Amendment of the Law

Lord Clarke of Nottingham Excerpts

Monday 23rd March 2015 Commons Chamber

[Mr Kenneth Clarke (Rushcliffe) (Con)]

I congratulate my right hon. Friend the Chancellor, the Chief Secretary and the rest of the Treasury team on the Budget. I also congratulate them, even more emphatically, on the extraordinary record of the last five years which enabled a Budget of this kind to be presented. I think it must be acknowledged that we took over a worse situation in 2010 than any Chancellor had taken over since the war. It was even worse than the winter of discontent in 1979. I have not looked up the debate on that first Budget, but I believe that our present position would then have been beyond the wildest dreams of most Members on either side of the House. That is why this Budget gives us such a firm foundation for making further progress.

I also congratulate the Treasury team on the type of Budget that we have been given. I am relieved and delighted that it was not a gimmicky Budget, and that we did not see one of those foolish attempts to start buying votes with populist measures. Chancellors who are facing elections are always besieged with requests for them to do unbelievably silly things in the belief that the public will respond by voting for them, but the public are usually far more sensible than most of the journalists and most of the politicians, and have never responded to such measures in the past. Admittedly, both the right hon. Member for Edinburgh South West (Mr Darling) and I eschewed that type of Budget, because we were producing the last Budgets for Governments who on any sensible view were doomed to be defeated at the next election, but we did what has been done on this occasion. It is not a question of the electoral purpose; it is a question of the national interest. A sensible, competent, prudent Budget is in the national interest, and gives us the best opportunity to deliver what we hope to deliver over the next five years.

[Sir Edward Leigh (Gainsborough) (Con)]

In her peroration, the hon. Member for Leeds West (Rachel Reeves) produced a great, long shopping list of things that could have been done in the Budget. “It could have been a Budget” for this, that and the other. Would not the best response to the hon. Lady be “It could have been a Budget to bankrupt Britain if Labour were in charge”?

[Mr Clarke]

I think that it would. Blatantly going around telling people that their pay will go up and that expenditure will be increased in a number of instantly popular ways, along with Labour’s earlier promises to start ordering companies to reduce the prices of sensitive products in highly volatile markets, is totally irresponsible. I hope that, were the population so foolish as to return a Labour Government in six weeks’ time, their policies would be hastily abandoned when they found themselves confronted with the realities of power.

In basic terms, this is a fiscally neutral Budget, which is plainly what was required. During Budget debates, we used to spend more time discussing the Budget judgment, and on this occasion that judgment was “fiscally neutral”, which I think has been widely applauded. That does not mean that the Budget is devoid of significant measures, including measures that will have a considerable impact on the rest of the human race—the ordinary men and women out there who have ordinary, moderate incomes. I am rather surprised that so little attention has been paid to the wider impact of another rise in personal allowances, which will not only have the welcome effect of taking the very low paid out of tax altogether, but will have a big impact on the great bulk of the population who are receiving perfectly ordinary pay. Some 27 million people will benefit, and average taxpayers will be better off by £900 million a year.

However, so that the Budget could remain fiscally neutral, that easing of the problems of the ordinary population has been balanced and financed by a rather eye-watering increase in the bank levy—which I think is a perfectly sensible way of raising money now that the banks are on their way to recovery—and a further reduction in tax relief on the pension contributions of not the very wealthy, but the better off. They can build up a pension pot of £1 million, which is not to be sneezed at; they have secure jobs, are making contributions, and have plans for their retirement. How that measure can be characterised—as the activities of this Government often are—as helping the rich at the expense of the poor and ignoring the demands of the ordinary man, I cannot imagine. It is the banks and the better off whose taxation has been raised, and the ordinary man and woman whose income tax has been lowered. That shows that free-market economics can be combined with a social conscience, which I have always believed is the best guiding principle for the Conservative party when it is running the macro-economic affairs of the country.

There are also further measures—which, again, will not create pleasure among all the rich—to deal with tax avoidance, of which a great deal has been made. On this occasion, they mostly involve corporate tax avoidance. My right hon. Friend the Chancellor has set a very ambitious target for the future—he is aiming to get another £5 billion out of tax avoidance—but he has already introduced a general tax avoidance measure in the Finance Act 2012, which has had an enormous impact on what we can do. We have agreements in the G20 and with Switzerland and Liechtenstein, and it is now impossible to hide money in the way that caused a scandal recently, when it was discovered that in 2007, under the last Government, thousands of British taxpayers were finding it easy to evade tax abroad. That is not favouring the rich. The present Government have done far more to tackle tax avoidance and evasion, and to make the raising of revenue more efficient, than any of their predecessors for 20 years or more, including the Government in which I served. Looking back, I have to concede that.

I do not have time to go into all the other measures that have been introduced, but ending the annuities racket and giving more flexibility to those who are saving for their retirement and their old age, so that they can make more use of their own resources, is a major social reform, on which I congratulate the Government and the Pensions Minister in particular. All that has been taken further in the Budget, together with our drive to help business. That is very important: we have to be pro-business. We are trying to revive the economy through lower corporate taxation and more extension of investment allowances, and by easing the tax burden on North sea oil. This Budget is an extremely responsible package, and it bodes well for the future if we are returned to office.

The debate has been dominated by extraordinary arguments about deficits: the size of deficits in the past, the size of deficits now, and where the deficit will go in future. Most of those arguments are based on strange interpretations of statistics or wild over-reliance on forecasts that are at least five years out, which has reduced the debate to a rather simplistic level. I agree—indeed, it is absolutely fundamental—that tackling the problems of debt and deficit is an essential pre-condition of putting the disasters of 10 years ago, and since, behind us, and paving the way for a modern, competitive economy in future.

[Mr Jack Straw (Blackburn) (Ind)]

Will the right hon. and learned Gentleman give way?

[Mr Clarke]

No, I will not, because, with great respect to the right hon. Gentleman, it would not be fair to the 30-odd other Members who wish to speak.

The hon. Member for Leeds West keeps criticising the Chancellor for not succeeding in eliminating the deficit entirely in the last five years. I am very glad that he did not do so. It is the same with all forecasts—[Interruption.] It is not possible to find a Chancellor who has produced forecasts that are three, four or five years out and which resemble what actually happened. It is necessary to take account of what is happening in the real world. Macro-economic policy has to be pragmatic.

I cannot tell what will happen over the next five years, and nor can any Opposition Member. Will China actually have a soft landing? What will happen to the oil market? Is the recovery in the United States really sustainable? Will the eurozone begin to achieve a bit more growth this year and beyond? What about difficult emerging markets like Brazil? The fact is that we are part of a globalised economy—quite apart from the impossibility of forecasting with exactitude what will happen here.

The Chancellor has cut the deficit substantially, and has moved nearer to getting it under control. Had he moved at a faster pace, heaven knows where we would be now, but we would be in a very difficult situation. Actually, I do not know whether the Labour party thinks that he should have moved faster or more slowly, but I am sure that it is not capable of maintaining progress. I hope that we can achieve a surplus in the next Parliament—and so, obviously, does the Chancellor—but that will depend, again, on whether circumstances permit us to do so. In five years’ time, we shall find out where we are.

Meanwhile, having that kind of responsibility is an essential precondition to raising our educational standards and continuing to tackle the skills shortages which always slow up the British economy—we are making great progress with apprenticeships, and we have much further to go. At last we are beginning to see business investment come through, with more confidence and, I hope, improved credit for businesses. That should pave the way for the productivity growth that we desperately require. We need infrastructure investment, which the Government are pressing on with. We need the EU reforms, which the Prime Minister was talking about earlier. If we can complete the single market—if we can extend it to services, if we can have a common energy market, if we can have a common market for the digital economy, if we can have an EU-US trade agreement—all that will reinforce the efforts of the Government to put this country in a much better position than any other to look optimistically to the future.

If we were in the world of traditional politics of 30 or 40 years ago, this Government would be on a walkover in this election, producing figures to die for after taking over a disaster. We still have to rise above the cynical comedy of today’s protest politics. This Budget shows that a competent Conservative Government can finish the job.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order.

--- Later in debate ---

[Mr Darling]

My right hon. Friend is right. Our debt levels were the second highest of the G7 group of economies in 1997, but 10 years later they were the second lowest. On public spending, last week the Chancellor blamed all our woes on our alleged overspending. How was it that the Conservatives were supporting our public spending plans right up until December 2008? As for the Liberal Democrats, they were in a different stratosphere from the rest of us when it came to calling for more public spending.

At the last election five years ago the essential argument between us was whether we could halve the deficit in a five-year period, which was my judgment of what we could safely and realistically do. The Chancellor—the shadow Chancellor at that time—said that that was woefully inadequate. But what was woefully inadequate five years ago was announced as a personal triumph last week. He has managed to do what I said we could do, but he somehow says it is a great triumph on his part and something we should be grateful to him for.

Let us look at what the Chancellor has actually done in relation to borrowing. He announced last week that at long last borrowing was on a downward curve. Every Budget he has ever presented shows borrowing on a downward curve. The difference between this Budget in 2015 and the Budget in 2010 is that it is on a downward curve all right, but he is borrowing three times more than he expected to borrow in 2010 because the economy slowed down so badly in 2011-12.

As for debt, we all expected that it would be shown that we were not going to hit the Chancellor’s original target of debt reducing as a share of national income by 2015, and that was what was expected from his autumn statement in December, yet, lo and behold, last week suddenly he was meeting his target, by a minuscule amount—coming from 80.4% to 80.2% of GDP. Why was that? It was not because of some economic miracle. It was because he looked around the Treasury cellars and found assets he could sell, one of them being a thing called Granite, which is an absolute monster of financial alchemy. Northern Rock produced it, into which it fed sub-prime mortgages, and the more sub-prime they became, the more mortgages had to be fed into this thing to keep it going. After five years it is, of course, possible to manage these things and get them to come right, and that is why the debt is coming down—because he is selling off this asset—yet even the OBR says it is highly uncertain whether or not this target will actually be met. So when we look at what the Chancellor said on the causes of where we are now and what he has done over the last five years, I have to say his credibility and track record are not as great as he would have us believe.

On the public expenditure figures of last week, the OBR has described the Chancellor’s spending profile as a rollercoaster. If we want to go on a rollercoaster, we go to Disneyland, not the British economy. Anybody else whose plans had been described as a rollercoaster would have hung their head in shame. What sort of planning can people put in place when they have no idea what is going to be spent? We have the absurd situation where the Ministry of Defence may have to lay off armed services personnel in 2016-17 because of the steep decline in public spending, only to say, “It’s all right. We’ll be able to re-engage you in two years’ time.” How can universities plan for research and development when we have such a steep decrease in public spending now, with the promise of perhaps something in the next few years?

The former Chancellor the right hon. and learned Member for Rushcliffe knows as well as I do that when we look at spending profiles for four or five years, the last two years are pretty doubtful.

[Mr Kenneth Clarke]

indicated assent.

[Mr Darling]

The right hon. and learned Gentleman nods. They are pretty doubtful for one of two reasons: one is that a lot can change in that time, and the other is that the person presenting them has every intention of changing them as and when we get to that time. I do not believe for one moment that the Chancellor has changed his philosophy or beliefs from when he told the House last year that he wanted to reduce public spending to the lowest share in modern times—certainly since the welfare state and the national health service were introduced. All that has changed is that that was a political embarrassment last year, so he has simply shoved up the numbers at the end of the spending profile to be able to say, “Look, I’m not going to cause you any difficulties; public spending is going to rise, not decrease.” That is nonsense; the Tory view of public spending has not changed one jot.

Where I part company with many Government Members is that I do not think public spending is almost de facto a bad thing. It is extremely helpful to an economy in education and research and development, never mind the things an advanced economy demands in relation to the welfare state and pensions. So when we look at that profile, it is not credible, and I think it also conceals what the Conservatives would really like to do.

I want to say one thing about oil. I welcome what has been proposed. It is very sensible, because the oil taxation regime had to change, but I just remark in passing—and I am sorry only one nationalist has turned up to the debate—that the OBR forecasts are 47% below what it proposed just a year ago. North sea oil revenues are a 10th of what the nationalists told us they would have if they had an independent Scotland. This is another example of where pooling and sharing resources across the United Kingdom makes a massive difference. If Scotland had been independent today, it would have been faced with cuts that would make the austerity that is now being visited on the economy look like a Sunday afternoon tea party. They would have been substantial and damaging to the people of Scotland. That is why the nationalists have nothing to say about this; they have no one to blame for this problem but themselves.

--- Later in debate ---

[The Chief Secretary to the Treasury (Danny Alexander)]

We have had a good debate with distinguished contributions from Members across the House, and like the shadow Chief Secretary I particularly wish to recognise the contributions of those who are not seeking re-election to this House. A number of hon. Members said that their speech would be their final contribution here, including the hon. Members for Sheffield, Heeley (Meg Munn) and for Thirsk and Malton (Miss McIntosh), the right hon. Members for Holborn and St Pancras (Frank Dobson), for Sheffield, Brightside and Hillsborough (Mr Blunkett), for Salford and Eccles (Hazel Blears) and for Edinburgh South West (Mr Darling). I am sure the House will agree that in their different ways they have all made a significant contribution to British public life, and the whole House will be grateful for their service to their country.

The right hon. Member for Salford and Eccles spoke movingly about the circumstances in which she grew up and the commitment to social mobility that that imbued in her—a commitment I strongly share. I am grateful for her kind words about the Government’s decision to support the Speaker’s parliamentary placement scheme, which as the House will know provides opportunities for many young people from disadvantaged backgrounds to work in this House. Credit should go to the right hon. Lady, and to you, Mr Speaker, for promoting that scheme. In her remarks she gave some examples of young people who have benefited from the scheme that she promoted, and many hon. Members will have encountered young people who have gained apprenticeships through it.

My hon. Friend the Member for Thirsk and Malton spoke about her rural constituency, and drew attention to the issues facing rural communities and the need for broadband. As a Member who represents a very rural constituency, I share that concern. I draw her attention to the supplementary document that was published alongside the Budget which included the strategy for superfast broadband, and indeed for moving to ultrafast—[Interruption.] The shadow Chief Secretary is muttering, but I will come to that point. The supplementary document on the move to ultrafast broadband set out a new and ambitious strategy for this country, including moves towards superfast broadband for 95% of households through the BT scheme, the roll-out of 4G broadband to 98% of households, and the availability of a vouchers scheme for the most remote households to gain satellite connections. I hope that that answers her point, which I am sure is an important issue for many hon. Members.

Other strong contributions included the one from my hon. Friend the Member for Cheltenham (Martin Horwood)—I do not know whether he is in his place. He made an important point about the decision in the Budget to extend the pension changes to police and fire service widows and widowers where someone has lost their life in the line of duty. We made clear in the Budget that we also intend to extend that change to apply to members of the security services who have lost their lives in the line of duty. That pension change is not yet fully worked out, but we intend to make it along the same lines as the measure announced for police officers and members of the fire service who lose their lives in the line of duty.

The hon. Member for Liverpool, West Derby (Stephen Twigg) made a balanced speech—I think he was the only Labour Member to welcome the strong record of job creation we have seen since 2010, and I credit him for that. He also—fairly, I think—called for further improvements to the quality of job creation, and the measures that the Government announced in the Budget, as well as the creation of more than 2 million apprenticeships during this Parliament, will help to support the agenda he described.

We also heard distinguished contributions from two former Chancellors of the Exchequer. My right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) provided distinguished service in government during this Parliament, and indeed for many, many decades before that—[Laughter.] I know he is standing again; I am not citing him as a Member who is stepping down. He is an immortal in this House as far as many of us are concerned. In his remarks he gave strong support for a balanced, fiscally neutral Budget, and responsible measures from the coalition Government. He rightly celebrated the rise in the income tax personal allowance, a matter to which I will return. I am bound to say, however, that his customary generosity deserted him when describing the political heritage of this particular policy commitment. My hon. Friend the Member for Cheltenham corrected the balance of the ledger in that respect, when he made clear that this policy emerged from the 2010 Liberal Democrat manifesto. It is making a huge difference to 27 million people.

[Mr Kenneth Clarke]

I cannot remember whether I raised personal allowances once or twice in my Budgets, but once certainly, so it does have slightly older antecedents. I always thought it was a good idea. I was unfortunately discouraged by the then Prime Minister who told me that he thought there were no votes in it.

[Danny Alexander]

It is fair to say that the current Prime Minister also discouraged this policy. In the television leaders debates in 2010 he said it could not be done and could not be afforded. We have shown in this Parliament that we can afford it. The difficult decisions we on the Government Benches have been willing to make in other areas have meant that we have been able to deliver the largest income tax cuts for working people in a generation. That is something of which I am very proud indeed.

My right hon. and learned Friend also rightly highlighted how much progress we have made in tackling tax avoidance during the course of this Parliament. He was humble enough to admit that progress had not always been as strong during his time as Chancellor. There were many measures in the Budget to tackle tax avoidance and evasion.

We then had a contribution from the right hon. Member for Edinburgh South West. It is fair to say that there were many things in the Budget that he was not very keen on. He certainly made that clear. He did not like the rollercoaster, as he described it, of the public finances. I have set out my own alternative scenario on that. He did not mention the big dipper that the public finances had been on during his time in office.

The right hon. Gentleman rightly welcomed the package of measures to support the oil and gas sector, which was a very strong feature of the Budget. The measures will ensure that the sector, which is suffering from a dramatic fall in the oil price, has some confidence in the future. He welcomed those measures, but he rightly pointed out that the oil revenues in the OBR forecast at this Budget were a little more than a 10th of those predicted by the nationalists in the recent Scottish referendum. He made the point that had Scotland voted for independence and experienced the fall in oil prices, the difficult decisions made in this Parliament—I think I quote him correctly—would have seemed like a school picnic in comparison.

The right hon. Gentleman was too modest to remind the House of the service he rendered to his country with the leadership he showed in the Better Together campaign. I hope that Members on all sides of the House express their appreciation for that. It was certainly something I experienced first hand. It was immensely important in ensuring that the people of Scotland voted the right way in the referendum. The experience of working with him on that campaign, although we may have disagreed on many other matters over the years and will no doubt continue to do so, is one I will always remember. He showed himself to be a man of the greatest statesmanship in his conduct of that campaign.

Before I respond to some of the other points, I want to respond to the jibes from the shadow Chief Secretary—[Interruption.] It certainly is not—there are another 10 minutes to go. The shadow Chancellor, the shadow chunterer, is in his place chuntering as usual. He doesn’t have many policies, but he sure does like to chunter.

The Budget, as set out in the Red Book, was agreed by Conservatives and Liberal Democrats working together in the coalition Government. There is no policy measure in the Budget which Liberal Democrat Ministers did not sign off. Are there differences in the way the two parties in the coalition would approach the task of deficit reduction in the next Parliament? Yes, of course there are. I have made clear in this House and outside that there is another way we can meet the fiscal mandate that all parties signed up to when we voted for the charter for budget responsibility in January. Opposition Front Benchers appear to have forgotten about that, but we can do it in a more responsible and stable way. For that reason, last week I published and set out an alternative fiscal scenario for the next five years—a plan to borrow less than Labour and cut less than the Conservatives, a plan to give the UK a brighter future without sacrificing financial prudence. As the independent OBR mentioned in its economic and financial outlook, this profile of public expenditure

“is driven by a medium-term fiscal assumption”,

but

“both parties have said that they would pursue different policies if they were to govern alone.”

The Budget that my right hon. Friend the Chancellor presented last week is a coalition Budget that reflects the hard work the coalition Government have carried out over the past five years to turn the country around from the mess we inherited from Labour and to set us on a path back to prosperity. I do not hesitate, therefore, to speak in favour of it.