Finance (No. 3) Bill

Sammy Wilson Excerpts

Tuesday 26th April 2011 Commons Chamber

[Danny Alexander]

No, I do not accept that we have got this wrong; I think we have got it right. The level of the carbon price floor was set out in the consultation. A range of options were given, and we have taken a mid-point of the various responses we received. I think it is right that this country is the first country to introduce a carbon price floor. That is a very important mechanism to help us deliver on the low-carbon power generation to which I thought those on the hon. Gentleman’s side of the House were as committed as we are on this side. Of course this will have an impact; it is designed to have an impact. It is designed to have the impact of ensuring that companies and industries seeking to invest in low-carbon power generation have a clear sense of certainty about the price they will receive for that energy over future years. As a result of that, our country can ensure that we deliver on our targets for renewable energy and carbon emissions reduction, which are, I hope, very important to every Member of this House.

[Sammy Wilson (East Antrim) (DUP)]

Does the right hon. Gentleman not see any contradiction in terms in what he has said about making industry more competitive by giving it tax breaks? Introducing a carbon price floor will take more money from industry than corporation tax reductions give to it. Does he not recognise the point made by the hon. Member for Southampton, Test (Dr Whitehead): that in places like Northern Ireland this will simply push investment in electricity into the Irish Republic because of the single electricity market, rather than keep electricity production in Northern Ireland?

[Danny Alexander]

I recognise the force of the hon. Gentleman’s concerns, and I have great respect for the detailed way in which he puts them forward, which I have learned about through the relationship we have had as a result of his role as Finance Minister in the Northern Ireland Assembly Government. On this point however, I have to say that I think he is wrong. I hope that the carbon price floor will, alongside other measures, encourage investment in low-carbon power generation, including in Northern Ireland. That is what we are seeking to achieve through this mechanism. I think he also referred to energy-intensive industries, and we have announced that the climate change agreements, which are to the benefit of such industries, are to be rolled forward for another phase and that the relief given through those agreements is to be significantly increased. I hope that will ensure that such energy-intensive industries will be able to make the transition to lower, or different, energy use in a way that does not have the economic effects he describes.

--- Later in debate ---

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

Despite what the hon. Member for Bristol West (Stephen Williams) has just claimed about the Bill’s great achievements, I am afraid that the Liberal Democrats will be remembered for only one thing—the fact that they all, including their leader, pledged not to raise tuition fees. That is never going to go away, and everything else that they say will be seen in the light of that betrayal of the future of our young people in this country.

I was pleased to hear the thoughtful contribution from my right hon. Friend the Member for Croydon North (Malcolm Wicks) on the proposals on pensions, and particularly on pension ages. If we look back at the history of the actuarial analysis that was used to set the pension age at 65, we see that it was set at that age because most working-class people—there were many more people in heavy industry then—died before they reached the age of 65 years and six months. The calculation was made to minimise the amount that would have to be paid to the working class for their pension contributions. The change that is now being introduced adheres to that same principle. It does not involve earned rights through contributions. Rather, as my right hon. Friend said, it is seen as an imposition if someone without an adequate income lives too long, and has to rely on the state for support.

I am going to disappoint my right hon. Friend now, because I am going to return to the subject of the oil and gas industry. The contribution by my hon. Friend the Member for Aberdeen North (Mr Doran) was important but, like that of the hon. Member for Dundee East (Stewart Hosie), it related to the upstream industry—the oil and gas exploration and production industry. I shall quote from the June report of the House of Commons Select Committee on Energy and Climate Change, which the Government do not seem to have read. It says:

“The oil and gas industry operating on the UK continental shelf currently faces a quadruple whammy of high costs, low prices, lack of affordable credit and a global recession. Unless the fiscal and regulatory regime is well designed and highly attractive then the likelihood is that the UK may not recover anything like as much of its reserve as would be desirable.”

The Committee did not realise that there was another spectre to add to the quadruple whammy—a predatory Chancellor who did not even consult the industry when he brought in a £2 billion rise in the tax burden. This is not so much about the level of the rise as the method of its introduction. Changing a tax regime overnight without consultation creates uncertainty, which increases risk. According to the economists with whom I trained when I was studying, when the net present value calculations are made when looking at board bids for investment, such activity can reduce the investment’s attraction. We heard that again and again from the Members who spoke about the upstream industry.

I have been pursuing the so-called responsible Department with questions about the downstream industry—the UK oil refining industry. I tabled an early-day motion on 29 March drawing attention to the fact that two oil refineries were up for sale. They have since been sold to overseas investors. I said at the time that 150,000 jobs were involved. Those jobs are now genuinely under threat.

We have looked at the opportunities as well as the warnings, however. One opportunity involves the fact that there are massive deficits in low-sulphur, high-quality diesel and in aeronautic fuel in the EU at the moment. With the right incentives, it would be attractive for someone to invest in those. The Budget proposals that the Government are putting forward in the Bill should therefore provide those incentives.

It is interesting to note that an opportunity was spotted by Mr Ifty Nasir, who owns Essar, an Indian oil company, which bought a refinery at Stanlow. He said on 11 April 2011 that he intends to expand Stanlow’s shipping terminal in the Mersey to provide a UK entry point for diesel and petrol produced at the Vadinar refinery in India—one of the biggest refineries in Asia, which is in the midst of a £1.7 billion expansion that will allow it produce euro high-quality, low-sulphur diesel. That is the very opportunity that should exist for our refineries, for our companies and for British workers.

I wrote about this to the Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry). I asked what future support for our refineries in the UK would be forthcoming. In his reply of 5 April, he said:

“We work closely with the downstream oil industry and its representatives to understand the impact of policy on the sector and to ensure this understanding is shared across a range of Government Departments.”—[Official Report, 5 April 2011; Vol. 536, c. 886W.]

We had an hour and a half’s debate this morning in Westminster Hall about oil refining. I come here tonight to ask Ministers about the Treasury’s understanding of this issue and what its response has been, as I can find no indication that the Chancellor is joined up to the real world in any way in respect of his Budget proposals that will affect the UK refining industry.

Let us consider the background to oil refining. When the climate change levy and the EU emissions trading scheme were brought in, they were to have an impact on manufacturing, but were also to be tax-neutral. The scheme was about redistributing energy-reduction incentives in other parts of the economy, and it is about to become the European trading system mark 3. It puts £15 million a year on to the cost of refining oil in Grangemouth, a refinery in my constituency, alone. That is a high price to pay, but the industry accepted that environmental standards meant accepting it.

What we have effectively is a 15% disadvantage in EU refining, of which we are part, in comparison with the rest of the world, including India. If we bring in the new carbon tax, which the hon. Member for Bristol West seemed to be lauding, it will add another 10% disadvantage on top of that 15% one—and for UK refining alone. We will be disadvantaged in Europe by 10%, and in the rest of the world by 25%, in terms of the environmental taxes we pay. The cumulative cost to UK manufacturing business in general—we should remember that the Government said that they were going to “rebalance” the economy with their taxes and incentives—will be £9.3 billion. That price will not be faced by other parts of Europe or other parts of the world.

I want to know from Treasury Ministers what thought went into this policy. What extrapolation did they make? What cost-analysis or impact-analysis did they do when they thought up this scheme? The scheme does not attract me, when 1,350 jobs are at stake in the refinery in my constituency. Beyond that, another 4,000 or 5,000 jobs in Scotland are dependent on that downstream work. About 150,000 people working in the refinery industry can see someone coming over from India to import a product that is refined in India where the pollution standards are much lower than here, yet the Indian owner does not have to pay either the emissions trading scheme costs or the carbon floor price. I want an explanation of why that tax is in this Budget.

Let me illustrate what happened on the day of the Budget because of the announcement that a carbon price will be introduced in 2013. A forward pricing exercise run by Heren shows what happened to electricity prices on that day. The electricity price for 2013 went up by £2.20 per megawatt-hour because of the fear and risk that had to be factored in. We spoke of the same thing earlier in connection with the impact of the Government’s decision to plunder the profits of the offshore industry. The price has now risen by another £3 to £56.50. That 5% increase will affect all industries that are heavy electricity users. The oil refining industry cannot pass it on, because its margins are so small. The Government said that they would rebalance the position in favour of the manufacturing base of our economy, but instead they have laid that burden on it.

The second tax that I wish to discuss is the carbon reduction commitment, which was designed by the Labour Government as a tax on office spaces and other entities that could not be reached by the emissions trading scheme. It has since been simplified, and we understand that it will also apply to the manufacturing industry and to United Kingdom refining. The UK Petroleum Industry Association has described it as no more than another general tax. Will the Treasury exempt manufacturing industries and the UK refining industry from that tax? If not, it will impose another burden on the UK’s manufacturing capability.

[Sammy Wilson]

Not only has the tax been extended to a wider range of bodies, but the Treasury has removed an incentive for firms to reduce energy consumption. Some of the money that they had paid into the scheme used to be returned to them, but that will no longer be the case.

[Michael Connarty]

The hon. Gentleman has hit the nail on the head. That incentive has gone. Ports such as Grangemouth, in my constituency, cannot pass the tax on to those who rent or are sublet property. It will not make people who rent property more energy-conscious, although it was originally designed by the Labour Government—who employed an excellent methodology involving a great deal of consultation with the industry—as an incentive for the reduction of energy use.

The Department for Business, Innovation and Skills is probably partly responsible for matters involving the oil refining industry, although it seems to be burying its head in the sand and kicking that responsibility over to the Department of Energy and Climate Change. The two Departments are supposedly engaged in a study of the cumulative impact of climate change and energy policies. However, the Treasury must be involved as well, and it must take responsibility for the damage that it will do if it does not moderate its carbon taxes. Specifically, anyone who pays the costs of the European emissions trading scheme should be exempt from them. It has been calculated that the carbon price in the UK is likely to reach €54 per tonne, while the price on the European mainland will be only €36 per tonne. We are therefore at a disadvantage in relation to Europe, let alone the world.

There is a further tax that the Treasury consistently hang on to. Those who import a fuel oil must pay tax on what they land at the depot or terminal. If, for example, Grangemouth refinery supplies the terminal in the north of Scotland by tanker, it will pay tax on the amount of product that it puts into the tanker. However, an evaporation factor places an additional burden on every tanker load, so no one with any sense will convey fuel from a UK refinery to any UK destination. INEOS in Grangemouth prefers to import it from Lavera in France, because it pays less tax on the same tanker load, because of evaporation. Regardless of which party is in Government the Treasury has retained that tax, but it is time to reconsider. If we want products to be made in this country and taxed in this country, we must have a tax system that gives incentives to industry rather than punishing it.

--- Later in debate ---

[Sammy Wilson (East Antrim) (DUP)]

As a Member who represents part of the United Kingdom that has seen the highest increase in unemployment and that will see £4 billion taken out of public spending over the next four years as well as a 40% reduction in capital spending, may I say that I trust that the Chief Secretary was right to say what he did about the purpose of this Finance Bill, the objectives the Government have set for it and their hopes for it? That might seem strange from someone on the Opposition Benches, but if we consider the impact of the recession and the absence of growth on my constituents and on the public across the United Kingdom, we can only hope to get back on to a growth trajectory as quickly as possible. I am not so sure, however, given the proposals in the Finance Bill and the Budget, that that will be the case.

As the shadow Chief Secretary said, there is a lack of ideas on the demand side. Indeed, over the next five years, the Bill will put only £20 million additional money into the pockets of businesses and consumers, which is hardly a big increase that will allow the public and businesses to spend money. We know that Government spending is curtailed. As for investment, I believe that it will not have the impact that the Government hope that it will. The Government are relying on one other aspect of aggregate demand—exports. As I shall point out, some policies in the Bill will make it much more difficult for firms to be competitive. On the supply side, firms will invest only if there is a degree of confidence, if there is consumer demand and if there is the infrastructure that can give them that confidence. With cuts in the capital budget, in particular, I am not sure that that will be the case.

I do not want to get into a macro-economic analysis of the Finance Bill, as I want to follow on from the theme taken up by the hon. Member for Linlithgow and East Falkirk (Michael Connarty) and to consider the impact of some of the environmental taxes. Specifically, I want to consider the distorting impact that they will have on growth, industry and consumers in places such as Northern Ireland.

Some Members will know that I am not a great fan of green taxes—indeed, for many reasons, I do not believe that the adjustments that such taxes will make and their impact on CO₂ output in the United Kingdom will save the world or have a great impact on the climate in 100 years’ time. They are not designed to be behaviour changing and, as the hon. Member for Linlithgow and East Falkirk has pointed out, some that have been claimed to be behaviour changing have resulted in nothing but stealth taxes. If we consider the Government’s predictions for the revenue from such taxes, it is clear that the Budget is dependent on their not changing behaviour. Otherwise, revenue predictions will be short of what the Government anticipate. The final reason why I do not support the taxes was shown in the illustrative example about the oil industry. Rather than helping to achieve the objective set out by the Government, namely to make our tax system the most competitive in the G20 and to encourage investment and exports, these taxes will make industry less competitive.

Let me deal with one tax to start—the carbon price floor. We have heard from the hon. Member for Linlithgow and East Falkirk about the impact on the oil refining industry. If one considers the Budget figures published by the Government, one can see that over the next five years firms will, as a result of the reduction in corporation tax, save approximately £1.1 billion in year five. As a result of the imposition of the carbon price floor, they will pay £1.4 billion. All the gains from the reduction in corporation tax will be wiped out and more by one specific environmental tax. Of course, that cost will fall more heavily on the very industry that the Government hope will lead the charge for growth, namely manufacturing, which is one of the biggest consumers of energy. As energy prices go up as a result of the carbon price floor, it will have an impact on business costs. We have heard the example of what will happen in the oil industry. The Government have published figures showing that for some heavy energy consumers, such as firms that make glass, tyres or metal products, the impact will be a rise of as much as 9% on their energy bills.

The carbon price floor will also have an impact on consumers. If the Government’s figures are anything to go by, electricity prices will have gone up by 6% by 2015. Let me put that into context: it means an increase of £30 a year on an average household electricity bill of £500. However, as a result of the Budget and the tax changes in it, households with income at the 10th decile—the lowest-income households—will receive an increase in household income of £1.42 a year. So, the impact of this tax, which the Chief Secretary has proudly said we are the first in Europe to impose, will be to increase fuel poverty among the lowest-income households and to make manufacturing industry less competitive at the very time when we want it to lead the charge for growth.

The tax has specific connotations for places such as Northern Ireland, because we are part of a single electricity market that links us to the Irish Republic, which has not gone down this route. The way in which the single electricity market runs means that electricity is drawn from the cheapest producer first and then, as demand increases during the day and at peak times, it is drawn from more expensive producers. The impact of the tax will be that the cheapest producers will be in the Irish Republic, which will have two impacts on people in Northern Ireland. First, our security of supply will become imperilled, because we will become more reliant on producers from the Irish Republic. Secondly, as the tax will be imposed on gas, which is used in Northern Ireland mainly for electricity generation, the cost of extending the gas network in Northern Ireland will fall on consumers as the consumption of gas goes down. The whole purpose of exempting Northern Ireland from such measures for a number of years was, first, to try to deal with fuel poverty by increasing gas distribution across Northern Ireland, thereby making businesses more competitive by ensuring there was a gas network, which enabled them to use cheaper fuel, but the carbon price floor is likely to put all that in jeopardy.

I welcome the discussions with the Treasury and the fact that it wants to investigate more fully the impact of the carbon price floor on places such as Northern Ireland. I hope that there will be a revision once the full extent of that impact is seen in terms of what it does to the electricity market, to the cost of energy for consumers and businesses and to the ability to increase the gas distribution network. Those who are concerned about carbon dioxide output and production will find it ironic that the tax could drive power production towards coal-fired power stations in the Irish Republic—so it will not even achieve, on a European basis, the objective that the Government have set out for it.

The second tax that I want to consider, which has been frozen for this year, is air passenger duty. The tax was designed to cut air travel and, in doing so, supposedly to reduce the amount of CO₂ produced by people who fly around the world. One of the problems in a region such as Northern Ireland is that the Government of the Irish Republic, who received a loan of £7.5 billion from the Government here in London, have used part of that to reduce their air passenger duty to €3 and intend to reduce it to zero. That has an impact on the one international flight from Northern Ireland. Members may say, “Big deal—one international flight,” yet a large part of our economic strategy involved attracting investment from north America. We have succeeded in getting Citibank, the New York stock exchange and a range of other big investors into Northern Ireland, bringing high quality, highly paid jobs on the basis that there was a direct transport link between Northern Ireland and north America, as north American business men wanted.

As a result of the distortion of the air passenger duty, we are likely to lose that Continental Airlines flight, our only link with north America, as the airlines find that it is much more competitive to fly from Dublin, 100 miles down the road. That is one of the ways in which an ill-thought-out tax can cause distortion. It is not as though there is not an answer to it. Recognising that air passenger duty caused problems for areas away from the centre, the Government have already introduced an exemption for the highlands and islands of Scotland. An exemption could be made as part of the rebalancing of the economy of Northern Ireland. I look forward to the discussions with the Treasury on the impact of the tax, which may or may not be beneficial. I leave Members to make up their own mind about it. It may reduce air travel, or simply make it more difficult and more expensive for our constituents, but the distorting effects must be taken into account.

The third topic is the aggregates levy credit scheme—

[Mr Nigel Dodds (Belfast North) (DUP)]

Before my hon. Friend moves on to that, does he agree that the carbon issue, as well as the issues of air passenger duty and corporation tax for Northern Ireland, arises because Northern Ireland has a land frontier with the Irish Republic, which is a unique circumstance within the United Kingdom? [Laughter.] That is not special pleading, but a recognition of the special circumstance in which Northern Ireland finds itself, because it shares a common land frontier. England, Scotland and Wales do not; we do, and therefore people find it easy to go down the road and fly out of Dublin, as opposed to Belfast. Government Members may laugh at these matters of fact and economics, but they are harsh realities for those of us who live in Northern Ireland, who try to make the economy work and who are trying to grow the private sector. All we are asking is that a Government committed to the private sector should help us in that, not diminish us or reduce our efforts to do so.

[Sammy Wilson]

One can see the mirth of Government Members. I can understand why the Liberal Democrats are keen to see regulation, interference and high taxation, but I would have thought that Members on the right wing of the Conservative party would sympathise with the case that I have been making, which is that less regulation helps to grow the economy and that less of the distorting impact of the influence of Government can help to improve the economy of Northern Ireland and enable people to stand on their own two feet.

[Jacob Rees-Mogg]

I thank the hon. Gentleman—if I may say so, my hon. Friend—for giving way. Many of us on the Government Benches sympathise with that point of view.

[Sammy Wilson]

I knew from the hon. Gentleman’s speech that he has sympathy with that view. Indeed, I hope that such sympathy will also be found among Treasury Ministers as we discuss these matters.

The problems with the aggregates levy credit scheme are also a result of the land boundary with the Irish Republic. The aggregates levy was designed to encourage the recycling of building materials and reduce the use of virgin stone from quarries. It is good not to waste building materials, and the levy made sense in an area that is surrounded by sea and does not have a land boundary with another country that also quarries stone but does not impose such a levy, so allowances were made for firms in Northern Ireland. The Government are sympathetic to the continuance of the scheme, but as a result of a referral to the EU Commission it has been stopped. I notice that provision has been made in the Bill for a new scheme, albeit an altered one, which can be made available once discussions have been held with Europe. Again, I look forward to that and hope that we will get a positive response from Treasury Ministers.

I very much doubt that there is a great deal of sympathy for my views on the green taxes, but I hope that there will be sympathy and support for the need to look at their distorting impact on a part of the United Kingdom that is up against competition from a country that does not impose the same level of taxation. The Government have said that they want a competitive tax system; we want that. They say that they want to create a situation in which exports and private industry can grow; we want that. I therefore think that cognisance must be given to the points that I have made.

Amendment of the Law

Sammy Wilson Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

I appreciate being called so early in the debate, Mr Deputy Speaker. In Northern Ireland we are in competition with neither the Conservative party nor the Liberal Democrats when it comes to elections, so I suppose I can afford to be a little more objective in my assessment of the Budget. As we know, the allies of the Conservative party in Northern Ireland have now abandoned them, and the hon. Member for Belfast East (Naomi Long), who had some association with the Lib Dems, has abandoned them since coming to the House, so I hope that I can be objective on this.

The Chancellor made it clear in his speech today that his ambition for the Budget is that it should promote growth in the economy, and I wish him well in that. Coming from a part of the United Kingdom where growth has been most sluggish and, as a result, unemployment is rising faster than in any other part of the UK, I know that success for the Chancellor will mean success for our economy. It will reduce the deficit so that huge resources will not go simply on paying interest, put people back into work, increase living standards and, in the long run, provide funding for vital public services.

I wish the Chancellor well in that, but I think it is a little ironic that the Budget has been headlined as a Budget for growth, because one of its major statistical announcements is that growth forecasts have been downgraded once again. Indeed, the Chancellor optimistically indicated last June, and again in October, that the measures he would undertake would give us growth of around 2.5% or 2.3%, but in the six months since then we have had a 33% reduction in his forecast. There is a certain degree of irony in that, which is one of the reasons I believe that some of the criticisms that have come from the Opposition about the speed and depth of deficit reduction have some merit. I remember that when I used to teach economics I would say that there are always two sides to the economic growth coin. First, there is the question of how to increase the economy’s potential to produce more. If we do not increase potential, once demand goes up, all we get is inflation, or we will suck in imports.

The Chancellor outlined a number of measures today—I will not go through them all—some of which are contradictory. The measure that he held out as the beacon at the start of his speech was the decrease in corporation tax, which he argued will give firms the ability to keep more profits and, therefore, the opportunity to invest in new equipment, new markets or research and development. According to the Red Book, the decrease in corporation tax should put £1.075 billion into the coffers of companies over the next five years, so it could certainly be argued that the Chancellor has released resources for companies to invest if they choose to do so.

However, on the next page we see that, as a result of wanting to be a trendy green, or I suspect of looking for a stealth tax, he is imposing a carbon floor price. By 2015, all the additional revenue that firms will have from the decrease in corporation tax will be more than absorbed in the carbon price floor tax—£1.41 billion. On the surface, the measure appears to be a way of releasing resources to companies, but closer examination shows that companies will not be much better equipped.

[Stephen Williams (Bristol West) (LD)]

Will the hon. Gentleman concede that the whole purpose of a carbon tax is to incentivise firms to change their behaviour so that those that do change their behaviour by producing goods more sustainably will pay less carbon tax and benefit from reduced corporation tax and those that do not will pay more?

[Sammy Wilson]

That is clearly not what the Chancellor intends, because he hopes to raise £1.4 billion. If the hon. Gentleman is saying that this is all about changing behaviour so that firms do not get the money, there is an immediate hole in the figures the Chancellor is presenting to the House today. I suspect that it is not all about that at all, but is another way of raising tax. What appears on the surface to be a good supply-side measure will be more than offset by some of the other measures undertaken. Of course, the kinds of firms that are most likely to be hit by this are the very firms that the Chancellor says he wishes to promote: those in manufacturing industry. The service industry will not be hit by those measures as much as manufacturing will, and, given Northern Ireland’s reliance on gas and oil to fuel and power manufacturing industry, and the fact that our energy costs are already higher than in other parts of the United Kingdom, that will gravely disadvantage manufacturing firms in Northern Ireland, at the very time when the Executive in Northern Ireland is trying to rebalance the economy.

[Sajid Javid (Bromsgrove) (Con)]

The hon. Gentleman started his speech by saying that he would provide a more objective analysis, and I was excited by that. In that vein, does he accept that the Chancellor’s announcement that, for the first time, as a major departure from corporation tax policy, he would consider a separate tax rate for Northern Ireland, making the whole Province an enterprise zone, is very welcome and could help with some of the things that the hon. Gentleman is pointing out?

[Sammy Wilson]

I wish to come to that point later, but I hope the hon. Gentleman will accept that my comments so far, at least, have been objective, because they are based on the figures that the Chancellor has provided.

The Chancellor talked about another measure today for encouraging growth, the enterprise zones that the hon. Gentleman mentions. When we look at the figures in the Red Book, however, we find that in the first year, 21 enterprise zones will eventually be in place but the money made available to businesses as a result of tax exemption will amount to £20 million. By the final year, the figure will be £80 million, and I do not know whether £4 million in each zone will generate a great deal in additional output.

[Mr Kevan Jones]

In 2009-10, the budget for the nine regional development agencies in the UK was £2.2 billion.

[Sammy Wilson]

That probably puts it all in perspective. The measure looks good in the Chancellor’s speech, but, when one looks at the resources that it releases, which in turn are supposed to increase the willingness of firms to invest and the productive potential of the economy, one sees just how miniscule it is, and we have to judge whether it will make a very great impact.

[Mr Nigel Dodds (Belfast North) (DUP)]

My hon. Friend speaks with great expertise as the Minister for Finance in Northern Ireland, and I congratulated him on the production of his budget there just a few weeks ago. Does he share my concern at the response from the Secretary of State for Northern Ireland, during Northern Ireland questions? When asked about the enterprise zone and the real substantive changes, he said that it was really a phrase he had been using to “cover”—that is the word he used—the idea of Northern Ireland being more open for business in relation to corporation tax. Does my hon. Friend share my concern that, in Northern Ireland, there might not be much substance to that phrase?

[Sammy Wilson]

My fear is that, not just in Northern Ireland but throughout the United Kingdom, the measure will be more like a branding exercise and good for a soundbite, rather than something that will have any real impact. I hope that the measure has an impact, but, if I look at the amount of resources that will go into the zones, and at what really is required to lift such areas, I fear that it will not.

Other changes have been mentioned, such as those to the tax structure, and I noted what the Chancellor said, but some of them might not include extensive consultation—the issue is complex—and might be years away. So, again, they look good in the Budget, but what is the immediate impact going to be?

[Helen Goodman (Bishop Auckland) (Lab)]

On that point, it is interesting to look at the changes to national insurance contributions, which are forecast to have an impact right out to 2016, because they show that the proposed bringing together of the two taxes—national insurance and income tax—will not happen for at least five years.

[Sammy Wilson]

I hope I am not quoting the Chancellor wrongly, but I think he talked about nine years in the future before those changes have an impact, so again we have to ask, “What is the impact going to be?”

[Dr William McCrea (South Antrim) (DUP)]

Does my hon. Friend agree that the Chancellor missed a vital opportunity for the Northern Ireland economy today? Does my hon. Friend think it right that a £7.5 billion loan from the British Exchequer to the Government of the Irish Republic should be used to enable that Government to abolish air passenger duty, which in turn gives them an unprecedented competitive edge on flights, bearing in mind that it impacts on my constituency and the international airport in it?

[Sammy Wilson]

I am a bit miffed, because I wanted to use that point later in my speech, so I will have to scribble it out. When we look at some of the issues, whether they are the delays, the amount of money being put in, the offsetting of increases in taxation when some tax cuts have been made, the regulations or the consultation that has still to take place with Europe to see whether we can reduce red tape, we have to ask whether the predictions for future growth based on the supply-side measures in the Budget are as fragile as the autumn predictions that were wiped out by a fall of snow. If that is how fragile the predictions are, then I have concerns.

There is another side to the coin, because not only do we have to increase the productive potential of the economy, but people must be willing to purchase the goods that can be produced, and aggregate demand can be made up of several different factors. The Government have already ruled out one for very good reasons, and I accept that the deficit has to be reduced. I may have some issues about how quickly it is being reduced, but the one thing we do know is that Government spending is not going to take up the slack that already exists in the economy.

Consumer spending is not going to take up the slack, either, because the Chancellor made it quite clear that he would not make any tax giveaways. Indeed, if one looks at what he said about the indexation of direct taxes, one finds that he has now built automatic increases into the tax system for the next four years. There will not be discretion on a year-to-year basis; inflationary increases are now built into the tax system.

That leaves investment demand and exports, and it seems that the Chancellor is emphasising the role of exports. Given that over the past year and a half the exchange rate has fallen by 20%, our export growth is still one of the weakest among the OECD countries. Investment might improve competitiveness, but the only direct measure that the Chancellor has produced today is the export credit guarantee. I have quickly looked through the Red Book to see how much the guarantee involves, and I cannot get a figure, but that is the only measure to increase the one component of aggregate demand on which the Chancellor is relying to improve growth in the economy.

If we look at the supply-side measures and the lack of demand-side measures, we have to ask, “Can we really be confident that this is a Budget for growth?” The conclusion that I come to—not because I want to take a pot-shot at the Government, but because I want to get in behind the figures to see whether the hope being held out is genuine—is that I am left with some concerns.

[Mr Graham Stuart]

The hon. Gentleman is right to be sombre because of the situation the country is in. The Chancellor mentioned what is happening in other countries, and we are in a fragile position because of the appalling inheritance. The growth predictions, however, are no longer the predictions of a politician; they are the predictions of the OBR. We are in a very fragile state, and it is no wonder that predictions change, but the prediction is that over this Parliament this country’s growth will be higher than the EU average. That, considering where we started, would not mean golden times, but it would be a solid achievement.

[Sammy Wilson]

Of course, the earlier growth figures were also OBR-ified, if one wants to use that term, yet they did not prove to be realisable over a six-month period. We cannot simply rely on the assurances that the OBR has looked at the figures and thinks they are okay, as there could well be a revision. I am merely pointing to some aspects within the Budget document that give me cause for concern as to whether these growth figures can be achieved. If they cannot, there are implications for the deficit, for employment, for living standards, and for the ability to provide public services in future.

Let me turn to some of the measures that apply to Northern Ireland. As we heard in an earlier intervention, tomorrow morning an announcement will be made about the corporation tax proposals for Northern Ireland. I am waiting to see that. I have no doubt that the ability of the Northern Ireland Administration to reduce corporation tax could be a useful lever. As a Unionist—I know that the hon. Member for Dundee East (Stewart Hosie) will probably be totally appalled that anyone from a devolved Administration should say this—I do not want to see huge fiscal powers devolved to Northern Ireland. I am part of the United Kingdom, I want to remain part of the United Kingdom, and I wish fiscal powers to stay part of the United Kingdom.

There has been a groundswell of opinion for some variation in corporation tax; indeed, the Secretary of State for Northern Ireland has been very enthusiastic about it. However, there is no point in devolving corporation tax if the price tag attached is such that it savages public expenditure, which has already suffered a huge cut as a result of the Budget decisions made last October. There would be a gestation period between a reduction in corporation tax and the impact on jobs on the ground, whereas any cut in public spending or in the block grant would take immediate effect. There would be no increase in private sector employment, together with an immediate decrease in public sector employment, and that cannot be good for economic recovery.

I fear that the figures in the document that we have tomorrow will be neither a fair reflection of the cost of devolving corporation tax to Northern Ireland nor the kind of opportunity and offer that would be attractive to the Northern Ireland Administration. We will want to see that the Treasury and the Government have not made a savage reduction in the block grant even though it bears no relation to what the real cost of devolving corporation tax might be.

[Mr Dodds]

Does my hon. Friend agree that there is a supreme irony in the fact that as part of the conditions for the bail-out of the Irish Republic—£6 billion of UK taxpayers’ money—the Irish Republic insisted that its corporation tax rate would stay at 12.5%, yet Northern Ireland, which, uniquely within the United Kingdom, is in direct competition with the Irish Republic, would be allowed to reduce its corporation tax but would not receive any similar subsidy from the UK Treasury, whereas the subsidy is going directly to the Irish Republic?

[Sammy Wilson]

We can see how the bail-out of the Irish Republic conflicts with what is happening in Northern Ireland. My hon. Friend the Member for South Antrim (Dr McCrea) mentioned air passenger duty. I am disappointed about this because the Chancellor could have done something about it. In particular, the one flight between Northern Ireland and North America is very important in attracting not only tourists but inward investment. A sum of £2.1 million would have ensured that that flight continues, yet the Chancellor did not find that he could allow for regional variation. There are precedents for that because regional variations are allowed for Scotland. The irony is that the Irish Government, using the £7.5 billion that was obtained from the United Kingdom, are now going to abolish air passenger duty, which places them at an even more positive advantage regarding the service that flies from Northern Ireland.

[Mark Durkan (Foyle) (SDLP)]

Will the hon. Gentleman acknowledge that the Irish Government had made the decision about air passenger duty before any loan facility was agreed with the UK Government—and I stress that it is a loan facility?

[Sammy Wilson]

I find it strange that the hon. Gentleman should want to apologise for the Irish Republic, which is in direct competition with the economy of the area that he represents, but we will leave it to his constituents to question him about that.

The Chancellor has made much of the fuel duty escalator. Northern Ireland does not have the highest fuel prices in the United Kingdom, but it certainly has the second highest, and we also have the problem of the border with the Irish Republic. I would have hoped that the Chancellor would come through on the promise that he made when he was in opposition. We have a promise that future price increases will be deferred, but the impact on current prices will be very slight. That leaves Northern Ireland, with its high dependence on road transport for its manufactured goods and its dispersed rural nature, at a disadvantage.

I acknowledge that the Government have responded to some developments recently. I look forward to seeing the outcome of the aggregates levy and the allowance that has been made. I welcome the fact that the loan facility for the Presbyterian Mutual Society has been built into the Budget. In his concluding remarks, the Chancellor said that he would put the fuel in the tank of the British economy so that it could drive forward. I may be about to show my age, but I hope that it is a tiger in the tank so that we finish up with a tiger economy. I fear that we are going to run out of fuel very quickly, and we will all be poorer for it.

--- Later in debate ---

[Mr Jones]

Yes. That is the entire flaw in the Government’s policy: the idea that they can cut public expenditure as deeply and savagely as they are going to, and that somehow jobs will be created in the private sector—something that will just not happen. It might happen in parts of the economy, but there is certainly no indication that it will happen in my region. In fact, the situation is even worse, because Durham university’s model shows that taking out 20% of the public services will lead to 50,000 jobs going in the north-east, with 20,000 of them actually in the private sector. Replacing those jobs, in addition to the 30,000 in the public sector, is going to be very difficult.

[Sammy Wilson]

Does the hon. Gentleman accept that, if the growth figures are wrong, the impact will be magnified and multiplied the further one moves away from the south-east of England? The impact on regions of the United Kingdom will be much more severe if the Chancellor has got it wrong.

[Mr Jones]

The hon. Gentleman makes a very good point, but do the Conservatives care? No, I do not think they do. We saw that in the 1980s and early 1990s in the north-east of England. His constituents will face similar problems to constituents in the north-east, given the contraction of public sector jobs, which will have a direct impact on the private sector. Trying to attract business and growth to those areas will be very difficult, and I fear that we could have a two-speed Britain: a reasonably prosperous south-east of England, but stagnant or even declining regions, such as the north-east and Northern Ireland. Does the Conservative party care about that? No, I do not think it does.

Fuel Prices and the Cost of Living

Sammy Wilson Excerpts

Wednesday 16th March 2011 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

I welcome the opportunity to bring a Northern Ireland perspective to the debate, although I expect that it will not be all that different from what we have heard from all round Great Britain. There are a number of particular problems which the escalation of fuel prices brings to a place that is on the periphery of Europe and on the edge of the United Kingdom, with all the attendant costs for industry, whether for the transport of raw materials in or for the transport of goods out.

At a time when the Northern Ireland Executive are trying to rebalance the economy and promote the private sector, such increases in costs present particular difficulties. They also present a difficulty when the fuel duty in Northern Ireland is much higher than in other parts of the island. For example, on diesel there is a 60% tax take, whereas across the border in the Republic it is 55%. That distorts competition in industry. Northern Ireland also has a large and dispersed rural community with high levels of rural poverty, so escalating costs will hit people who can ill afford them, as many Members have highlighted for their constituencies.

[Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)]

Does my hon. Friend agree that an added problem in Northern Ireland is that it is the only part of the UK that has a land border with another state and that fuel smuggling has been endemic for many years? Would the Government not be better served by putting more resources into HMRC’s capacity to tackle fuel smuggling and apprehend those engaged in that unlawful activity, as that could bring in a lot more revenue to the Exchequer?

[Sammy Wilson]

I accept my right hon. Friend’s point: with a 20% price differential, fuel smuggling of course becomes a lucrative trade.

Although there are differences in approach, there seems to be a fair degree of unanimity that this issue needs to be dealt with. In fact, the only dissenting voice I have heard is that of the member of the Green party who sits in front of me, the hon. Member for Brighton, Pavilion (Caroline Lucas), who seems to think that it is a good idea that fuel prices go up. I think she is more interested in influencing temperatures in the world in 100 years’ time than dealing with the poverty people face in the present day—it is a quirky party, so of course it has quirky ideas.

A number of criticisms have been made of the motion before us, and I must say that I have some sympathy with them. I know that getting a derogation from Europe will not be easy. Indeed, after this debate I will be speaking with the Minister about the aggregates levy and derogations for it, and even for something that simple we are looking at more than a year for Europe to agree a variation on something that it has already accepted. One must bear it in mind that that is not a quick remedy. However, the motion at least highlights the issue, which is one reason I support it, and it does so in stark terms, setting out the impact that fuel price rises have on people.

The Economic Secretary’s response has been threefold. First, she spent quite a lot of her speech looking back. I suppose it is difficult for someone from Northern Ireland to criticise another for looking back, so you will have to allow me to overcome that irony, Madam Deputy Speaker. I admire the way the Economic Secretary made her argument. In fact, I like her style—head-butt the opponent, get them on the ground and kick them when they’re down. She should be an honorary Ulsterwoman. I appreciate her approach, but although the previous Government have a case to answer, I think that people outside are interested not so much in who did what in the past, but in what will happen in future. Although it was good to hear her robust response, it has to go further.

Secondly, the Economic Secretary gave a number of reasons why things could not be done. She talked about deficit reduction and the fact that there would be a cost attached to any action on fuel prices, but one point that has escaped mention in the debate is that we are talking about a windfall for the Government. The increase in money that has resulted from the price rises was not anticipated in the deficit reduction plan in the first place—at least I do not think that the Government anticipated there would be a war in Libya and that that would put up fuel prices and built that into their Budget. If they did, God help us, because if that kind of planning goes into a long-term Budget we should be very worried. It is a windfall tax, so the Government have an opportunity to give it back to the people; it does not impact on the deficit reduction plan and it alleviates a problem that they have identified.

Thirdly, the Economic Secretary said that she cannot pre-empt the Budget, and I suppose we must have some sympathy with that. I do not think that anyone would want her to do so, but if there is to be some good news in the Budget, I would have liked her to have at least softened us all up by giving some hope that that will happen.

[Robert Flello (Stoke-on-Trent South) (Lab)]

I am thoroughly enjoying the hon. Gentleman’s speech, but, to pick up on that point, Government Front Benchers could pre-empt the Budget by announcing now, as Labour did in the past, that the proposed increase will not happen. They do not have to wait until the Budget.

[Sammy Wilson]

I was just coming to that point. Government Front Benchers could today at least have offered us some softening up, some promise or some hope held out, but that was not apparent in the speech we heard. Perhaps in the winding-up speech there will be such an opportunity. The one thing we do know is that in opposition and faced with increasing fuel prices and protests about them, the current Chancellor said that when prices and the tax take go up, taxes should go down, and that when prices go down, taxes should go up. That was the policy enunciated when Government Members were in opposition. I look forward to next Wednesday to see whether that promise and policy will be given some effect in the Budget. If that happens, this motion and this debate will have been worth while and there will be at least some alleviation of the hardship that fuel price increases have brought.

Fuel Prices and the Cost of Living

Sammy Wilson Excerpts

Wednesday 16th March 2011 Commons Chamber

[Justine Greening]

The hon. Gentleman is talking about postponements, because those fuel duty increases eventually came through. That is one reason why in their final months in office—from December 2008 to April 2010—the previous Government increased fuel duty no fewer than four times.

Over the weekend, the shadow Chancellor confidently proposed cutting VAT on fuel.

[Sammy Wilson (East Antrim) (DUP)]

The Minister quite rightly highlights in her amendment the previous Government’s fuel duty increases, but the motion recognises that people are feeling pain now, and holds out the hope that the Government will do something about fuel duty. Rather than talk about what the previous Government did, will she tell us what she intends to do to alleviate the hardship for people in places such as Northern Ireland?

[Justine Greening]

I shall not pre-empt next week’s Budget, but the hon. Gentleman knows that both parties in the coalition Government spoke in opposition about the effect of fuel duty on motorists. Conservatives spoke in opposition about how the oil price fed through into fuel prices at the pump, and Liberal Democrats talked about the impact of fuel prices on people living in remote rural areas. The coalition Government are now looking at how to tackle both those problems, but I cannot pre-empt the Budget.

Comprehensive Spending Review

Sammy Wilson Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

It did make a difference, and I found in the Treasury absolutely no plans to reduce the budget deficit. They were pencilled into the March Budget, which Labour Members all cheered at the time, but absolutely no plans were put in place.

I am delighted that we have been able to help Herefordshire in this way. It is one of the most rural parts of England, and I think that super-fast broadband is key to the future of the rural economy.

[Sammy Wilson (East Antrim) (DUP)]

We understand the economic mess that the coalition Government have inherited and the problems that it presents, but the spending review represents a huge gamble with people’s jobs, with economic growth and with public welfare. I suppose we all hope that it pays off.

How does the fact that capital expenditure will fall by 40% over the next four years in an already fragile Northern Ireland economy sit with the promise from the Secretary of State for Northern Ireland only last week that the investment programme would be protected? What assessment has the Chancellor made of the impact on his desire, and that of the Northern Ireland Executive, to rebalance the Northern Ireland economy?

[Mr Osborne]

Let me say first that the biggest gamble that the country could have taken in the current world environment would have been not to set out a credible plan to reduce the budget deficit. If we had not set out that plan and made our decisions, we really would have been in the firing line. Secondly, the capital spending cuts that I have—unfortunately—announced today are less than those proposed in the Labour Government’s plan, because of the increase in the capital envelope that I announced. That does make them particularly easy, but I have sought to prioritise infrastructure investments, and if there are good projects in Northern Ireland we can work on them with the devolved Administration. This is, of course, an area of devolved responsibility.

Finally, let me say that one of the absolute priorities of my right hon. Friend the Secretary of State for Northern Ireland, after security, is enabling the economy to grow and a private sector recovery to take place in Northern Ireland. I am sure it will be possible to arrange, some time later this year, an opportunity for us all to get together—the representatives in Northern Ireland, the Secretary of State and I—to discuss what we can do to help Northern Ireland see that private sector job growth.

Equitable Life (Payments) Bill

Sammy Wilson Excerpts

Tuesday 14th September 2010 Commons Chamber

[Ms Ritchie]

It would have been much better for the coalition Government to implement the ombudsman’s recommendations. That would have been much more democratic and it would have reflected the needs of all our constituents.

[Sammy Wilson (East Antrim) (DUP)]

Does the hon. Lady accept that although the coalition Government have been quick to introduce a Bill that enables payments to be made, the level of payment is equally important to our constituents, as is the commitment, which was made by both parties in the coalition before they entered government, to implementing the ombudsman’s report?

[Ms Ritchie]

I could not agree more with the hon. Gentleman. That is exactly right, and it is the kernel of the letters that I have received from my constituents. They want this matter resolved by amendments to the Bill to reflect what was said in the original ombudsman’s report.

The parliamentary ombudsman’s report is independent and transparent, but it is being overruled by a Government-directed report that results in less favourable terms for investors. Such injustice at the heart of successive Governments is a great slight on our democracy. I urge the Government, at this late hour—perhaps it is not too late—to make amendments so that the Bill reflects clearly the ombudsman’s report. Such amendments would show that we are truly earnest about helping some of the most beleaguered members of our society.

--- Later in debate ---

[Jim Shannon (Strangford) (DUP)]

I thank you, Mr Deputy Speaker, for allowing me to say some words in favour of the Bill, and I congratulate the hon. Member for Congleton (Fiona Bruce) on a very good maiden speech. The spirit of her predecessor certainly lives in her, and I wish her well in the Chamber.

A society is judged very much on how it treats its young and vulnerable, on how it looks after and cares for the elderly and on how the young are given opportunities. I hope, therefore, that no one is judging us in the Chamber by the standard we have set in the treatment of Equitable Life members, because if they are, they will be sorely disappointed. This debate has continued without redress, at least until now, and with no help from this place, at least until now, and EMAG estimates that about 32,000 policyholders have died since its campaign for compensation began—a stark figure already mentioned today—with members continuing to die at a rate of about 100 per week. Those are stark facts when we realise that these are people’s lives we are talking about.

By the time this scheme starts paying out next year, 13,000 more members will have passed away, bringing to 43,000 the total number of people who have struggled more than is fair or judicious because no solution could be reached or help given by the Government when it was needed. I am glad, therefore, that today’s legislative change is passing through the Chamber, and I look forward to further contributions when the programme goes forward.

I have some concerns, however, about the quantum. Everyone seems to be in favour of the process, but we have not been able to identify the percentage. I have been contacted by Equitable Life members, including a gentleman who is terminally ill—this sort of situation will be replicated across the whole United Kingdom—and is desperate to receive the money so that his wife will be able to live comfortably. Surely, this is the very thing that we should be trying to do; this is the whole purpose behind pension schemes and Governments encouraging people to invest in private pension schemes.

I stand here on behalf of that terminally ill gentleman and others like him. I could do nothing else, because my job as an MP is to fight on behalf of those who come to me. That is what we are here to do, and I urge that a reasonable solution be agreed today, so that people can receive their compensation in time for it to make a positive difference to their lives. I have constituents who were paid half of what they expected on the commencement of their pensions in 1992, when petrol was about 40p a litre. It is now three times that, and the pensions are worth half their value. That is an indication of where their pension schemes are and of how Equitable Life members are losing out. Lives have been severely affected, and it is our duty in this place to redress the balance as much as we can.

[Sammy Wilson]

Does my hon. Friend accept that it is the duty of the Government to take this matter forward, especially given that when in opposition and during the election the Conservative party pledged to implement the parliamentary ombudsman’s report and recommendations, which for most people meant not a small fraction of their relative loss but substantial payments?

[Jim Shannon]

My hon. Friend must have read my mind. The parliamentary ombudsman’s report describes the Equitable Life situation as a decade of regulatory failure, and her second recommendation is that the Government should set up and fund a compensation scheme with the aim of putting people who have suffered a relative loss back into the position they were in before maladministration occurred.

The issue facing us is the percentage of the value of the Equitable Life schemes. A report commissioned by the previous Government suggested that policyholders lost up to £4.8 billion in this debacle and proposed that they should receive a package of about £400 million. However, there is no guarantee of that figure, which has been bandied about by many. They are not new figures, and I am sure that some here could repeat them in their sleep, especially the Financial Secretary to the Treasury, who has been reminded of them several times in letters from constituents of mine, forwarded through my office, yet they bear repetition so that all here will be under no illusion about the situation.

I remind hon. Members that this is not merely a number-crunching game that we are playing; we are playing with the quality of people’s lives, and it is essential that the Bill be subject to any decision reached. In July, the Financial Secretary said in the House:

“Consistent with the ombudsman's recommendation, Sir John has advised that relative loss for an individual policyholder should be capped at the absolute loss they suffered.”—[Official Report, 22 July 2010; Vol. 514, c. 577.]

Yet I remind the Financial Secretary that when he was a shadow Treasury Minister he wanted to ensure compensation for injustice. I ask that this be done and that we compensate for the injustice that all those people have suffered over years of unnecessary struggle.

I agree wholeheartedly with Chris Wiscarson, chief executive of Equitable Life, when he said:

“Let’s not make Equitable policyholders victims three times over. First, at the hands of the regulators, as so clearly articulated by the parliamentary ombudsman”—

as colleague have indicated—

“second, at the hands of the Labour government who failed to bring closure over a decade; and now third, compensation that will be decimated if Sir John Chadwick's advice, meant for the Labour government and slated by the ombudsman, is used.”

I am aware of the financial position. We all know that we have to make hard decisions over the next few years about how the money will be spent. We are not running away from that. Indeed, I am fighting against reductions in grants that mean that Northern Ireland Housing Executive constituents are living with damp in their homes; that worthy disability living allowance recipients are being stripped of their support; and that roads are ruining cars because there is no money to fix them. I see all of that, and everybody else sees it, but I accept that we must take into account the fact that the money is unavailable. However, to compensate Equitable Life members with 10% of their investments is scandalous and can never be acceptable.

Today, it is my desire, and that of many in the House, that reasonableness be made the basis of any decision.

Finance Bill

Sammy Wilson Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Byrne]

No. I am saying that the country’s investors now have so little confidence in the economic plan that they would rather save their money than dare to invest it in productive capacity and growth for the future.

Let us look at some of the measures that show the decline in confidence. The Bank of England says that mortgage approvals fell in June; last month, the consumer confidence index fell for the first time in a long time; and yesterday, Rightmove told us that house prices have been cut for the first time this year. The Budget and the Bill are putting Britain’s recovery in the slow lane. The greatest irony of all is that we must all pay more as a consequence.

[Sammy Wilson (East Antrim) (DUP)]

The right hon. Gentleman mentioned two aspects of aggregate demand—consumer spending and Government spending—but is he also concerned that the Government are depending partly on an increase in exports, because all the indications are that the markets in Europe and America will not be as buoyant as was assumed? Therefore, all three major areas of aggregate demand will be subject to downward pressure.

[Mr Byrne]

The hon. Gentleman makes an extremely good point. The evidence on that is mixed. The CBI industrial production survey, which was published earlier this afternoon, shows that manufacturers reported that the second quarter of this year was good and that they have a degree of confidence in exports. However, the problem is that the OBR is projecting a £100 billion increase in exports over the next four or five years. That is the equivalent of our exports to America tripling, our exports to China going up by something like 20 times, and our exports to India going up by something like 40 times. That may well come to pass, but it is safe to say that very few people would bet on it. That is why the Opposition believe that the Government should do a little more to nurture both domestic business investment and domestic demand.

The alternatives for reducing the deficit that we have rehearsed in the past couple of weeks bear a final word this afternoon. I want to return to the explanation of the difference between the scorecard projections for tax growth and what the OBR said would come through the door, which the Exchequer Secretary struggled with earlier. The point centres on how much growth will contribute to paying down the deficit over the next four years. The Labour Government’s deficit reduction plan projected that the deficit would be reduced by something of the order of £78 billion over the next four years, and the OBR inconveniently told the Chancellor that we were on course to deliver that. That plan involved £57 billion-worth of discretionary action, which was set out in detail in chapter 6 of the March Budget—£19 billion in tax increases and £38 billion of spending cuts. However, £21 billion of the deficit was projected to be closed by the economy returning to growth, with higher tax receipts and lower benefit bills.

The June Budget appears to hit growth so hard that £9 billion of extra tax is necessary to make good the effect of lower growth. That is the price of slowing the recovery. The Liberal Democrats are awfully pleased that they got an increase in income tax thresholds, and I congratulate them on securing that concession, but the truth is that they have been sold a pup. They could have had the increase in the threshold they originally wanted if we did not have to pay for the cost of lost growth.

The Budget scorecard on page 40 of the Red Book says that by rights, the Chancellor’s decision ought to bring in an extra £8.2 billion in tax by 2014-15, but the OBR says that only £3.1 billion will actually come through the door, because growth will be depressed so much by the Budget. The Red Book goes on to say—on page 97, table C9—that something like £9 billion in extra taxes and spending cuts are necessary because of this go-slow Budget. In other words, the Government have almost halved the contribution of growth to closing the deficit. It is now quite clear to the House that although the Government may have lost their monetarists, they have certainly not lost their masochists.

Finance Bill

Sammy Wilson Excerpts

Thursday 15th July 2010 Commons Chamber

[Chris Leslie]

Absolutely. My right hon. Friend the shadow Chief Secretary to the Treasury made that point very forcefully earlier. The regressive impact of insurance premium tax is not widely understood, but, when our poorest constituents take out insurance, they are hit disproportionately hard, and unfortunately many of them will decide to go without that insurance altogether.

[Sammy Wilson (East Antrim) (DUP)]

I appreciate the hon. Gentleman’s point about a 1% rise being regressive, but, on his earlier point about it putting people off buying insurance, the average household insurance policy is £400 and a 1% increase will add £4 to the total cost. If someone who seriously wishes to insure their home is prepared to pay £400, is he really suggesting that an extra £4 will produce the result to which he referred, namely that many people will no longer purchase insurance?

[Chris Leslie]

The hon. Gentleman makes a reasonable point, and he is right that at that level the disincentive might well be marginal. However, my point is that there is a slippery slope, and, with 1% here and 1% there, before we know it we have 2% or more—3%, or even 4%. My right hon. Friend the shadow Chief Secretary asked about the potential risk of aligning our insurance premium tax arrangements with those of the wider European Union, and, if they are at 22% in Italy or wherever, there is a risk of a serious disincentive.

So, I regard this debate as a stitch in time to put down a marker and say to the Government, “Don’t chance it too far. This may well feel like a small amount of money. but £10 on a motor insurance policy of £1,000 is quite an additional burden and not to be sniffed at.” If the Government continued to ratchet up the costs in that way, that would be regrettable. Some of the amendments before us are very sensible, and, in asking for a report from the Treasury, I also urge it to consider in that document the merits of a requirement on insurers to advertise more prominently the yield from insurance premium tax and the rate of tax that customers pay, because it is exceptionally important that our constituents understand why they are asked to pay so much.

When I consulted the Association of British Insurers about that, its representatives said that they would welcome more information on policy documentation and be more than happy to work with the Treasury on those matters. If the amendment is carried, and there are good arguments for doing so, I hope that the Minister will consider that point seriously.

The impact on travel insurance will be even greater, given the costs for many people who travel abroad on, perhaps, their holidays. If those people are my constituents, they will often do so for one week a year, if that. However, all travellers are encouraged to take out travel insurance for such trips, and the rate is currently 17.5%, but it will go up by 2.5 percentage points to 20%, which is a significant amount of money, so, if we discourage our constituents from taking out insurance on their holidays or travel, there will again be consequences.

--- Later in debate ---

[Sammy Wilson]

I am listening intently to the hon. Gentleman. Would he extend his argument to, for example, household insurance and the whole range of insurance premium tax? As was pointed out earlier in the debate, people insure their houses against flooding and fire, for example. There is therefore no burden on the state in the event of flooding, because the insurance companies carry it, and if a house catches fire, people do not have to look for a loan from social security, because they are covered by the insurance. Does he accept that the amount of money involved is hardly likely to act as a disincentive?

[Mr Chope]

The answer is yes; I would wish to extend my argument. However, I tabled two specific amendments so that we could have a focused debate. It has become apparent in the course of the debate—I did not know this before—that about half the yield from the IPT increase will be from motor and health insurance premiums, and about half from other insurance, such as household insurance.

I am concerned that in my constituency, particularly as a result of the rather reckless behaviour of the Environment Agency, there is a blight on a number of houses, whose owners find either that they cannot access flood risk insurance or that that insurance is much more expensive than it used to be. Because of how IPT works, the state benefits from the latter outcome through extra income, and there is an extra burden on householders. Some very important points were made by Members who are concerned about household insurance. It was open to anybody to table similar amendments, but I tabled two to focus the debate. The hon. Member for Dundee East (Stewart Hosie) did the House a service by tabling an amendment that calls for a proper analysis so that the House can know the full implications of the proposals before we are asked whether we support them.

We have spent two hours discussing this matter, but we have still not really heard from the Government about the direction of travel. We certainly have not heard whether the principles so articulately described by my right hon. Friend the Transport Secretary—he spoke of people who can afford to pay their fare using free bus passes—apply throughout the coalition Government, and to those who take responsibility for their health care, education or other aspects of their lives.

--- Later in debate ---

[Mr Kevan Jones]

Over the past few weeks since the coalition came into being and the announcement of the Budget, the rhetoric that we have heard has been all about fairness. The Prime Minister and the Chancellor have said on many occasions, “We’re all in this together.” The other phrase is, “There’s no alternative.” We have heard the accusation that the previous Labour Government did not have a deficit reduction strategy. Well, this element was a key part of that—£3.6 billion of it.

I am quite sad that only one Government Back Bencher is in the Chamber, and I notice that the Liberal Democrats have not been here throughout this debate. During the election, we heard nothing about the VAT rises, but we also heard nothing about the fact that one of the things that the Government would do in their first Finance Bill would be to give a £3.6 billion tax give-away to the richest 2% of pensioners. I am sure that that would have gone down very badly with the electorate if the Government parties had been honest with us at that time. During the past week, the Liberal Democrats and the Conservatives, in their great coalition together, have been arguing that VAT is not regressive, although a key exception is the hon. Member for St Ives (Andrew George), who has found this policy very difficult. However, one cannot say that the measure we are debating is progressive at all.

[Sammy Wilson]

Does the hon. Gentleman accept that if the amendment, which would require a distributional analysis of any changes, were accepted, we would be in a position to make a judgment on whether a system that is complicated, as the shadow spokesman said, was at least being replaced with a system that was fair and did not, as the hon. Gentleman says, give a huge amount of money to the very richest people?

[Mr Jones]

I entirely agree with the hon. Gentleman. There seems to have been confusion from the Minister in the sense that she is saying, “Nudge nudge, wink wink, say no more”—in other words, that the Government might not actually introduce this measure. If this change is to be made, we need to know who it will affect lower down the income chain. If the top 2% are not going to carry their share of the burden, people lower down the tax scale will be affected, such as pensioners, who are already being hit by VAT and other implications of this Budget.

This proposal affects 300,000 people—2% of pension savers and 1% of working age taxpayers. We are being told that it is fair, just and progressive to abolish what was put forward by the previous Labour Government, which would have raised £3.6 billion to help to reduce the deficit that was created because of the lending we had to provide following the economic crisis. I am sorry, but I do not accept that that is fair, and I think that if this were explained to most members of the public, they would agree. Currently, no one who earned under £130,000 a year would be affected by this measure. If someone is in a Cabinet packed full of millionaires, that perhaps skews their perspective on what poverty is and what income buys. However, the average member of the public, certainly in North Durham, would be appalled by the fact that we are going to let off people who are earning what is not just a good wage but, for most of my constituents, a fantastic, unimaginable wage.

--- Later in debate ---

[Geraint Davies]

I certainly do not think that the Government can be trusted but, more importantly, do the industry, consumers and the wider financial community trust them to get their ducks in a row and recover the £3.6 billion? Much was made of the Chancellor saying, “We’ve got to get all this money and get the deficit down, otherwise we might be re-rated,” but suddenly we do not know where a key component of that—£3.6 billion—is coming from.

I mentioned that there will be a discussion group of stakeholders in the summer. The previous Labour Government considered reducing the annual allowance and all the other options. It is on the record in Hansard that the annual allowance proposal was rejected partly because it was less well targeted—as has been said, we wanted to focus on those who are able to pay most easily and without great pain rather than make the weakest pay more—and partly because of its complexity.

Another key point I wanted to make—I do not think it has been made clearly enough—is that primary legislation is necessary to reduce the annual allowance. The proposal in the Bill is half-baked. It gets rid of a system of gathering £3.6 billion and the Government are incapable of replacing it with an alternative. I object to the clause not just because of the discussion with stakeholders and the uncertainty, but specifically because section 282(2) of the Finance Act 2004 states that the annual allowance set by Treasury order must not be less than the preceding year. Given that the allowance is £255,000, it cannot suddenly become £30,000 to £45,000 without changing that legislation. Such a measure is not included in the Bill, which is another indication of how half-cocked the proposals are. We are discussing a Finance Bill now, but we would need another one before April 2011 to change that allowance. The proposal is incomplete and will mean uncertainty; it demonstrates ineptitude and incompetence; and it undermines confidence among industry providers and consumers. After all, we want more people to save with certainty, so that they have comfort rather than hardship in what we hope will be their long and happy retirements. This will undermine those prospects. People will be less likely to subscribe to sensible, robust pension schemes for the future.

The Government are giving themselves the power to repeal primary legislation by order without knowing exactly what will be put in its place. That is a half-baked approach. Amendment 60 calls for an analysis of “the likely impact”. I tabled an amendment that was not selected, but it simply suggested that this clause should be scrapped. We have looked at the issue, and we know what the distributional impact will be, albeit not in detail. We know that the rich will be let off the hook, and more widely it will cause massive uncertainty about the future. There may also be a question mark over whether we can fulfil our financial obligations as set out in the Budget.

Towers Watson, which is a leading consultant on pensions, says that lowering the annual allowance to £30,000 would lead to tax charges for long-serving final salary scheme members. That means that employers would pull the plug on such schemes. That is not my claim, but that of industry experts. We have already seen across British industry the loss of reliable and robust final salary schemes. Towers Watson says that the changes will undermine final salary schemes because they will not be as useful in retaining staff if they have a tax bill attached. The Minister has not thought this through. If big employers have these final salary schemes, their staff stay with the company because they know that each year they gain a little more benefit, instead of going to a predatory competitor company.

Towers Watson argues that the Government can either introduce a simple system or a fair system, but not both. A rough and ready approach was fine when a few were worried about the annual allowance, but the Government’s proposals would have an impact on hundreds of thousands of people. All the stakeholders will be running around wondering what the changes will mean for them and providers will wonder whether they should provide a different scheme. I mentioned KPMG before, and I will not go through all the consultants in terms of their support for my position, but KPMG says that the number of pension savers affected has widened from 2% to 10%. PricewaterhouseCoopers says that the level will need to be £30,000—as opposed to £30,000 to £45,000—to raise the £3.6 billion needed. The movement from £255,000 to £30,000 is a radical change and we are still consulting on it.

PricewaterhouseCoopers says:

“Employers need certainty over the regulatory framework for pensions if they are to be remotivated to provide quality workplace pensions.”

The Government’s proposals are unfair, unclear, half-baked, fast and loose and a massive new multi-million pound bankers’ bonus to pay back many of the people who put us in this mess in the first place. They are disgraceful and should be withdrawn.

[Sammy Wilson]

I have only a few points to make. The Conservative party’s fortunes or misfortunes do not really affect us in Northern Ireland so I am not seeking to score political points or to say that the Tories are bad people, even though they may be considered to be so by many people. However, the basic issue that hits everyone in the face in considering this measure is how it sits with the claim by the Government that the Budget is fair.

Finance Bill

Sammy Wilson Excerpts

Tuesday 6th July 2010 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

“Fair” and “unavoidable” are the two adjectives that have been attached to the Budget by the Government parties. It seems to me that the claim to fairness has been exploded, not just by Opposition Members and sometimes by Liberal Democrat Members but by the independent analysts who have established the regressive nature of many of the measures in the Budget. I want to concentrate on the claims that there is no alternative, that the markets are demanding deficit elimination on the scale and at the speed proposed in the Budget and that the Government are simply responding to economic facts.

Government Members talk about political economy as if it is a perfect science. The hon. Member for Bermondsey and Old Southwark (Simon Hughes), who is not in his place, suggested that the Office for Budget Responsibility was objective, the corollary being that it was reliable. The Government present the pronouncements of the OBR as gospel, at least when they are convenient for Ministers. They offer technocratic diktats. The Government claim the support of infallible markets and independent institutions. What they deny is that any Budget is inherently a political act as well as an economic one. Listening to the Chancellor deliver his Budget, I got a pretty good idea of what his new politics involved. He thinks that these vital political economy decisions are not a matter for him: he can absolve himself of responsibility. The OBR will provide the figures; the OECD is the supposed authority, the markets the excuses.

The issue of supply—the very reason this House came into existence—will be determined by what Ministers declare to be unavoidable. But political economy is not an exact science. It is a matter of priorities and judgment. It is almost always informed by ideology, self-interest and party interest. How could it be other otherwise when economists rarely agree on anything? Put two economists in a room and you will get three opinions. No, the Budget is deeply political. It embodies the long-held superstitions of the Conservative party, superstitions that come to the fore in times of economic stress—the 1920s, 1930s, 1970s, 1980s, and now again in 2010. However, these superstitions are not fully articulated by Conservative Members. They emerge almost accidentally through their rhetoric, but they are worth examining because they are the real motivation for the coalition Budget.

The first superstition is that debt, no matter what the circumstances, is unnatural and wrong for economic man or woman other than in the short term. This is a superstition since it denies the reality that many households and individuals balance their books only in the long term. They and we often have levels of debt that surpass our annual incomes for many years. Otherwise, no one would be able to afford a mortgage. The fact is that debt is a sensible mechanism for acquiring funds for responsible investments as long as repayments are manageable.

That first superstition encourages a second: states, like households, must not carry debt over the long term.

[Sammy Wilson (East Antrim) (DUP)]

The hon. Gentleman makes an important point. Does he accept that debt and the ability to borrow are not simply a function of one’s ability to pay, but of the perception of the exposure to debt and whether, in the long run, that debt will be manageable for borrowers? Our difficulty at present, looking at the evidence elsewhere, is that the markets are nervous about the ability of countries—even ones as stable as ours—to manage in the long run continuing increases in debt and to pay it back.

[Gregg McClymont]

Keynes famously said that, in the long run, we are all dead. To be fair to the hon. Gentleman, there is a serious point there, to which I was just coming.

As I said, the first superstition encourages a second: that states, like households, must not carry debt over the long term. But if that is untrue for households, it is even less relevant for states, because states are different from households. First, nations do not have to balance their payments over a life cycle as an individual does; unlike individuals, states are here for the long term. That is an important point. Secondly, states’ ability to borrow is much greater than that of any private citizen. States may borrow much more cheaply than any individual, simply because the amount of economic activity within any state’s borders is much greater than the economic activity to which any individual has access. I therefore disagree with the hon. Gentleman on that point.

More important, states have obligations to the societies they serve in a way that households do not. States can use their ability to borrow to support demand at a time of low private sector activity. Pull away that support for the economy and private sector firms are discouraged from investing, the tax take is reduced and spending and unemployment are pushed up; ultimately, the deficit is made worse. That is the paradox of Government thrift. We learned it in the 1930s. The Liberal Democrats warned us of its dangers up until 7 May. Now, that lesson seems to be totally lost on both elements in the Government.

Government Members claim that the fiscal deficit is crowding out private investment by pushing up interest rates and making investment more expensive. Crowding out is not an insignificant issue and it does have some relevance in conditions of full employment when an economy is at full capacity, but we are nowhere near that point. As the right hon. Member for Wokingham (Mr Redwood) pointed out, the private sector has taken a real battering in the past two or three years. Excess capacity is manifest. In my view, there is a much simpler explanation for low private sector investment: the private sector is not investing and banks are not lending because they fear that households will not have the confidence or the ability to buy goods.

What do we use to restore confidence? So far, we have used monetary policy, but it is not clear to me how much further we can take that. Interest rates are already at rock bottom. We cannot reduce them much further if this Budget tips the economy back into recession or, as my hon. Friend the Member for Telford (David Wright) suggested earlier, it has us bumping along the bottom. At that stage, if the recovery does not take place along the lines the Government that claim it will, the only instruments of monetary policy at our disposal would be further quantitative easing or a further devaluation of the pound to encourage exports. That could be dangerous, encouraging exactly the increased inflation and higher interest rates that Government Members fear. In my opinion, fiscal policy continues to have a role to play.

I mentioned two superstitions that I think underpin the Government’s attitude, but there is a third: the idea, repeated over and over, that our national debt is unprecedented historically and exceptional internationally. That is the basis on which the Government claim over and over again that public spending is out of control. They assert again and again that we have left the nation’s finances in a mess, and that is the context for the spectre of a sovereign debt crisis.

Budget Resolutions and Economic Situation

Sammy Wilson Excerpts

Tuesday 22nd June 2010 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

First, we all must recognise that this is a very difficult Budget at a difficult time. Throughout the United Kingdom, people are talking about this Budget. They were fearful of what was going to come out, of its consequences and of the fallout from it. However, as the Chancellor said, with the announcement of the emergency Budget, at least we can now start to inject some certainty into the economic way forward, and from that point of view it must be welcome. Secondly, despite the background to the current situation, there is still immense economic uncertainty, even among those who have been professional economists, about the best way forward. I shall address that point when I discuss what we are looking for in the Budget.

Thirdly, I come from Northern Ireland, where the major party in the coalition was recently rejected by the electorate, so we do not have too much to fear from them; where the Labour party does not even stand; and where the Liberal Democrats do not have a presence, either, although they have a sister party in the Alliance party. Therefore, the political point scoring in the debate so far does not have to form part of my response. I sit on the Opposition Benches, but the Leader of the official Opposition’s hysterical reaction does not grace this debate with the seriousness that it deserves. There was not even any recognition of the role that the previous Government played. Although there were many other responsible factors, the previous Government played a role in the situation in which we now find ourselves. Indeed, there was not even any recognition that, as today’s figures point out, something similar would have had to be done if there had been a different outcome in the election. The Leader of the Opposition’s reaction was disappointing, and it is right that I make that point. However, I do not make it because I have to score party political points; I make it just as a general observation on a very serious situation.

[Stephen Pound (Ealing North) (Lab)]

I appreciate that the hon. Gentleman is rising above the fray in this debate, but, as a former economics lecturer, is he as concerned as I am about paragraph 2.108 of the Red Book, which refers to

“rebalancing the Northern Ireland economy”?

I suspect that I know what that means. What does the hon. Gentleman fear it means?

[Sammy Wilson]

I shall come on to the issue of rebalancing the Northern Ireland economy. My understanding is that it is in keeping with the Northern Ireland Executive’s programme for government, namely that we cannot for ever remain as dependent upon the public sector as we are at present. There must be a rebalancing, so that we have a structured economy that allows for greater private sector involvement and, therefore, leaves us less open to the dangers of what has had to be done today. I do believe that what has been announced today will be very detrimental to the Northern Ireland economy in the short term.

However, let me turn to what we were looking for in the Budget. We want a Budget that is effective at getting us out of the current economic situation. The Chancellor’s view is that, given the size of the debt, the interest that is accumulating on it and the fact that we have to finance it for a large number of years, we must show the financial markets that we are serious about getting the deficit down. That will ensure that our good credit rating continues, and that we do not have to borrow at punitive interest rates and, therefore, take even more money from that which we have for current spending. I have been able to have only a cursory look through the Budget statement, but it seems that the Chancellor’s assessment is that if we do not do this quickly, we will find that our credit ratings go down and we lose the confidence of the financial markets, with all the consequences of that.

The other side of the coin is that if that assessment is wrong—if our credit rating is good for a number of years because we show that we are starting to make efforts and we do not have to take draconian measures of the kind that have been announced today—then withdrawing public spending from the economy will lead to a downward multiplier effect. That will impact on the level of growth, thereby getting us into what has been called the double-dip recession, whereby tax revenues go down, welfare spending goes up, support for industry has to increase, and we get ourselves into an even bigger muddle.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Does the hon. Gentleman recall that prior to the election, the leader of the Conservative party particularly targeted Northern Ireland and the north-east of England, my region, for criticism on account of the amount of investment in public sector funding? We have seen in today’s Budget that the Chancellor has not heeded the advice of the North East chamber of commerce, a leading voice of business in the north-east, which has said that the Chancellor and the coalition Government need to re-check their commitments on public sector spending so as not to jeopardise economic growth in the north-east.

[Sammy Wilson]

The hon. Gentleman is leading me on to my second point, which is about fairness, but let me finish this point first.

I have described the two sides of the argument. It is a subjective assessment, because the report before us does not present any conclusive evidence to the effect that the financial markets are so nervous that we have to take such deep, draconian action at this stage. Neither is there an assurance that the reduction in the amount of money that is going into the economy as a result of public spending cuts will not have an impact on economic growth.

[Mr Redwood]

I think that we should try to talk about the Budget that was actually presented. The figure for total spending in 2009-10, the last year of the previous Government, was £669 billion, and the forecast total spending for the last year of this Government, if they run to five years, is £737 billion. That is an increase of about £77 billion over the period, so what is the hon. Gentleman talking about?

[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.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I suggest that the hon. Gentleman look at the report by the independent Office for Budget Responsibility in the Red Book, which sets out the impact on growth of the package proposed by the Chancellor and suggests that, post-2012, GDP growth will be stronger than the OBR initially estimated in its work prior to the Budget.

[Sammy Wilson]

As far as I am concerned, this is not about scoring political points off the Conservative party; the Conservatives do not present any threat to us in Northern Ireland. This is all about ensuring that the citizens of the United Kingdom do not have to live in the economic doldrums for a long period. I hope that the projections that have been quoted are correct, but it is right at least to look at both sides of the argument and make an assessment on that basis. Should these measures have been delayed, or should we have jumped in as we have done?

Secondly, we will judge this Budget on the basis of fairness. I look at that in two ways. First, is it fair to individuals; and secondly, is it fair to specific regions of the United Kingdom? The second point, as the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) suggested, is extremely important to people in Northern Ireland. Before the election, the Prime Minister—he has tried to explain it away and qualify what he said—stressed in a “Newsnight” interview that Northern Ireland is heavily dependent on the public sector. That is a fact, but he then implied that Northern Ireland would be targeted as a result. That is one of the reasons why the alliance between the Ulster Unionist party and the Conservative party failed so miserably—I do not know how well it would have done otherwise. People in Northern Ireland were extremely nervous that we in that part of the United Kingdom were going to be treated unfairly.

Under the proposals in today’s Budget, a regional fund will make money available immediately. However, it will not apply to Northern Ireland, or to Scotland or Wales, but only to England. Infrastructure projects have been guaranteed spending, but none of that applies to Northern Ireland. We are promised a report in the autumn on how Northern Ireland’s economy might be rebalanced, including an examination of proposals on economic enterprise zones, a possible mechanism for changing corporation tax rates, and other economic reform options. I look forward to that paper, and I am sure that the Northern Ireland Executive will do so too, but I note that that paper is merely examining options and proposals.

The Northern Ireland Executive have made a genuine attempt to restructure the economy by using public policy and public spending, trying to build up the infrastructure, trying to get people economically active by giving them new skills and preparing them for work, and so on. The reduction in public spending will have an impact on the ability to do such things, because they required that pump-priming. We will look to see how quickly the impact of the reductions in public spending is offset by some of the proposals in the promised paper on rebalancing the economy. This is important to us, and we want to drive it forward, but it will be made more difficult by some of today’s announcements.

[Mark Durkan (Foyle) (SDLP)]

Does the hon. Gentleman recognise that in the autumn, around the same time as the consultation document on rebalancing the Northern Ireland economy is published, the Executive and the Assembly will find out the outcome of the review of departmental expenditure limits in the current comprehensive spending round? That will have an effect on what Northern Ireland gets through the Barnett formula. The Budget also projects serious reductions in annually managed expenditure in the form of social security benefits, and those two squeezes on Northern Ireland combined could have a high economic impact that would make what is in the consultation document pretty irrelevant.

[Sammy Wilson]

That is related to the point that I made about the downward multiplier impact that the proposals will have on the UK economy, and particularly on the Northern Ireland economy. I am always reluctant to plead special cases, but one has to consider where Northern Ireland is in the economic cycle. We lag behind, as we are still in the downward part of the cycle. All the available indices, whether of output, employment, forward orders, investment or whatever else, show that we are still on the downward slide in the cycle. Our concern is about the impact that the attempts to restructure the economy could have, and the fact that while growth might occur in the rest of the United Kingdom, we might find ourselves still stuck in a recession because of the particular circumstances in Northern Ireland.

[Ian Paisley (North Antrim) (DUP)]

On the subject of fairness and special cases, the Red Book outlines a special case for Scotland, where there is to be a possible pilot scheme for rural fuel duty. Given that Northern Ireland is the only region of the UK that has a land border with another EU state whose fuel duty is progressively lower than ours, would it not be wise for that possible pilot scheme to be extended to the region that would benefit most from its findings?

[Sammy Wilson]

I would like to see that scheme initiated quickly in Northern Ireland. I suspect that it is one of the proposals that the Liberal Democrats were keen on pushing forward. Given the rural nature of much of Northern Ireland and the particular circumstances that we face, we would welcome it. We will be interested to see the outcome of the pilot scheme and how quickly it is rolled out across the rest of the UK, if at all.

I turn to fairness for individuals, on which there are things to be welcomed in the Budget. I suppose that at the end of the day, it will all be about balance. I am pleased to see that the pledge to restore the link between earnings and pensions has been honoured. For many pensioners who find themselves in difficulty, that will be an important gain. We also have the banking levy, the change to capital gains tax for those paying the top rate of tax and the fact that the pay freeze will not apply to those at the lower end of the public sector pay scale. There has been a genuine attempt to recognise that those who are already on low incomes should not be pushed down further.

On the other hand, there will be concern about the regressive nature of the VAT increase and the freezing of child benefit and tax credits. I am particularly concerned about the backdating of tax credits for one month instead of three, and I hope that the Chancellor will give us an answer about that. I hope that Her Majesty’s Revenue and Customs will improve its performance in dealing with tax credits, otherwise many people will have an unfair result through no fault of their own. They will be powerless against a bureaucracy that seems unable to move on the issue.

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

Is it not also the case that the families whose circumstances are most prone to change will be particularly hard-hit by a mere one-month backdating period? Those are families, of course, for whom jobs are particularly stop-go and at risk. The risk to families who already face dangerous and unstable economic circumstances will be heightened by that ungenerous measure.

[Sammy Wilson]

Not only are those the families whose circumstances are most liable to change, they are often the ones who find it the most difficult to deal with the bureaucratic maze that they face when making applications. I should like to hear from the Chancellor what proposals are in place to ensure more efficient processing of claims.

The final thing that I am looking for in the Budget is some certainty, particularly about its impact on Northern Ireland. We have been told that there will be a 25% cut in departmental expenditure limits over the next four years, but that it will not apply evenly and some Departments and areas of Government spending will be hit more than others. In Northern Ireland, we have now started the budget process. Because of the neglect of the previous Government, there was no comprehensive spending review announcement for the previous year, so we are planning in a vacuum. It is important that information be made available quickly to regional Assemblies as to what the impact on their departmental expenditure limits is likely to be, so that effective planning can take place. There is nothing worse than asking Departments to deal with difficult economic circumstances and then giving them a list of parameters and assumptions that are so vague that is almost impossible for them to make any long-term decisions.

If less money is going to be available, it has to be used more effectively. For that, there must be an ability to plan, so that we can look forward and see how that money can best be put to use and how Departments might work together to get more services from the available money. That can be done only if there is certainty, so I appeal for the information that regional Assemblies require to be given to them quickly.

[Several hon. Members]

rose—

--- Later in debate ---

[Mr Redwood]

I was going on to say that we are talking about a big increase in cash. If all of us in the public sector can get better at managing that cash, we should be able to do a good job for people because the amount of spending is going up.

What could go wrong? Well, the hon. Gentleman has mentioned two things that could go wrong. If public sector inflation is as high as, or higher than, forecast general inflation, that will eat away at the value of the money that we are spending and make it more difficult to sustain good public services. However, Ministers tell us that they will be very tough on wage increases. That will help, as it will share the work and mean that we can keep more people doing more worthwhile things for our constituents, without all the money being eaten away by wage increases.

After all, that is what the private sector had to experience for two or three years, during the worst of the recession. In that regard, I pay tribute to the many work forces and unions in this country that did not merely accept that there would be no pay increases; instead, they often accepted pay reductions and very tough work-sharing schemes. They did so because they understood how dire the position of their industries and companies were, and they helped their managements to see their companies through.

We do not have to go that far in the public sector, but there is something that we need to tell all our public sector employees, and I think that this is a task for Opposition MPs as well as Government MPs. We need to say, “Things will be less painful and better for all of us if we can keep costs down and wages and salaries under control. More jobs will be preserved and a better service delivered to the people whom we serve, because more of that cash increase is going to go into helpful spending.”

As the hon. Gentleman says, the rising interest charges are also a worry, albeit one that makes the coalition Government’s case rather well. If we do not tackle the rising deficit now, more and more of the money will go on paying interest bills for past spending, rather than being available for paying teachers’ or nurses’ wages, which is what we would rather be doing with it. His point therefore makes the case strongly that the more action that is taken at the beginning, the better, because then more of the quite large sums of extra money that will be available will go on buying real improvements or maintaining a decent quality of public service, instead of going on the rising interest bill.

The Government have had just one piece of good fortune with their rather bleak inheritance, as well as quite a lot of bad news from outside the United Kingdom. The one piece of good fortune is that over the weekend the Chinese Government announced that they were going to allow their currency to start to move upwards against the dollar. We have had quite a long period of the yuan/renminbi being pegged to the dollar. That has meant that China has been super-competitive. China works hard, she is developing much better technology and she produces good products. With the managed exchange rate that we were experiencing, with the pound sticking around with the dollar in recent months, we discovered that China was getting more and more competitive. Indeed, there has been another huge surge in Chinese exports in recent months.

Let us hope that the Chinese will now allow their crawling peg to crawl up quite a bit. The last time they had a crawling peg, it started a bit slowly, but then there was a 20% revaluation of the currency, which was quite helpful. We need all the help that we can get, because Britain has to export more and earn more money in overseas markets. The world’s No. 1 colossus—the dominant, most competitive exporter—is China, and any currency revaluation would be helpful. We still have to work hard—we have to get smarter and control our costs—but that revaluation might take some of the pressure off.

However, the bad news is that the European market is getting worse. We had hoped that European countries would have a normal, cyclical recovery, such as that which the United States is enjoying. However, it now looks as if their recovery will be slow, with quite a number of countries going backwards this year and early next year, because of their deficit problems and difficulties with the euro. Indeed, those countries’ economies might continue to fall or start to fall again. That is difficult for Britain, because euroland is an important marketplace for our physical goods—it is not nearly so important for services or inward and outward investment, but it is important for physical goods. It is therefore in our interests that euroland starts to mend itself as soon as possible. I therefore hope that the Chancellor will continue his negotiations and work with his European partners, because it is important that we allow them to take the actions that they need to take to start mending the euro.

The euro is a single currency in search of a single country, and that has been its tragedy ever since it was first created. Those of us who warned that we could not have a single currency without a single economy, a single budget and a single Government were told that we were quite wrong and that we had misunderstood things. Apparently all that history that we had read was a waste of time. However, all the history of currency unions that I have ever read shows that they work only if there is control of the borrowing and spending levels through a central power, which is what we are now told our friends and colleagues in euroland are learning. They have discovered that they cannot allow Ireland, Greece, Portugal and Spain to free-ride at the expense of the rather more prudent core. Those in euroland are learning that, if they allow those countries to borrow and borrow at the lower common interest rate that Germany has granted them, there comes a point when the markets no longer believe in those countries and they start to blow their debt markets apart.

[Sammy Wilson]

Is the right hon. Gentleman not a bit concerned that the Government now accept that the European Union perhaps has the right to scrutinise the budgets of euro countries before those budgets are implemented? Does he not believe that that could be the thin end of the wedge, and that such scrutiny might eventually extend to all members of the European Union?

[Mr Redwood]

I am very strongly of the view that countries have to do that, and more, in euroland. As Members might guess, I am passionately of the view that that has nothing to do with Britain. The deal I want my right hon. Friends to offer our European partners is that we will accept more or less any kind of treaty change to give them proper control over the budgets of euroland as long as we get some powers back and it is made very clear that we are not part of this new machine to try to create an economic Government of Europe.

There need to be changes. The system is not at all stable, and I do not think that the much advertised trillion dollar package of loans and guarantees, and possible facilities, is necessarily going to see all these countries through the future threats to their stability. Given the rather damaged states of their private sector economies in many cases, there is a danger that, if all they do in response to the financial market pressures is to cut public spending to try to get their borrowing down, they will not succeed. If they are cutting their public spending, but there is no growth coming through in the private sector to take up the slack, or if they are cutting their public spending while their tax revenues are falling, the gloomy pundits will be right and the medicine will not work. Just cutting expenditure does not create a strong economy.

It is important to cut spending sufficiently to allow the private sector to grow and it is important to cut spending sufficiently so that the deficit does not get out of control and produce too much pressure on interest rates, but that needs to be done against the background of the beginning of a recovery—as we have in the United Kingdom. For a country in turmoil with a deeply damaged economy, as some of the southern states seem to have, simply cutting expenditure might make the problem worse, not better, without taking other action to try to get the economy’s private sector going.

The proof of the Budget will be in what happens to the private sector recovery over the next year or so. I hope that the Office for Budget Responsibility will turn out to have been too gloomy. It says that the impact of the Budget in the first two years will be to lower the growth rate slightly; it says the growth rate will be better in the following years when the full benefits of deficit reduction and private enterprise promotion kick in.

It need not be like that; we could do better than that. If the Chancellor wishes to do better than that, as I trust he does, he needs to turn his attention urgently to the state of the British banking industry and the capability of British banks to finance the private sector-led recovery that we clearly need. I do not believe that the current regulators of the British banks have got it right, and although I fully support centralising the regulation of money markets and banks in the Bank of England—I advocated it myself and I am happy that that is going to be done—that in itself is not enough. That is a structural change, but what we also need is an attitude change.

The sad truth of life is that we have just lived through the worst five years I have ever seen in terms of mismanagement of money and banking in this country. Labour Members will want to blame just the private sector banks, and I agree that some directors of those banks got it horribly wrong and they deserve to be dealt with in the appropriate way by their shareholders and by others. However, I hope that sensible Opposition Members would agree with me that it does not speak well of the monetary control system and the regulatory system that that happened. Why do we have financial regulators? We have them to stop that kind of thing happening. They are meant to stop runs on banks, even if banks have directors who are likely to produce a run. They are meant to stop systemic collapse, even if directors get a bit carried away.

--- Later in debate ---

[Chris Leslie]

I could not agree more. That level of maturity is refreshing, but the Chancellor of the Exchequer saying that there was consensus that the measures had to be taken in a particular way shows how the hon. Gentleman departs from his Front-Bench colleagues. I hope he will have the foresight to listen to the differences of opinion and recognise the possibility that austere and harsh public expenditure reductions, as well as some of the tax increases, could have a harmful effect on the economy. We do not know about the individual measures, but we have already heard from my right hon. and learned Friend the Leader of the Opposition about the effect on unemployment, as shown in the forecasts from the so-called Office for Budget Responsibility, appointed while the Conservatives were in opposition.

[Sammy Wilson]

The hon. Gentleman is making some good points, but he takes his argument a little too far when he describes Government Members as economic masochists who enjoy the process. At the end of the day, their constituents will not thank them for unnecessary cuts. There is a good argument to be made, but does the hon. Gentleman not agree that the extent to which he is taking it may diminish his case?

[Chris Leslie]

I hope that the hon. Gentleman is right. Judging from the Conservatives’ reaction—the papers waved in the air when the Chancellor sat down—the enjoyment they took in those harsh—[Interruption.] The hon. Member for Devizes (Claire Perry) calls out, “Pathetic”, but why else would they cheer with such fervour?