Oral Answers to Questions
Viscount Thurso Excerpts(12 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
I completely understand the concern about excessive and very high interest charges, which have been a problem for many years. I think it is better to tackle the specific abuses. The Government are conducting a review of the cost of credit to consumers, but by tackling very specific abuses such as the roll-over of loans and the use of continuous authority, we think we are getting to the really hard cases and abuses that we want to see ended. I have to say—this was certainly the view of the previous Government, too—that although it could be worth looking at, simply introducing a cap might have the effect of pushing a lot of people into a completely unregulated black economy. I am not sure that any of us would want to see that.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
I remind the Chancellor of the excellent suggestions in the Treasury Committee’s report on the objectives of the successor body to the FSA, as they would certainly help consumers. Will he take the opportunity provided by the current legislation to give effect to those recommendations?
Mr Osborne
As I have set out before, we have listened carefully to the Treasury Committee and made all sorts of amendments to the Bill to take account of its recommendations, including changing the FCA’s remit to include competition. The Joint Committee chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) also proposed similar recommendations. We have listened to Parliament; thanks to those suggestions, we have made changes that we think will improve the Bill; and the Bill is now before the House and soon to be debated.
Oral Answers to Questions
Viscount Thurso Excerpts(12 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
Following on from that question. Given that banks can lend only if they have capital and that 80% of financial transactions take place within the financial services industry, so that only 20% result in an end user, can the Minister say what steps the Government are taking to look at the marginal utility of the financial services industry, or what Lord Turner described as its “social usefulness”?
Mr Hoban
My hon. Friend makes an important point. It is vital that banks and other participants in the financial services sector play their full role in supporting growth across the economy and meeting the aspirations of families across the country. It is vital when banks are faced with difficult decisions about how to use their capital that they should focus their efforts on securing lending and boosting economic growth.
Civil List
Viscount Thurso Excerpts(13 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
Much of what I wish to say has already been said. I congratulate the Chancellor on what seems to be the beginnings of an elegant solution to a difficult problem. I wish to make three quick points for him. First, on the matter of principle, it is extremely important that the process does not become a formula that is reviewed annually which puts the whole of the household's finances into play on an annual basis. Whatever method is used for the calculations, it must be robust enough, as the previous debates that the shadow Chancellor cited made clear, to allow the dignity of the Crown across a period of time. That is an important principle.
Secondly, as other Members have suggested, we should consider exactly what we mean by the profit, because students of the Crown Estate’s annual finances will know that that is a highly variable figure, depending on the point at which we decide to look. It depends on whether it is the operating profit and whether there are movements in surpluses. There is one number that we might look at, which is not necessarily a profit but relates most closely to what might be regarded as the surplus cash within the Crown Estate: the annual remittance to the Treasury, which last year was £200 million or so. That is the figure that the Crown Estate remits to the Treasury, having considered what it wishes to withhold for future investment and having regard to the various discrepancies that come in the statement of total recognised gains and losses. The Chancellor might wish to look at that percentage, rather than a particular profit figure, and perhaps it could be made clear whether the grant is intended to be supplemental to that £200 million or part of it.
My final point relates to the Chancellor’s comment on the potential income from marine renewable energy, including wind, tidal and wave energy. It is rather curious that that sits within the Crown Estate at all. If we look at the precedent of the Forestry Commission, which was created in 1919, and to which the Crown Estate forests were transferred in 1923, we will see that it might be worth considering whether the marine estate should be transferred in its entirely out of the Crown Estate and possibly given to all the local authorities on the coast that could benefit from what is going on. That might be an interesting way of giving a direct benefit to local authorities on the coast, where marine energy could form the bedrock of a future economy, without having to trouble the Chancellor. I leave that little thought with him and again congratulate him on what looks like the beginnings of a very elegant solution to an old problem.
John Thurso
The hon. Gentleman has tempted me. Part of the 1760 settlement was that the Crown no longer had to pay for the Army. Would it be equitable for it to take back the Crown Estate and the entire Ministry of Defence Budget?
Michael Ellis
Now my hon. Friend is tempting me.
It is important to bear in mind, as Professor Vernon Bogdanor has stated in one of his treatises on subject—“The Monarchy and the Constitution”, I think—that it costs about the same to run the royal family as it does to run the Driver and Vehicle Licensing Agency in Swansea. I venture to suggest that the royal family attract far greater support from the British public than most institutions.
The issues at stake are important, and they are: fairness, accountability and transparency, and the necessary flexibility, which has not been built into the system to this point. As my right hon. Friend the Chancellor of the Exchequer has pointed out, the previous system, although not that old, was quite frankly archaic, bureaucratic and burdensome. It was also inflexible, so that if money was saved in one department—for example, in travel arrangements—it could not be spent on, say, repairing a leaking roof. The previous arrangements were unnecessarily bureaucratic, and they urgently needed reform to save taxpayers’ money and to save time. They also needed to be more accountable and transparent, which is what these necessary reforms will achieve.
If we take the trouble to look at how the money is spent, we see, for example, that £400,000 is spent on communications. I venture to suggest that much of that money is spent on communication with members of the public who write in to the palaces, and on other necessary duties, such as inviting to garden parties the tens of thousands of people—and it is, in fact, tens of thousands—who enjoy and appreciate visiting the royal households by invitation every year. This money is not spent on trifles; it is spent for the general public’s enjoyment.
The same thing goes for the palaces. Much of the expenditure goes on the maintenance of royal palaces. I venture to suggest that not even the few republican diehards whom we might find in this House would propose that the royal palaces be knocked down after the abolition of the monarchy and car parks built in their stead. Even in the absence of a monarchy—may God forfend—those palaces would have to be maintained. They might be museums or something similar, but they would still need the maintenance that they need now. In fact, they have been allowed to fall into a state of disrepair because of the lack of funds, which only makes it more expensive to repair them.
I also support the modernising arrangements as they relate to the Duchy of Cornwall. That is welcome, because in future the heir to the royal house will be able to secure funds and revenue from the Duchy of Cornwall without necessarily being male—that is, without being the Duke of Cornwall. That is important and follows other reforms, in the tradition of the Demise of the Crown Act 1901. Formerly, offices of the state were cancelled on the demise of the Crown. However, the various Acts that Parliament has seen fit to pass over the past 100 years or so have meant that such positions—ministerial positions, judicial appointments and the like—could continue. My right hon. Friend the Chancellor of the Exchequer’s further reform, making it necessary only for an Order in Council after the completion of one reign and the beginning of another, simply follows in that historic tradition.
I commend these measures, and I support them in full. I congratulate the Chancellor on bringing them forward, and I invite Members of this House to consider supporting Her Majesty in her 60th jubilee gift, which the House is currently considering.
Amendment of the Law
Viscount Thurso Excerpts(13 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Alison McGovern (Wirral South) (Lab)
It is an honour to participate in the debate in which my hon. Friend the Member for Barnsley Central (Dan Jarvis) made his maiden speech. He made a really excellent contribution.
I want to comment on two aspects of the Chancellor’s statement: first, on inflation and the cost of living that people in Wirral and elsewhere are facing; secondly, on young people and employment. On inflation and the cost of living, we all need to acknowledge the global pressures that are causing price increases in the shops. Those pressures, including what is happening in the middle east and the price of food and other basic materials, make it more important that we get our policy right domestically. We have recently seen CPI inflation rise to 4.4% and RPI inflation rise to 5.5% in the UK, yet inflation for the EU as a whole is 2.8%. This picture of increased prices must also be taken into consideration in the context of our constituents whose wages are being held down. People have not seen an increase in their pay packets, but they are seeing price increases in the shops.
What is causing this inflation? I am well aware of the structure for setting interest rates and controlling price increases, and I look to the Governor of the Bank of England for an explanation as to why inflation has moved away from the targets. He says that
“three factors can account for the current high level of inflation: the rise in VAT relative to a year ago, the continuing consequences of the fall in sterling in late 2007 and 2008, and recent increases in commodity prices”.
He cites the Tory tax hike as having played a part in building inflation. My worry is not just about inflation this year, however; it is about people’s expectations of building inflation and the permanent hit that they will have on families.
Alison McGovern
I will not, if the hon. Gentleman does not mind; I am conscious that other Members want to speak.
Labour rightly instigated a temporary reduction in the rate of VAT to help us through the downturn, but I am now worried because the Tory-led Government have implemented a permanent hike in the prices that ordinary people in my constituency face in the shops. That is clearly having a huge impact on our economy and threatening future growth, as has been illustrated by the reduction in the growth forecast.
On the increase in commodity prices which has also caused inflation, the Chancellor said in his statement that the UK would seek to have an impact on those prices through the G20. It is therefore incumbent on Ministers to explain how they are going to engage with our international partners to achieve that. There is no doubt that those worldwide events are having an impact on the streets of Bromborough, Bebbington, Heswall and New Ferry in my constituency, and I would like to know what action the Government are going to take in that regard.
I shall deal briefly with young people and employment. I know that Members across the House care about the issue, but we need to bring some words of caution to the debate. The Chancellor rightly reserved extra funds for the future training of apprentices, but money reserved does not equal apprentices hired. Other factors are necessary for getting young people into employment. The first, business confidence, is vital: businesses must have the confidence to invest. I refer hon. Members to what I said about the in-built inflationary expectations in the economy and what they might do to investment. It is a matter of great concern. A second necessary factor is growth, and it is worrying to see growth forecasts revised downwards. The Chancellor might have said that this was a Budget for growth, but I feel that it was all words and very little action. A final necessary factor is a change in culture, whereby businesses feel that it is their role to bring on the next generation. The current generation at work should be allowed to share their skills in the informal setting of the workplace to bring on the next generation.
I highlight, as always, the role of my own local authority. Wirral has shown great leadership in the sphere of encouraging small and medium-sized businesses to take on apprentices. However, the local authority cuts, which have been much greater in our area than in others, have put Wirral’s ability to play this role in jeopardy. The Government need to think about how they will bring about this change of culture in practice rather than simply reserve the funds and say they are there if business wants to take them.
Finally, I fear that Britain is seeing the end of any interventionist role for the Government. I feel strongly that the future jobs fund was an excellent answer to youth unemployment, but the Government have withdrawn from it. They say they are reserving funds for apprentices, but they are doing little more than that to encourage businesses to invest. We are also seeing inflationary pressures on the cost of living, which the Governor of the Bank of England relates to the rise in VAT. This is a price hike that hard-pressed families in Wirral and elsewhere can little afford. On those two issues that I have prioritised, I would like to see Ministers taking much more action.
Oral Answers to Questions
Viscount Thurso Excerpts(13 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
I certainly think that our Government have got their priorities right when it comes to lifting the burden of income tax on low-income workers. The increase in the personal allowance by £1,000, which will come into effect in April this year, will ensure that 880,000 low-income workers will no longer pay income tax. Furthermore, 23 million basic rate taxpayers will see a tax cut of £200 next year.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
Has my right hon. Friend considered the letter sent to him by the chair of the tourism group of the Sutherland Partnership, which outlined the importance of tourism for employment in the area and the barriers that VAT is creating, particularly in relation to road fuel? Is there anything that the Government can do to mitigate that effect?
Danny Alexander
I have seen that letter and, as a fellow highland MP, I am fully aware of the impact that high fuel prices have on families and individuals. We have already taken steps to deliver a 5p duty discount to island communities, and I hope that we will be able to do what we can tomorrow, but that will be a matter for the Chancellor to announce in the Budget statement.
Fuel Costs
Viscount Thurso Excerpts(13 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stewart Hosie
My hon. Friend touches on an important point. It has been mentioned already that car ownership is normally a sign of wealth and affluence, but in remote, rural and sparsely populated areas, people on almost every level of income, including those on low and modest wages, require a car. That results in their spending a disproportionate amount of their net disposable income on fuel.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
A further point that the hon. Gentleman will recall from the many debates that we have had on this subject is that people in my constituency and elsewhere who earn below the average wage often cannot afford to buy good, modern cars. Their cars are therefore much more costly to run. That is part of the triple whammy that I remember talking about six or seven years ago.
Stewart Hosie
There are whammies after whammies, and the hon. Gentleman is right to say that the use of a car can be a necessity, and that people have to buy whatever they can afford. Also, if the roads are not quite as good as they ought to be in remote and rural areas, that can pose its own problems, especially in winter.
There are three key issues in this debate. The first is the lack of choice, which is very important. The second, which I hope urban Members will recognise, is the fact that the average mileage per year travelled simply to access essential services in rural areas is 8,794 miles. The comparator in urban areas is 5,200 miles. So the people in rural areas have no choice, and the distances that they have to travel are far greater. On top of that, the third factor is the price of fuel.
I am grateful to the BBC, which reported on 22 January that the RAC Foundation had found that some filling stations in Orkney were charging £1.50 a litre, which is £6.82 a gallon. An increase of only 4p or 5p per litre would result in the £7 gallon, which, because people have no choice, they would have to pay in order to travel the greater distances necessary in rural areas to access the services that most of us take for granted.
The time for talk and promises on fuel is over. There is now an absolute necessity for the Government—both bits of them—to deliver on their promises. We need to put the stabilisers on rocketing fuel prices now, before the brakes are slammed down on any chance of economic growth.
Justine Greening
I will give way to my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso), because he tried to intervene earlier.
John Thurso
I think I heard the Minister quote from a letter from members of the SNP saying that they had thought of the derogation first. In fact, it was first raised in the House of Commons in 2000 by my predecessor in the constituency, now Lord Maclennan. I fleshed it out in a debate that I held in Westminster Hall in 2001, and I think I have raised it every year since then. Given that the matter was raised over a period of 12 years, is it not commendable that this Government have done more in six months than the last Government did in those 12 years?
Kerry McCarthy
I want to conclude now. I have taken quite a lot of interventions, and hon. Members will have the opportunity to pose as many questions as they like in their own speeches.
Finally, I ask the Economic Secretary to confirm several things. Has the Conservative party dropped the fuel duty stabiliser policy in the light of the OBR’s fairly clear and damning verdict on its practicability? Is the policy now restricted to the rural derogation, and what time scale does she think would be appropriate for its introduction? It will take some time to get it through the EU, and considerably longer to roll it out to the UK as a whole. In the meantime, is she actively considering the impact of the VAT increase on fuel prices? That is hitting people now, and not an issue for the future.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
There are two issues in the debate, which I would like to try to disaggregate. One is the high premium paid in rural areas and the specific circumstances that apply to it. The other is the general high cost of fuel in the country. Let me deal with the two separately.
Briefly, the derogation for rural areas exists because there is a premium to be paid in those areas. Many Members have provided the arguments, so I will not go over them all again. However, I would point out that it exists not simply because there is a premium. I have researched the issue over many years, so I can tell hon. Members that I have often found that a certain petrol station in Sloane avenue is in the top three or four for prices. That shows that it is not simply a matter of high prices; the problem is that there is high price, a premium and a lack of public transport, coupled with the other deprivation typically seen in the more remote rural areas. It is not high prices alone, but the combination of all those factors that counts.
Secondly, as a number of hon. Members mentioned, I wrote a paper on this subject and it dealt with all the elements that cause worry—imperfectly, I am sure, but the hon. Member for Wallasey (Ms Eagle), who was the Exchequer Secretary at the time, took it seriously and her officials looked at it, so it was reasonable enough. I would like to think that the imperfections contained in that scheme are currently being ironed out and that we will shortly know what the Government intend to put forward.
I want to deal more fully with the other question of the generally high price of fuel. I commend to anyone who has not yet had a chance to read it the note produced for this debate by the Library. Among other things, it contains some very interesting facts. For example, it points out that for a number of years, the cost of motoring has actually gone down in this country in real terms, whereas the cost of public transport has by comparison gone up. One of my successors as Liberal Democrat transport spokesman often used to point that out.
It is also interesting to look at the percentage of tax take. The total has varied from a high of about 89% at one point in the ’90s down to the high mid-50s and now back up to 63%. The tax take in real terms today is about equivalent to that of 1997-98. We need to get our facts right and look at the issue in perspective.
We need to take account of some of the external factors. They must include the fluctuation in the oil price, which has once more hit $100 a barrel. A number of economists believe that that is merely a resumption of the upward trend that existed before the recession. It is entirely possible that the price will rise further, in which event we shall have to deal with the consequences of a high fuel price for our economy.
I congratulate the Government on giving thought to the introduction of a fuel stabiliser, although I have some doubts about the practicalities. There is only one thing worse than a stabiliser that works, and that is a stabiliser that does not work, so if we are to have one, let us ensure that it works. However, we might consider how the Government could, as it were, be removed from the equation. There are a number of possibilities, and I should like my hon. Friend the Minister to investigate them.
The first possibility involves VAT. When the last Government reduced it to 15% they also increased duty by 2p, and that remained when VAT rose again. Thus a relationship was established between VAT and duty. I suggest that the reverse should apply: that VAT on fuel should be 5%, in line with VAT on heating fuel, and that the duty should be altered to an amount that the Government considered appropriate. That would remove the variability that comes from the market. It would not affect the Treasury, and it would not have some of the deficiencies of the stabiliser. It is an imperfect mechanism, but it would be of some small comfort to know that when the price at the pump rose, it would be largely a result of what the oil companies were doing rather than what the Government were doing.
Albert Owen
I agree with the principle of a stabiliser. However, the Government talk of having “inherited” the duty increase. In 1997, the Labour Government inherited a Conservative proposal to raise VAT on domestic fuel and then “disinherited” it. Is the hon. Gentleman suggesting, as I am, that the Conservatives should “disinherit” the duty increase? That would help people in his area and in mine.
John Thurso
I am, in fact, presenting the Minister with a novel suggestion which I hope he will consider in the Treasury, and which might benefit us all.
Let me make another point about the current regime. I happened to note that if the escalator were introduced, it would be based on the retail prices index. Perhaps the Minister would consider basing it on the consumer prices index, which would be in line with the rest of Government thinking.
Finally, let me express a view on an issue that I studied in some detail when I was my party’s transport spokesman. I believe that the whole way in which we tax fuel is wrong. In my opinion we should not tax it at all, but should adopt a proper method of variable road user charging. Through that mechanism, we could both raise the amount of money that we wish to raise and incorporate all the fairness that we seek. It would require those who are most able to find alternatives, and who use the most congested roads, to pay the most, while allowing those with the most need—most of whom live in the least congested areas—to pay the least, and it has been suggested by most academics in the field of transport.
I have a funny feeling, Madam Deputy Speaker, that when I first raised the issue of road user charging in a Westminster Hall debate in 2001, it was you who responded from the Dispatch Box. I hope that the Government will seriously consider introducing such a system, because it would enable us to escape from the groundhog day of the fuel duty debate which comes round at least once a year, and adopt a sensible method of charging for road use that would be both green and economically efficient.
Oral Answers to Questions
Viscount Thurso Excerpts(13 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
One does wonder where the hon. Gentleman has been for the past couple of years. We are picking up the pieces of the biggest banking crash of our lifetimes, caused by the poor regulation of the previous Government. Since coming to office, we have announced major changes in regulation, putting the Bank of England in charge—which we still do not know whether the Opposition support—and a permanent bank levy, which was opposed by every single Labour Member during the general election. We are determined to sort out the problems left to us by the previous Government.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
The enterprise finance guarantee scheme was specifically designed to help small businesses to get bank finance. It has not worked, and many companies feel that it has not assisted them. What is my right hon. Friend doing to ensure that the scheme plays a full part in helping companies to get finance?
Mr Osborne
The first thing that I would say to my hon. Friend is that, of all the schemes that we inherited, this was the one that we thought had the most chance of improvement and was worth investing in. The other schemes had almost no take-up, but this one did. We were able to provide some additional money for it in the Budget, in the form of £200 million to support additional lending. We are also introducing changes to the way the schemes work, so that there will be a limit of 20 business days that all major lenders taking part in the enterprise finance guarantee scheme will have to comply with, so that people are not left on the hook waiting for an answer.
Finance Bill
Viscount Thurso Excerpts(14 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
As I understand it, the House of Commons analysis does not include the impact of all the measures in the Budget. VAT is paid much more in cash terms––that has been accepted by the Institute for Fiscal Studies––so it is paid more by the wealthiest. The analysis that we should rely on is that which is presented in the Budget because it shows that the distributional impact of the Budget measures hits those on highest incomes hardest. That is the relevant measure and the one that I intend to draw attention to.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
I commend my right hon. Friend on the fairness that he has ensured runs right through the Budget, especially in respect of pensioners, but may I draw his attention to one small potential unfairness that may have crept in? Pensioners who are on a modest works pension and the state pension will pay £100 more in tax this year than they did last year because of the difference in the thresholds. I am sure that this was inadvertent. Will he look again at that particular issue?
Danny Alexander
I am grateful for that intervention. I am sure that my hon. Friend will have the chance to raise that point either in Committee or on the Floor of the House when the Bill is considered.
Capital Gains Tax (Rates)
Viscount Thurso Excerpts(14 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Alistair Darling (Edinburgh South West) (Lab)
I welcome the opportunity to open the second day’s debate on the Budget. There are two tests to be applied to this Budget. The first is what it does to ensure that we can secure the recovery and get long-term sustainable growth, and therefore support jobs. The second is what it does in respect of fairness and, in that context, what it says about the promises made by the parties that now comprise the Government.
I expect that over the next few days many points of detail will be explored, but I want to look at some of the bigger issues, especially the context against which this Budget needs to be judged. Before I do that, I welcome the Secretary of State for Business, Innovation and Skills to his place. I have not had an opportunity to cross swords with him in this Parliament, and I look forward to doing that and to hearing what his views are now as opposed to what they were a mere seven or eight weeks ago.
I want to start with the context in which the new Government made their decisions on this week’s Budget. Yes, that context has to be the need for us to reduce our borrowing—no one disputes that, although there are very live and real arguments about how fast and the extent to which the deficit ought to be reduced. However, I believe that it must also be seen in the context of growth. For some, like the Business Secretary, what I have to say will not be news because, after all, he largely agreed with the approach that I took during a lot of the last Parliament. However, he seems to have become rather more forgetful in the past few weeks, so a reminder may be useful.
On 28 April, which the right hon. Gentleman may now regard as being ancient history, but for most of us does not seem that far away, he said:
“The deficit problem is easier to solve if there is growth. That is why the next government has to recognise the fragility of the economy and not take action which would precipitate a double dip recession leading to more unemployment and even bigger budget deficits.”
I agree with the sentiments behind his statement. He was right on 28 April, and my guess is that he will still be right on 28 June, but I cannot understand why he has changed his mind in the intervening period. Growth is slightly stronger than before the general election, because at that time we thought that it was just 0.3% in the last quarter. However, although it has improved, it can, on no view, be said to be anything other than pretty modest and pretty fragile. I believe that the measures announced in the Budget yesterday present a risk of derailing that recovery, and worse, of giving rise to a situation in which our economy simply bumps along the bottom for a number of years. In that way, we would not get the growth that we need, and we therefore would not get the jobs. Worse still, of course, we would not have the funds to reduce our deficit and, therefore, our debt.
The past three years have been tough for businesses and families throughout our country and, indeed, many are still experiencing the problems that arose because of the recession. However, as I said, we have seen a return to growth, but it is only 0.3% in quarter one; unemployment has stabilised and begun to fall; and tax receipts are higher than expected, which is why our borrowing is £11 billion less than I forecast in March. All those improvements are a direct result of the action that the previous Labour Government took.
Throughout this debate and for some time to come, doubtless we will hear the now familiar mantra that everything that is wrong and all our problems are confined to one country alone—ours—and that they are due solely to the actions of the previous Government. Like any Government, we got some things right and some things wrong, but I am absolutely certain that the action we took to stop this country tipping from recession into depression was right, as was the action we had to take to stabilise the banking system. I will not yield to anyone who says we should have done differently. We needed to stabilise the economy and to keep people in their jobs and homes. We took that action because we do not believe that in such a situation people should be left to sink or swim. Those actions were taken largely with the support of the Liberal Democrats when they were in opposition, but everything has changed in the past seven weeks.
Mr Darling
I will give way to someone who is perhaps an unreconstructed member of the Liberal Democrats, especially one who represents a constituency in the north of Scotland that may be the subject of change because of his leader’s determination to reduce the number of constituencies, particularly in his neck of the woods.
John Thurso
I am grateful to the right hon. Gentleman for those kind words, but I suspect I would be out of order if I responded.
May I bring the right hon. Gentleman back to the point he was making and remind him that when the Northern Rock crisis hit, my right hon. Friend the Business Secretary immediately proposed that nationalisation was the correct way forward, and that the Government whom the right hon. Gentleman represented prevaricated for six months before taking that action?
Mr Darling
The hon. Gentleman raises an interesting point. He is right that the right hon. Gentleman called for nationalisation at an early stage. The current Chancellor, however, was dead against that. I imagine that if that situation arose now, the Chancellor’s view would prevail and the Business Secretary would have to do what he is told. The hon. Gentleman is absolutely right that at the time I agreed with a lot of what the Business Secretary was saying. For reasons that I will not go into just now because of the various legal requirements and other considerations, we did not nationalise Northern Rock until February 2008, but we were absolutely right to do so then. The Chancellor still thinks that we were wrong, but I am glad to say that the current Secretary of State for Justice believes that our action was right. The action we took, whether in relation to Northern Rock, the rest of the banking system or the rest of the economy, was critical.
Diana R. Johnson (Kingston upon Hull North) (Lab)
May I welcome you to your new position, Mr Deputy Speaker, and thank you for calling me so early in the debate?
I pay tribute to the hon. Member for Harrogate and Knaresborough (Andrew Jones). I am very pleased indeed to follow a fellow Yorkshire MP making his maiden speech. In particular, he talked about some of the best traditions of Yorkshire—first, the community spirit of Yorkshire people and, secondly, the great Yorkshire institution of Betty’s tea rooms. I am sure that hon. Members on both sides of the House will appreciate the fact that people can get a good cup of tea and a good piece of cake at Betty’s tea rooms.
I wish to comment on one of the other contributions to the debate. The Secretary of State for Business, Innovation and Skills made quite an attempt at explaining his about-face in respect of what the Liberal Democrats fought the general election on and how he now comes to the Dispatch Box to defend the vicious and savage cuts in the economy. He is obviously a distinguished and well-thought-of economist, so it was rather strange that he did not pick up before that the position was so bad that he would have to change his party’s policy. He was seen as brilliantly forecasting some of the problems in the economy during the previous Parliament and he has been given great recognition for some of his forward-thinking views, but he was not able to pick that up in the weeks before the election. I was rather taken aback by how out of touch he claimed to be and by how he had to have the meeting to explain the current economic situation and to change his party’s policy.
I was also very surprised indeed to hear a Liberal Democrat try to argue that VAT is not a regressive tax. I have never heard anything like it, and it took my breath away when I recalled that my Liberal Democrat opponent in the general election made it clear on every hustings where I appeared with him that increasing VAT was not something that the Liberal Democrats would support. He constantly attacked the Conservatives for the fact that, whenever they have been in government, they have always put up VAT.
The main reason that I wish to speak in this debate is the growing anger—not only in my constituency of Kingston upon Hull North, but in vast swathes of the north of England—at the coalition’s policies so far announced and those in the Budget statement yesterday. Many of the policies that the coalition Government have proposed to the British people have no mandate—obviously, the deal was done after 6 May—and the electorate, particularly Liberal Democrat voters, feel misled, betrayed and disfranchised. When I talk to people in my constituency, they tell me that they did not vote for many of the polices proposed in recent weeks and yesterday. In fact, they feel that they were not given the opportunity to vote on the very policies that the coalition Government have proposed. As I have indicated, the Liberal Democrats sought election clearly on the mandate that they would not let cuts come during this financial year and that they were against VAT increases, but look at them now.
John Thurso
May I reassure the hon. Lady that I have spent a great deal of time talking to my constituents since the Government were formed and that the only thing that they wish to express is their overwhelming relief that the Labour party is no longer in government?
Diana R. Johnson
If the hon. Gentleman talks to the electorate in Yorkshire, he will find they express a different view. He might also find that the views of his electorate have changed considerably since they heard the Budget.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
I congratulate you on your election, Mr Deputy Speaker. This is the first time I have spoken with you in the Chair.
First, let me respond to the hon. Member for Kingston upon Hull North (Diana R. Johnson). The thrust of her speech was almost entirely, “It’s the banks wot done it,” whereas her party, although in government, did not have a great deal of responsibility. She is right in that the major part of the crisis was brought to a head by the irresponsibility of the banking community throughout the world, especially in the UK, but she is not right to ascribe the whole crisis to that one cause, because there are two more that must be taken into account. Probably the most important—it has driven many of the problems in the economy—is the imbalances in the world economy. I served on the Treasury Committee in the last Parliament, and even before Northern Rock, that was something to which Members from all parties were drawing attention. There is a major structural problem in the world economy, and because of our particular weakness in relation to the financial sector, we suffered more than others.
The second thing that has to be taken into account is the amount of debt in the economy. The point is extremely well made by the chart on page 7, which sets out that relationship, so that one can see the inexorable rise of debt in the financial sector in comparison with debt in non-financial companies and households. If I remember the figures correctly, over the past 50 years or so, the consolidated balance sheet of the financial industry has gone from roughly half of GDP to five times GDP. That is the core of the problem: at every level in society we have been living beyond our means, and it is necessary to deal with that.
I want to focus mainly on enterprise, growth and rebalancing the economy, but I should like to make one or two general points about the Budget as a whole. The right hon. Member for Edinburgh South West (Mr Darling) is not in the Chamber now, but having shadowed him as a Minister in several Departments in the last two Parliaments, and having dealt with him in the Treasury Committee, I have great respect for him, and I echo the remarks of my right hon. Friend the Secretary of State for Business, Innovation and Skills about his integrity. He was given a hospital pass when he accepted the keys to No. 11, and it is to his credit that he managed to stay on his feet. None the less there have been some significant mistakes, to which I shall allude.
Looking at the Budget as a whole, I ask myself two questions. First, how would I feel about the Budget if I were sitting in my old home on the Opposition Benches? Secondly, how would I feel about the Budget if I were sitting on the Government Benches supporting a wholly Liberal Democrat Government? We can all have aspirations. Let me answer the first question. I would feel extremely cross, deeply angry and irritated, because I would see a Budget that contained a mass of things for which I had just campaigned and which I had proposed to my constituents as things I wanted to do in government—so I would have been sitting on the Opposition Benches powerless, while whoever was in government was introducing all the measures for which I had fought. I would say to myself, “How on earth do I oppose that?” but I would not be able to come up with much of an answer.
Angela Smith
I wonder therefore whether the hon. Gentleman campaigned against Lib Dem policy in the election, and campaigned for massive cuts to the economy now rather than later.
John Thurso
As a matter of fact, given my experience on the Treasury Committee, I was extremely careful about what I said. I stated my preferences, but I also stated the principles underlying them; I shall come on to that in a moment. First, however, let me answer my second rhetorical question, which requires a little more consideration. The first thing that I would look at—this pertains to what the hon. Lady was asking—would be whether the deficit needs to be dealt with now in depth. I shall draw guidance from my experience as a member of the Treasury Committee and from my own experience of rescuing nearly bankrupt companies in the past.
In past three years or so on the Select Committee, I observed how often Members in all parts of the House were behind the curve in estimating the scale of the problem. When we looked at Northern Rock in our report “The run on the Rock”, it took time to perceive not only the scale of what happened at that institution but the fact that it was a precursor or early symptom of what was to come later in 2008. I remember the Governor telling us quite late in 2008 how this was a financial crisis that he hoped would not get into the real economy. Looking back, one has to say that that was a false hope.
Huw Irranca-Davies
I share the hon. Gentleman’s frustration, as many people were behind the curve, but one person who was not is “Danny” Blanchflower, the economist, who spotted it coming, identified it and sent out the warning signals. We, collectively, were not listening. He is now warning, “Cut hard and deep and you’ll send the recession backwards.” Should we listen to him?
John Thurso
We should certainly listen to “Danny” Blanchflower, for whom I have great respect. He gave evidence to the Select Committee on several occasions, and he is one of a number of voices that we should—[Interruption.] Absolutely—it was David Blanchflower’s nickname at the time. We should certainly listen to him, but we should also listen to all the evidence. He was, on that occasion, more right. I am not persuaded, having heard other voices, that he is entirely right now—but he does highlight a danger, and we should certainly not disregard that. Across the piece, as the hon. Gentleman acknowledged, we did not appreciate the scale of what was coming.
When I look at what was happening in the early part of this year, my instinct would be to cut the least possible, and to stimulate growth as much as possible. However, there comes a point at which we have to deal with what is before us, rather than what we hoped might be before us. It became clear during the election—and I remember making this point at an all-party hustings—that throughout Europe it was a very different ball game from the one with which we had all been dealing just three, four, or five weeks before, and that we needed to take that into account.
I am therefore predisposed to assume the worst, and to look hard at the core problem. The next piece of guidance derives from my experience of running companies in the hospitality industry. I am not for a moment saying that the relatively small companies that I ran bear comparison to a country, but some of the principles do. I remember taking over two companies that were essentially bankrupt. If the owning shareholders had not guaranteed the finance, they would have gone into administration. In both cases, my job was to turn them round, and I heard arguments about how I should get hold of money and invest it on the one hand, or how I should redress the costs of the company on the other.
When people do not have money—the piggybank is empty, and it is difficult to get money from the banks—they have no choice but to live within their means. I learned that by stabilising company expenditure, and forgoing some investment for the future, I could produce a more stable enterprise. It is the same with this country and the balance of risk. The risk, on the one hand, of failing to take action is that we seriously run out of money, our credit rating is reduced, our borrowing costs go up, and we end up spending far more on debt interest than on health, education or defence. Something would then be imposed on us, as happened with the Labour Government in the 1970s. The risk on the other side is that if we cut too quickly, growth will be stifled and we will take longer to come out of our current situation. Balancing those two risks, I believe that the risk is greater if we do not deal with the deficit, so it needs to be dealt with.
Secondly, is the Budget fair? My right hon. Friend the Secretary of State for Business, Innovation and Skills made an extremely good case for demonstrating that it is—in as much as any pain can be fair. I would far rather be standing here supporting a Budget that gave people lots of money. That would be lovely, but, as the Labour Chief Secretary to the Treasury said, there is no money. So we have to be prudent, and that means that we have to share the pain. The whole point is that everybody will suffer, but we have to ensure that the suffering falls least on the most vulnerable, and most on those who can afford it. Charts A1, A2 and A3 in the Red Book set out exactly how the suffering will fall, and it is perfectly clear from them that those at the bottom will bear the least pain and those at the top bear most.
In my constituency average earnings are £21,000, and table A1 on page 64 shows that after the Budget somebody on £20,000 will be £170 better off, given the amount of income tax and national insurance that they pay. They will pay £170 less than they would have done. Table A2 shows that they will receive £145 less in family tax credit, but when we put the two amounts together we see that they will still be £25 better off. That is not a large amount of money, but it makes the point that if we take the Budget in the round, including VAT, which nobody can deny is regressive on its own, we clearly find that the pain is shared, and felt less by those at the bottom than by those at the top. So I conclude that the Budget is fair.
I welcome the Budget. It is not one that I would have liked to have to support. I would have liked to see the coffers full, and to be able to be nice to people—but in the circumstance this is the right Budget, and it is fair.
Owen Smith (Pontypridd) (Lab)
Will the hon. Gentleman not also reflect on the fact that those tables do not capture the punitive effect of the forthcoming 25% cut in non-ring-fenced public services on people who most rely on benefits and public services? Those elements in the tables and in the Budget do not really take into account—in the round, as he puts it—the full impact of the cuts that we will see.
John Thurso
The hon. Gentleman makes a very good point. Broadly speaking, 20% to 25% cuts are going to be introduced in this autumn’s spending review, and we will need to look at that. However, I find it difficult to take lessons on that from a party that introduced £40 billion of cuts without a single centime being allocated to anything whatever. That is like a bankrupt father promising his children a sackful of presents at Christmas as the bailiffs wheel him out on Christmas eve: it is deeply irresponsible.
Let me turn to the specific measures. I absolutely must commend the Government on their commitment to consider a pilot scheme for a remote rural fuel discount, because year in, year out I made that proposal from the Opposition Benches and the previous Government compared it to the cost of beer and all sorts of other things. My friends in the Conservative party chose to wait and see what would happen, and I am delighted that they did so, because they now agree that my measure should be considered, for which I thank them warmly.
On enterprise, it is critical that we rebalance the economy. First, we must achieve a rebalancing whereby there is more private sector and less public sector. That does not mean that the public sector has to shrink; the private sector has to grow to support the public sector. Secondly, we absolutely have to move our economy away from an utter dependence on financial services, which delivered 25% of tax revenue three years ago, and towards manufacturing industries and technologies and skills-based industries throughout the regions of the United Kingdom.
I am glad that the Government will continue with and enhance the enterprise finance guarantee scheme. However, the scheme has one flaw, which I have highlighted many times: the Catch-22 situation whereby the banks that do not lend then decide whether to include an enterprise in the scheme. There must be some way in which the banks’ decisions can be reviewed.
I also commend my right hon. Friend on the action being taken to get non-bank finance into small and medium-sized businesses, but may I gently ask my friends who are now on the Front Bench to look at the papers that I wrote—they were in the Liberal Democrat manifesto—on enterprise funds, and consider whether some of those ideas might help to address how we get equity funding into small businesses? May I also stress the importance of the regional growth funds and express the hope that the details of them and how they will work will be brought forward quickly? The concepts of an infrastructure bank and a green investment bank should be brought forward as rapidly as possible, too.
Having looked at the Budget, I conclude that it is not one that I particularly like to see brought in, but it is necessary. There is pain, and it has to be borne, but the Budget is equitable in that the pain falls least on those who have least. Notwithstanding my personal regard for the shadow Chancellor, I really cannot take lessons from him or his party, having listened for nine years from the Opposition Benches to their boasts about the end of boom and bust. We now know that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) was the father of all booms and the mother of all busts. That much-vaunted child, prudence, is lying battered, bloody and bruised in the gutter—and it is this Government who will take her out and restore to health.
Geoffrey Clifton-Brown
I am very grateful for that intervention. I have always been a supporter of nuclear power, and I am one of the very few Members who have been to Chernobyl and survived, so I can see what goes wrong in the nuclear sector. However, with modern technology—I say this carefully—I can see that the nuclear sector has an important role to play in the range and mix of our power generation.
The Labour Government left us with another really dire legacy, however, because if we do not introduce nuclear power generation to this country I do not see how we can keep the lights going in the next 20 years—[Interruption.] The Liberal Democrats had different views, but they have looked at the problem and signed up to a nuclear power programme, and I congratulate them on that, because it is the right thing to do. We in this House should not come up with ideological dogma; we should all look at the facts and see what is the correct thing to do, which is—[Interruption.] It is all very well the hon. Member for Penistone and Stocksbridge (Angela Smith) pointing at the Liberal Democrats, but we in the Conservative party have had to swallow things that we do not like. We have looked at the facts and seen the correct thing to do. Therefore, I support nuclear power.
John Thurso
My hon. Friend will know of my long-term support for nuclear power, which I expressed often in the House in previous Parliaments. However, the critical thing is to be in favour not of nuclear power, but of a proper engineering and scientific-based assessment of how to ensure the lowest carbon energy, and if that leads us to nuclear, that is the correct answer.
Geoffrey Clifton-Brown
As always, my hon. Friend’s wise words are correct. Nuclear power is not only an efficient way of generating energy, but a clean way. We have to use the very latest technology to deal with the nuclear waste that is produced, but I am absolutely certain that if we adopt an open mind and let our scientists get to work, we will find better and better ways of dealing with the waste that nuclear power stations produce. I welcome my hon. Friend’s support on that.
Innovation and exports are just beginning to return, and I am sure that hon. Members from all parts, if they have listened to businesses in their constituencies, will have had that experience. I have a wonderful firm in my constituency, a small FTSE company called Renishaw. It is the world-beater in measuring technology—metrology—but unfortunately it had to lay off several hundred people during the worst of the recession. I am pleased to report to the House, however, that in the past month or so it has begun to re-employ people. That is good news, because we must all work hard on measures with regard to how we employ the maximum number of people in this country. There is nothing worse than people who want to work but are unemployed—and unemployed through no fault of their own. We should concentrate on the terrible figures for 16 to 25-year-olds not in education, employment or training—the so-called NEETs—who are without jobs at the moment, because we have inherited a shocking waste of young talent.