me, rightly spoke so passionately about—is nearly a quarter lower today than when Labour was in office.
Ian Mearns
Does the hon. Gentleman accept that there are significant variations around the country? I am afraid to say that youth unemployment in the north-east of England is now 25%. We have been accused of being hypocritical a number of times this afternoon, but although he spoke eloquently about the scourge of low pay in his opening remarks, he forgets entirely that his party opposed the implementation of the minimum wage when it was introduced by the last Labour Government.
Gavin Barwell
The hon. Gentleman makes two excellent points. The regional variations in economic performance are a profound issue for public policy, and the Conservative party was wrong to oppose the national minimum wage, which is one of the things that the last Labour Government deserve credit for.
The second solution I would suggest involves interest rates. At the moment we have record low interest rates. If we followed the economic policies of the shadow Chancellor, the cost of borrowing would go up, which would make an already difficult problem far worse and hit anyone with a mortgage extremely hard. The third thing we can do is look at public policy changes that Government can make to try to help people in low-paid work. One of the things about this Government that I am proudest of is the increase in the personal allowance. That sounds rather technical, but what it means is how much you can earn—not you, Madam Deputy Speaker, but how much anybody can earn—before the Government start taking money away in tax. When we came to power, the figure was £6,475; from next April, it will be £10,000.
Gavin Barwell
I am afraid I cannot give way again.
That change has taken 2.7 million low-paid people out of income tax altogether and cut the income tax bill for someone on the minimum wage by a half. The shadow Chief Secretary talked about priorities. It is true that this Government have made a change to the tax rates for some of the wealthiest in our country, but if we want to talk about priorities, we have to say that the Treasury has spent 50 times more cutting tax rates for people in ordinary low-paid work than it has paid in reducing the top rate. That shows this Government’s priorities.
As other hon. Members have said, we have ensured that petrol duty is 13p a litre cheaper today than it would have been if we had followed Labour’s policies. We have cancelled the beer duty escalator. We have helped local councils across the country to keep council tax bills down. We have a scheme that we will introduce for tax-free child care, which will help with the cost of child care for people with children under the age of 12. We are ensuring that energy customers are placed on the lowest tariff. We have introduced the triple lock for the state pension, to ensure that we never again have the national scandal of our pensioners being given a derisory pension increase each year. We are also introducing the Help to Buy scheme, to try to help my constituents who want to own a home of their own and take that vital first step to get on the housing ladder, so there is much that this Government are doing.
Gavin Barwell
I cannot give way again.
There is also the crucial issue of wages. I have talked about the national minimum wage already, and there were some interesting reports in the media recently about the Government perhaps looking at what they can do on the minimum wage. As a Conservative, I would worry very much about a uniform increase, which might price some people out of the labour market. However, there is a case for asking whether larger companies or those that are making healthy profits should not be paying their staff more, because at the moment we are subsidising some employers to pay low wages, through the tax credit system that the previous Government introduced. I very much hope that the Government will look at how we tackle the issue of quality of life for people on low pay from both ends, by raising the personal allowance, so that we do not tax them so much, but also seeing whether we can ensure that they are paid a fair wage for the hard work they do.
One Opposition Member who talked about this issue implied that it was just Labour councils that are passionate about a living wage. My local authority, Conservative-controlled Croydon council, pays all its staff the London living wage, while the Mayor of London has guaranteed that that will apply to all staff working for the Greater London authority as well.
Chris Leslie (Nottingham East) (Lab/Co-op)
Will the hon. Gentleman give way?
Gavin Barwell
I am afraid I cannot give way again.
That is a big issue, particularly in London and the south-east, where pay costs are highest.
I also want to raise with my right hon. Friend the Financial Secretary to the Treasury, who gave an incredibly thoughtful speech, the issue of public sector pay. We have been quite right to restrict increases in public sector pay, because high increases would simply have meant more joblessness, but there is a limit to how long that policy can be continued. I hope that as wages increase in the wider economy, those who work in the public sector are not left out of that process.
Finally, if we want a high-wage economy, the long-term solution is to ensure that we have people with high skills who can command high wages in our globalised labour market. That is why I am so proud to work as the Parliamentary Private Secretary to the Secretary of State for Education, whose work, building on what the former Prime Minister and Lord Adonis achieved, is transforming standards of education in our country. Ultimately, if young people in Croydon Central want to command high wages in our economy, they need the qualifications and skills that will enable them to secure those jobs. We should not pretend that there is not a problem, but the Government are doing much to deal with it, and I hope they will do more still.
Alison McGovern
As I am following the speech of the hon. Member for Croydon Central, I will give way to him.
Gavin Barwell
The hon. Lady is typically gracious. May I just remind her—and, through her, the hon. Member for Worsley and Eccles South (Barbara Keeley)—that the policy of establishing academies was introduced by the last Labour Government?
Alison McGovern
My hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) mentioned free schools and the proliferation of such new schools opening. I believe that we should all, on a cross-party basis, call on schools to do everything they can to keep the cost of uniforms as low as possible. That message must be sent out loud and clear.
Alison McGovern
If the hon. Gentleman will support that suggestion, his support will be welcome.
The issue of living standards is not going to go away. It will affect us for many years to come. If we simply say that increasing GDP figures and nominal growth in the economy are all that matter, regardless of the distribution or sustainability of that growth, we shall be storing up problems for the future. We know this from the history of our country, and we should not be oblivious to the needs of those on low and middle incomes. Let us not forget that those people are not some small special-interest group; they are the vast majority of people. So when Labour Members talk about the importance of living standards for them, we are not engaging in some strange obsession with a small number of people. This is about the needs of everyone in the country, and about making sure that they are well served by the Government’s economic policy.
Chris Leslie (Nottingham East) (Lab/Co-op)
First, I commend my right hon. and hon. Friends for holding the Government to account on the cost of living crisis. My hon. Friend the Member for West Dunbartonshire (Gemma Doyle) made a powerful speech about the cases that Opposition Members see in our constituencies, with hard-pressed families struggling to make ends meet. She talked about not just the crisis that they face but the difficulty of even getting advice and support, including from the citizens advice bureau, as local authorities are scaling back their grants to voluntary organisations.
The crisis is exceptionally significant, so it is sad that there has been scant interest in the debate among Conservative Members and zero interest among Liberal Democrat Members, who have been completely absent from the debate for the past three hours. What better way could there be for hon. Members to see the complacency and lack of interest among Government Members in one of the most pressing and significant issues for our constituents?
We have had not just inaction from the Government for the past three years but policies that are actively making the cost of living worse for most people. Month after month, year after year, the Prime Minister and the Chancellor have presided over prices rising faster than wages. No other Prime Minister since records began has come close to the disaster in family living standards that the current Prime Minister and Chancellor have overseen. For 37 of the Prime Minister’s 38 months in office, real wages have shrunk in value. The pound in the pocket, the pound that someone has earned, does not go as far as it used to—it is diminished in value and worth less than it was before. No wonder people are working longer hours just to stand still.
Three years of suspended animation have created a treadmill economy in which millions are struggling just to stay where they are. My hon. Friends the Members for Wigan (Lisa Nandy) and for Inverclyde (Mr McKenzie) made that point exceptionally coherently. To listen to Government Members, however—those who took the trouble to take part this afternoon, possibly because reshuffle season is coming up—one would think that the way things are going is their idea of economic success.
Average hourly wages have fallen by 5.5% since the middle of 2010, but millionaires have never had it so good. Living standards for most people are falling, not rising, and as the Financial Times has pointed out, real wages have dropped back to their 2004 level.
Gavin Barwell
The hon. Gentleman said that millionaires had never had it so good. Will he remind us what the marginal rate of tax on millionaires was under the Labour Government, and how that compares with today?
Chris Leslie
For a moment during the hon. Gentleman’s speech earlier, I thought he was a little embarrassed about the cut in the top rate of tax from 50p to 45p, which happened in April. I was on the verge of intervening on him to ask whether he regretted voting to give priority to such a cut at a time when living standards are under the most stress. Does he regret doing that? Does he think it was the wrong thing to do?
Chris Leslie
I will give way to the hon. Gentleman one more time if he wants to say sorry to the House.
Gavin Barwell
The whole House will have noted that the hon. Gentleman is unable to answer the question, but I will set a good example and answer his question. I do not think very wealthy people need a tax cut in terms of living standards, but I think that when attracting wealthy people to locate to this country, high marginal rates of tax are a bad idea, and therefore I voted for change.
Chris Leslie
I said it was reshuffle season. We nearly got an apology; the hon. Gentleman does not think rich people need that tax cut, but he voted to give it to them anyway because he is that sort of generous guy. I say to him, and to other Members, that the Office for Budget Responsibility, which the Government created, predicts that by the next general election in 2015, annual incomes will be £1,520 lower than they were in 2010 in real terms. That is lower wages. Just think about that statistic for a moment. Five years of Conservative and Liberal Democrat administration will have left a legacy for working people in which they are actually worse off, and significantly so.
Oral Answers to Questions
Lord Barwell Excerpts(11 years, 9 months ago)
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Gavin Barwell (Croydon Central) (Con)
On the subject of priorities, how much does the Exchequer believe that cutting the higher rate of tax will cost compared with the cost of raising the personal allowance, which has benefited thousands of my constituents and millions of people across the country?
Economic Policy
Lord Barwell Excerpts(11 years, 10 months ago)
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Mr Osborne
As I have been explaining for the past 57 minutes, the test is there each day and each week as we have to borrow money to fund the deficit we inherited—even if it has come down. That is the test, and at the moment the world is lending us money at some of the cheapest rates in our history.
Gavin Barwell (Croydon Central) (Con)
Will my right hon. Friend confirm that a significant part of the deficit is structural, which means that, as vital as growth is, it will not do anything to reduce the structural element? As long as Opposition Front Benchers refuse to acknowledge the key fact that we need to start living within our means again, they will not be fit to return to office.
Mr Osborne
My hon. Friend is absolutely right, and that is why one of our debt objectives relates to the structural deficit. The structural deficit is the part that does not go away when the economy grows. The shadow Chancellor’s argument that all these problems will disappear as the economy grows is simply nonsense. That was his argument before the financial crisis, that is why Britain went into the financial crisis with a 5% structural deficit, and that is why, when boom turned to bust, the country found itself without any money.
Equitable Life (Payments) Bill
Lord Barwell Excerpts(14 years, 3 months ago)
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Sheila Gilmore (Edinburgh East) (Lab)
Thank you, Mr Deputy Speaker, for giving me the opportunity to speak in the debate. As a new Member, I have come to this issue afresh as a result of the contact I have had with the victims of this situation. I know that my predecessor also took up their cause. I have to say that, having read through as many of the reports as I could—they are certainly extremely lengthy and extremely difficult—I have come to the conclusion that the previous Government were wrong in their approach. I think they took the wrong road and I am not afraid to say so.
Clearly, the management of Equitable Life were also culpable, and it is highly regrettable that we are in a situation where that organisation is not in a position to compensate its customers who were so badly let down by its practices. It is equally clear, however, that there was maladministration and regulatory failure throughout the 1990s. Before we get into too much point scoring on the issue, that was obviously on the watch of Governments both Conservative and Labour.
What my constituents are now asking me—having read the Minister’s statements in July, which concerned them greatly; I am sure they are no clearer today—is whether the Government are using the Chadwick calculations, which reduce compensation for loss by 90%, with a possible further reduction following the spending review. Is that what is being followed or not? I am no clearer about that today, so I cannot answer that question for them. If it is to be followed, that is not what EMAG has been fighting for or what EMAG understood to be the position promised by both constituent parts of this coalition Government.
It is highly convenient for the Minister to hide behind what has become this Government’s theme tune—everything has to come second to deficit reduction, which is all the fault of the previous Government. It is too easy to sing that song continually, so I am going to take this opportunity—briefly, in view of what Mr Deputy Speaker has said—to say that we do not accept that statement of the situation. In our view, we are not deficit deniers. The last Government took steps to stimulate the economy and save our banks from collapse—something that at least one part of the coalition Government accepted at the time was the right thing to do, and several times said so. As a result, yes, when we left office, there was a deficit; equally, however, unemployment was considerably lower than had originally been predicted when the recession began. The deficit was actually reducing under the Labour Government.
We believe that the current Government’s plans are wrong, that they place recovery at risk, and that it is not necessary to reduce the deficit at such breakneck speed. That may seem to constitute a diversion from the debate, but I think it important to restate it, because the Minister and many other speakers on the Government Benches have raised the subject of the financial position.
Gavin Barwell (Croydon Central) (Con)
Did not the ombudsman recommend that the compensation scheme should take account of the state of the public finances? My constituents tell me that that they are happy to accept reductions that are in line with other reductions in public expenditure, but what are completely unacceptable are the reductions envisaged by Chadwick, which go far beyond that.
Sheila Gilmore
I agree. The people who have come to see me have said much the same. They have spoken of the possibility of staged payments and discussed how that arrangement could be affordable, but they have made it clear that what they do not accept is Chadwick.
At least one intervention and, I think, some speeches from the Government Benches have suggested that the Government will go beyond Chadwick and take wider issues into account, which suggests more than the £500 million or thereabouts mentioned by Chadwick. If that is so, I am not sure why it is still necessary to talk constantly about the spending review. Does not discussing the review all the time, and hinting that the Chadwick recommendations will be followed, suggest that there will be less rather than more? We need to know the answer to that question.
During the election campaign, having considered the matter and read a number of documents—I have read many more since—I pledged support for EMAG. I would have held hard to that support had my party still been in power, and if it were in power I would be saying the same thing now. However, I have questions to ask. What compensation is being promised? Is it simply the £400 million to £500 million mentioned by Chadwick, and if it is not, will it be more or less? Blaming the last Government may make for good political knockabout, but it leaves those who have suffered loss little the wiser. We and they need some real answers, and we need to work together.
Equitable Life
Lord Barwell Excerpts(14 years, 5 months ago)
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Mr Hoban
My hon. Friend makes an important point. The crisis has gone on for too long. Lord Penrose’s report was back in 2000, and the previous Government could have tackled the issue then. They blocked the ombudsman’s second inquiry into Equitable Life, and they took six months to respond to the ombudsman’s report. At every step in the process, the previous Government delayed. We want to make rapid progress, but fairly and transparently for policyholders and taxpayers.
In our coalition agreement we pledged to make fair and transparent payments, through an independently designed scheme, to policyholders for their relative loss as a consequence of regulatory failure. In the two months since we have been in office, we have made real progress and will continue to do so over the coming months. In May, in the Queen’s Speech, we announced an Equitable Life Bill, which will give the Treasury the statutory authority to incur expenditure in making payments to those who have suffered loss in connection with maladministration and the regulation of Equitable Life. The Bill will be introduced shortly and will be an important step towards resolving the issue.
Another important step will be the imminent publication of Sir John Chadwick’s final report on Equitable Life. It will give us a greater understanding of the losses that policyholders have suffered. Some have called for us to abandon the Chadwick process or to alter Sir John’s terms of reference. However, after careful consideration, I decided to allow Sir John to continue with his work under the current terms of reference. His work has been the culmination of almost 18 months of detailed analysis and evidence gathering. He and his actuaries have delved deeply into the issues, and their work has been informed by consultations with interested parties. For example, his flexible approach to establishing loss removes from policyholders the burden of proving what they would have done had they been aware of problems at Equitable Life. It is important to have his work available, as it will aid us in providing a swift response.
Gavin Barwell (Croydon Central) (Con)
The Minister certainly has the reputation with EMAG members that he mentioned earlier, but an issue of concern is the Government’s attitude to Chadwick. The Minister said that their response would be published imminently. Is there likely to be a statement before the summer recess?
Budget Resolutions and Economic Situation
Lord Barwell Excerpts(14 years, 6 months ago)
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Sammy Wilson
The right hon. Gentleman quotes the figure for spending, not the figures for taxation or, indeed, those relating to bringing down the deficit. That money was borrowed to be pumped back into the economy, so the amount of money going into the economy will be substantially less.
This is a subjective assessment, because the report does not give us any clear picture of what the likely impact will be. At least we now have an independent body reporting on whether these measures will be effective, but only time will tell as to whether the risk that has been taken today will pay off and will balance the economy quickly.
Gavin Barwell (Croydon Central) (Con)
Is the hon. Gentleman aware of the paper published by Goldman Sachs on 14 April, which reviewed every major fiscal correction in the OECD since 1975, and concluded,
“we find that decisive budgetary adjustments that have focused on reducing government expenditure have…typically boosted growth”?
Sammy Wilson
The context in which those adjustments take place is important, as is the speed at which they happen. All I am saying is that one way in which this Budget must be judged is on how effective it will be. Neither the report, nor the assurances given by the Chancellor today, offers any firm guarantee, if indeed that can be given, that the Budget will be effective.
Chris Leslie
I sincerely hope that that does not happen, but I worry that my hon. Friend may well indeed be right. The Government have tried their best to stagger the arrangement by delaying the introduction of the VAT rise, but they had better hope that the recovery is well under way by the time that the increase comes in—I think, in January—because, if there are still difficulties in our economy and they wallop up VAT by such a large amount, we risk a double-dip recession, which would particularly hit those who are in greatest need.
I want to talk about the most pernicious parts of the Budget which affect child poverty and even infant mortality: for instance, the scrapping of the health in pregnancy grant—just stating its name makes me incredulous that the Government have chosen it—in this financial year, from January onwards, coupled with the restriction of the Sure Start maternity grant to the first child from April 2011. I shall be very interested to see whether Government Members will walk through the Lobby with their heads held high to vote on those measures in respect of pregnant women in the greatest need. Coupled with the freezing of child benefit for three years, the shunting of lone parents off income support from next year—something that is also hidden away in the Budget—the abolition of the child trust fund and a couple of other things that the Chancellor spoke about very quickly in his statement, such as reversing the child tax credit supplement for one and two-year-olds and removing the baby element of the child tax credit from next year, which will cost young new families across the country £295 million, that is a phenomenal tax essentially on those who are in greatest need. Taken together, that seems to be one of the most despicable series of changes in the Budget.
Chris Leslie
I should like to hear the hon. Gentleman justify those changes.
Gavin Barwell
The hon. Gentleman is being very generous in taking interventions. Has he had the chance to look at chart A6 on page 70 of the Red Book, which shows the combined effect of the freeze in child benefits and the indexation increase in child tax credit? It demonstrates that the two changes are extremely progressive when taken together and not regressive, as he tries to argue.
Chris Leslie
It is interesting that the hon. Gentleman talks about that table because I have looked at the whole of annexe A of the document, which attempts to suggest that the changes will affect all income levels fairly and that we are all in it together. However, the tables extend only to 2012-13, which is only a couple of years hence. If the hon. Gentleman has a copy of the document in front of him, he will see that page 40 shows that cuts in benefits really start to bite in—guess when—2013-14 and 2014-15. There is more spin in the document than in any Budget document that I have seen before. If the hon. Gentleman would care to table a written question to the Chancellor to ask for the tables to be extended beyond the short period to 2012-13, I would then be more than happy to debate fairness implications.
I would like to raise a few more of the many hidden elements in the Budget. The Budget will levy an extra £455 million of tax on the insurance bills that our constituents pay, such as for buildings and contents insurance, although I do not think that the Chancellor mentioned that in his statement. The Government will also scrap the saving gateway, which was due to be introduced in July. That initiative was designed to encourage the very poorest in society to save for the future, but it is gone as a result of the Chancellor’s generosity. Given that the child trust fund is also being scrapped, we will have no measures to encourage the poorest in society to start the savings habit, so it is a great pity that Government Members will support such policies.
A further hidden element in the Budget is the Government’s announcement that they will cut support for the payment of unemployed people’s mortgage interest by £15 million in this financial year, although that support is given at the point of those people’s lives at which they are in most need.
Chris Leslie
Absolutely—my hon. Friend is right. We need a mature debate about the economy, and the hon. Lady should listen to her hon. Friend the Member for Wycombe (Steve Baker), who said that there are differences of opinion. There is not just one particular view of these things.
There are risks to the economy from completely pulling the rug from under it by doing things such as imposing tax increases that go too far or cutting public expenditure too swiftly or harshly. If the hon. Lady thinks that we can cut public expenditure harshly without any ramifications for the economy, I shall just have to beg to differ.
I have been director of a local government research organisation for the past five years, and something that I suspected would be in the Budget looks as if it may be coming. Capital expenditure will reduce significantly, but many local authorities rely on public borrowing from the Public Works Loan Board, which has a prudential borrowing regime that offers considerable freedom to local authorities as a means of accessing capital for important projects in our constituencies. The Budget document reveals that the tap may well begin to be turned off for local authorities, and discusses monitoring that lending far more closely. Reading between the lines, the implication is that the Government are considering reviewing the prudential borrowing regime. I urge members of the Government, particularly the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), who helpfully has come into the Chamber especially to hear my contribution, not to change that prudential borrowing framework, because the implications may be severe.
Gavin Barwell
I thank the hon. Gentleman for giving way again. He has just made an important point, but I should like to take him back to his reply to my hon. Friend the Member for Devizes (Claire Perry). He said that he wanted a pro-growth strategy. I am sure that everyone in the Chamber wants growth, but does he accept that by definition, growth will not deal with the structural deficit, which is what is there, even when the economy returns to growth. How would he deal with that deficit?
Chris Leslie
I disagree. I think it is possible to deal with the structural and cyclical deficits through pro-growth strategy. The fact that the Government’s so-called independent Office for Budget Responsibility has downgraded the growth forecast as a result of measures in the Budget shows that even it has had to admit that there are dangers in their strategy. I hope that they are absolutely confident about this—they seem to be—although I detect that a few Government Members may have doubts and questions in the evening when they are looking at the measures that will be introduced. I hope that they will look at them line by line, and not just hold their noses and vote regardless, especially Liberal Democrat Members.
Gavin Barwell (Croydon Central) (Con)
Thank you, Mr Speaker, for that advice on timing.
My constituents understand that, as a country, we are in a hole. The public sector makes up nearly 50% of the economy, and we have the second highest budget deficit as a percentage of national wealth of any OECD country—it is high not only relative to our competitors, but by historical standards. According to the Library, the deficit was 11.1% last year, compared with previous peaks of 7.7% in 1993-94 and 4.8% in 1980-81. This year, we are in the ludicrous position whereby almost a quarter of all the money the Government spend is being financed by more debt.
According to the OBR, things are worse than the previous Government told us. The structural deficit—the part of the deficit that will not disappear as the economy recovers—which we should focus on, is worse than predicted in the previous Budget. My constituents recognise that the structural deficit is partly the result of a global recession. They and Conservative Members also entirely understand that it is not all the fault of the previous Government, who had to respond to a recession. However, it is also partly the result of the previous Government spending more than they were willing to raise in tax over a prolonged period.
Some Labour Members seem to have convinced themselves that the recession is all the fault of bankers. It is rather ironic for them to blame bankers when we consider that the things the banks did wrong—failure to set aside money in the good years, holding liabilities off balance sheet and constantly going to the markets to raise money—are exactly the policies that Labour pursued in government. The fact is that we were running a structural deficit of nearly 3% from 2002-03 through to the beginning of the recession. We are still waiting for an apology for that mistake, which has contributed to the problem that we face. Indeed, listening to the synthetic anger of Labour Members today has been rather difficult, because the current Government are dealing with the mess they inherited from the previous regime.
Nicky Morgan (Loughborough) (Con)
Would my hon. Friend like to comment on the fact that there is not a single Opposition Back Bencher here today? It may well be a sunny afternoon, but not a single person is here to defend Labour’s record when my hon. Friend is talking about some very serious matters.
Gavin Barwell
My hon. Friend’s question is almost telepathic, because I was about to say that if the anger was genuine, I would have expected the Opposition Benches to be full throughout the debate, but that has not happened.
Gavin Barwell
I would happily give way but I want to make progress, if I may, given the time limit.
My constituents understand that the problem is due partly to the recession and partly to the previous Government. What they were looking for today is the truth, and for the Government to take the right decisions for the long term rather than chase tomorrow’s headlines. They want the deficit to be tackled without undermining the recovery, and as far as possible in a way that is fair to all sections of society and that protects front-line services. In her response, the Leader of the Opposition seemed to agree with those principles—but then told us absolutely nothing about how Labour would do things differently.
Bill Esterson
Last time I checked, I was an Opposition Back Bencher, as are my colleagues sitting next to me. I take exception to comments that suggest otherwise.
Gavin Barwell
Some Labour Back Benchers have attended the debate, but the Opposition Benches have hardly been full. The record is fairly clear.
The hon. Member for Leeds West (Rachel Reeves), who is not in the Chamber, said that it is the responsibility of the Conservatives to come up with the answers. It certainly is, and the Chancellor has discharged that today. However, it is the responsibility of the official Opposition to come up with a realistic alternative if they disagree with his measures. The hon. Members for Nottingham East (Chris Leslie) and for Great Grimsby (Austin Mitchell), who are also not in the Chamber, went much further and suggested that we could just grow our way out of the problem. They seemed not to understand that a structural deficit is one that will not disappear as the economy grows.
The key questions that my right hon. Friend the Chancellor had to answer today were: by how much to reduce borrowing, how quickly to do that, and what should be the balance between spending cuts and tax increases. The previous Government planned to dig deeper still into the hole by the end of this Parliament, and my right hon. Friend made the right judgment when he said that we should be in balance by the end of that period, and that we should have started paying off debt by 2014-15.
To the extent that I understand the Opposition’s position, they seem to be saying that we are doing too much too soon, and with too heavy a reliance on spending cuts. There are no risk-free options—it is actually a matter of judgment of the balance of risks—and there is growing evidence that the real risk to recovery is not robust action, but inaction. Anyone who has got into debt could tell us that the longer one leaves the problem, the worse it gets.
We are not going to convince Opposition Members on that point, because they have convinced themselves that Conservative Members take some ideological joy from cutting public services. It is worth putting on the record that that is complete and utter nonsense. I had lymphatic cancer at the age of seven and the NHS saved my life, and I have two children in a state primary school. My constituents want more police officers on their streets, and road maintenance to improve. I have come to this place wanting better public services, but they can be delivered only within a stable financial setting. That is what Conservatives stand for. There is a growing consensus on this point: the Liberal Democrats have shifted their position in the light of recent events in the money markets, and the Governor of the Bank of England, in a press conference on 12 May, said:
“it is very important that measures are taken straight away to demonstrate the seriousness and the credibility of the commitment to dealing with that deficit… I am very pleased that there is a very clear and binding commitment to accelerate the reduction in the deficit over the lifetime of the parliament, and to introduce additional measures this fiscal year to demonstrate the importance of getting to grips with that”—
problem—
“before running the risk of an adverse market reaction.”
The G20 communiqué a couple of weeks ago stated:
“Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their…frameworks”.
On the balance between spending cuts and tax rises, Goldman Sachs published a paper on 14 April that reviewed every major fiscal consolidation since 1975 and concluded:
“we find that decisive budgetary adjustments that have focused on reducing…expenditure have…been successful”
and “typically boosted growth”, and that by contrast, those that rely on tax increases
“typically fail to correct…imbalances and are damaging for growth.”
The Office for Budget Responsibility forecasts, based on the Budget, to which the Leader of the Opposition referred, show a slight reduction in growth this year and next compared with previous forecasts; but then, forecast growth is actually stronger as a result of the measures the Chancellor announced today.
On public services, there are many public sector employees in my constituency and they will be rightly concerned about what the Chancellor’s announcement today will mean for them. I welcome the commitment to protect the NHS, which clearly suffers from inflation above and beyond general inflation in the economy. That protection is well justified. I also believe there is the potential to make cuts without damaging the front line. Lord Myners, the former Financial Services Secretary, said in the other place:
“there is considerable waste in public expenditure. I have seen that in my own experience as a…Minister.”—[Official Report, House of Lords, 8 June 2010; Vol. 719, c. 625.]
Between 26 May and 2 June, the Institute of Chartered Accountants in England and Wales interviewed a number of its members, over 80% of whom believed that further efficiency savings were possible. I point out to the Treasury Bench that we must look at welfare payments, as the Chancellor said we would, over the next few months, because a 25% reduction in departmental expenditure is a significant target.
Let me say a few words about fairness. We need to protect not just the poorest but those in lower-paid jobs, who all too often are the group targeted whenever money needs to be raised. In that regard, raising the income tax threshold, thereby taking 880,000 people out of income tax, is a fantastic measure from the Liberal Democrat manifesto—but one that all Conservatives, I think, are happy to support. I also welcome the one-year council tax freeze. My own Conservative-controlled local authority will take advantage of it, and we hope that the Treasury Front-Bench team will find the money to extend it for a second year, as promised in the Conservative manifesto. On being progressive, I draw Members’ attention to chart A2 on page 67 of the Red Book, which shows that the overall effect of the package of measures announced by the Chancellor is progressive.
Finally, I would like to make a moral point, above and beyond the economic arguments I have tried to advance. Over the past few years, we in this country have been living beyond our means. The current generation is imposing a burden on our children and grandchildren. Above and beyond the economic arguments that will take place on the Floor of the House about that, it is morally objectionable to saddle our children in this way with debts they will spend their entire working lives trying to pay off. Although the measures the Chancellor has announced are tough, he told the truth and struck the right balance. There is a stark contrast between that and the Labour party’s complete lack of recognition of the problem, its lack of responsibility and its failure to apologise.
Office for Budget Responsibility
Lord Barwell Excerpts(14 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
The most obvious set of failed economic policies is that pursued by the Labour party.
Gavin Barwell (Croydon Central) (Con)
If I heard my right hon. Friend correctly, the policies of the previous Administration will lead to us spending an incredible £67 billion on debt interest alone by the end of this Parliament. In the interests of transparency, may I encourage him to put that number in context for the wider electorate, so that we know the amount per household in relation to the amounts we spend on our NHS and school system?
Mr Osborne
That is an excellent idea. I will ensure that that information is circulated not only to Government Members, but to Opposition Members as well.