Alec Shelbrooke
Main Page: Alec Shelbrooke (Conservative - Wetherby and Easingwold)Department Debates - View all Alec Shelbrooke's debates with the HM Treasury
(14 years ago)
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Alec Shelbrooke (Elmet and Rothwell) (Con)
Does my hon. Friend agree that the protests that we are hearing from those on the Opposition Benches are in stark contrast to the fact that the measures taken by this Government have secured our triple A rating?
Mr Gauke
My hon. Friend is absolutely right. The fact is that the Moody’s triple A credit rating was deemed to be at risk, and has now been stabilised. Our market interest rates have fallen, and we are restoring confidence in the long-term capability of this country. If we refused to take these measures, we would be taking the most enormous risk.
It may be helpful if I give some of the background. As I said earlier, there remain some technical changes that we could not include before the summer, and the Bill provides for those changes to be made.
I think it safe to say that Members on both sides of the House will agree on the contents of the Bill. I should be disappointed if they did not, given that within the last year all but one of the measures that we are debating were proposed by the last Government I am glad that we have reached a consensus on that, if not on other matters. None the less, we wanted to ensure that the public and interested parties had an opportunity to provide input.
In the Budget we set out our approach to tax policy making, with consultation at the heart of the strategy. In the spirit of that new process, we published the Bill in draft over the summer. That has not only allowed key interest groups to comment, but reassured those affected by the Bill. More than 60 responses were received, and nine clauses have been modified as a result. Furthermore, many groups have voiced their approval of the provision of a draft Bill to allow for additional scrutiny, which has made the Bill better, clearer and easier to apply.
We also increased opportunities for consultation by creating the Office of Tax Simplification over the summer. We need to increase transparency for businesses and the tax profession: that is a message that we hear frequently. We also hear about the importance of greater predictability, stability and simplicity in the tax system. The Office of Tax Simplification will identify areas in which complexity in the system can be reduced, and we will publish its findings for the Chancellor to consider before he presents his Budget. Simplifying the tax system is not just a means in itself, but a vital sign that Britain is once again open for business.
The Bill is not just a good example of engagement with the public; it also supports our aims of helping businesses and promoting fairness. Clause 10 provides support for real estate investment trusts by relaxing their distribution requirements. Clause 13 removes intellectual property conditions linked to research and development tax credits, enabling more small companies to claim. Clause 11 fixes issues in the worldwide debt cap regime to allow it to operate properly. The changes affect businesses large and small. Clause 9 removes an unintended tax charge from company distributions, and clause 7 makes changes to the venture capital schemes to guarantee state aid approval.
The coalition Government are committed to ensuring that the decisions that we make are fair, and that we protect the most vulnerable in our society. The choices that we have made to date, and the actions that we will take as part of the spending review, will help to make Britain fairer. Clauses 1 and 2 play their part by easing the tax rules for carers and extending the scope of the current tax relief. Clause 31 provides tax relief for trusts that compensate sufferers from asbestos exposure. I am sure that many Members will particularly welcome that clause. Clause 16 guarantees that those providing support under an adult care placement do not suffer capital gains tax as a result of sharing their home. Those too are small measures, but they provide significant and welcome support for those affected.
One clause has not been included in the Bill, although it was intended to feature. The aggregates levy credit scheme in Northern Ireland was introduced in recognition of the impact of the levy on legitimate businesses as a result of tax evasion on imports from Ireland and illegal quarrying. Over the summer, we consulted on legislation to be included in the Bill to extend the scheme beyond April 2011 to March 2021. Since then, the European General Court has annulled the Commission's state aid approval for the scheme, for the period covering April 2004 to March 2011. In those circumstances, it would not be appropriate to extend the scheme and we therefore decided to remove the clause from the published Bill. However, the Government strongly support the scheme and, if the Commission were to come to a fresh decision that the aid was approvable, legislation to extend it can be introduced in the Finance Bill in 2011.We will continue to work closely with the Commission, the authorities in Northern Ireland and representatives of the quarrying industry to find a solution that provides a level playing field for legitimate quarry operators in Northern Ireland, while maintaining environmental standards.
The other clauses help to align HM Revenue and Customs’ interest and penalty regimes; enable the National Employment Savings Trust to operate as a registered pension scheme; assist with the correct allocation of overpayments of tax to settlers of trusts; and tackle evasion of excise duties. Although those clauses could not make it into the previous Government's final Finance Bill—although 71 clauses did make it into their four-hour Bill—we are ensuring that these necessary but less glamorous changes are made.
This is a simple, straightforward Bill that eases burdens on individuals, businesses and HM Revenue and Customs. It is one that the previous Government all but enacted themselves. In brief, it is an important but, I hope, uncontroversial Bill, and I commend it to the House.
Ms Eagle
I look forward to the debate that will take place within the Government on that, as I can see that Liberal Democrat Members are not exactly enamoured with the hon. Gentleman’s point.
At the weekend, the Cabinet seemed to send incoherent messages about the £83 billion cuts agenda that lies ahead. The Energy Secretary told The Daily Telegraph that spending cuts were not
“lashed to the mast with a particular set of numbers”
and could be scaled back if economic conditions deteriorated, but the Transport Secretary insisted that the Government would not deviate despite fears that the drastic cuts would damage the economy. The latter clearly regards himself as the real Chief Secretary—or perhaps it would be more accurate to say the Tory Chief Secretary—but which of the two is presenting the Cabinet’s real view? They both serve in it, so which of them is right? Perhaps when the Economic Secretary responds tonight, she would like to enlighten us about which of their positions is the real Government policy, at least for today.
Some things that I would have thought would be in the Bill, given the formidable economic challenge that now faces us, are conspicuously absent. Where is the plan for growth? We all know that growth is one of the most effective ways of dealing with a deficit. Thus, plans to get the deficit down need to be growth-friendly, but precious little in the Bill is intended to address that urgent requirement.
Since May there have been plenty of cuts that may well have a bad impact on our growth prospects, such as the abolition of regional development agencies and the savage cuts in the funding available to assist regional growth strategies. The decision to scrap the loan to Sheffield Forgemasters is another example. That company could have played a leading role in the developing global nuclear industry, but its chances of doing so have been set back significantly by that decision. The increase in VAT, which estimates suggest will cost each household in the country more than £500, will hardly boost demand, so where is the plan for growth? The Prime Minister claimed that his first Budget would be
“a Budget that goes for growth”,
but after the Chancellor’s theatrical efforts in June, the Government’s own forecaster, the Office for Budget Responsibility, downgraded its growth forecast for this year from 1.3% to 1.2%, and for next year from 2.6% to 2.3%. The CBI also decided to lower its growth forecast for next year from 2.5% to 2% to take account of the June Budget.
Alec Shelbrooke
I welcome the hon. Lady to her Front-Bench position. If the 2.5% rise in VAT is so wrong, why was it right for the previous Government to return it from 15% to 17.5%? Although there had been a reduction, that was still a 2.5% rise.
Ms Eagle
The hon. Gentleman was not in the House at the time, but the reduction in VAT was part of the fiscal stimulus that kept the economy afloat during the most dangerous parts of the credit crunch. The growth figures for the early part of this year show that that fiscal stimulus package was working.
Nic Dakin (Scunthorpe) (Lab)
This is primarily a technical Bill and I support much of the detail in it. For example, the measures to close tax loopholes are welcome. I am sure that we are all united on the need to close such loopholes and recognise that successive Governments will need to be ever vigilant in that respect. But as the spending review approaches we need to be very careful to ensure that Revenue and Customs has the appropriate capacity and resources to tackle tax evasion and avoidance effectively. Assurances from the Economic Secretary on that point would be very welcome, as my hon. Friend the Member for Wallasey (Ms Eagle) said earlier.
There is much in the Bill to applaud. Unfortunately, there is also much to regret. It represents a missed opportunity to put in place a plan for growth. This is not surprising, as the Government see deficit reduction as the beginning, middle and end of their economic strategy—a symphony of despair, orchestrated by a coalition agreement and targeted at the lowest common denominator.
It is worth reminding ourselves of what the great British public voted for in May. They had two alternative economic strategies presented to them during the election. That promulgated by the Conservatives said that there was a need to cut hard and cut fast. The alternative argument was put forward by Labour and the Liberal Democrats—that the deficit reduction should be more carefully managed, as my hon. Friend the Member for Bassetlaw (John Mann) has suggested. A more gradual reduction would allow growth and tax increases to play their part. In that strategy, the reduction in spending would be managed in a way that allowed growth to pick up the economic slack. Doing so would avoid the spectre of a double-dip recession, with all the personal distress and misery that it would bring to people up and down the land. The British people delivered an inconclusive result at the last election, but one thing was clear: they did not support the Tory argument for fast and furious cuts. They backed Labour and the Lib Dems’ more considered approach.
Alec Shelbrooke
I am listening carefully to the hon. Gentleman, but I find it hard to understand how he can say that the Conservative party’s policies were rejected at the general election, when the party had its biggest result since 1931.
Nic Dakin
I think that there was a large feeling at the Conservative party conference last week that the Conservatives should have done better in the general election, given that they faced a Labour Government who were clearly struggling in the face of many challenges. I am interested in the hon. Gentleman’s spin on the outcome of the last election, but the reality is that nobody won it. What has happened since is that the Government parties have shown skill in developing a narrative that runs along the lines of what the hon. Member for Boston and Skegness (Mark Simmonds) outlined—it was also added to by the hon. Member for Bristol West (Stephen Williams)—which is essentially that everything comes down to Labour spending profligately and a massive deficit that needs to be tackled fast and furiously. That is the narrative, but it is not the truth. The truth is far closer to what we heard from my hon. Friend the Member for Bassetlaw, who demonstrated that what has really happened is that our deficit lies alongside that of Germany. The problem is serious, but it does not require us to go as far as is being suggested.
Nic Dakin
I thank my hon. Friend for that intervention. She is completely right to suggest that world public opinion is moving in the direction of expressing concern about global cuts in spending and their impact on the world economy. She is completely right to draw attention to that.
Nic Dakin
I have already given way.
In the summer, the Chancellor was keen to hold up Ireland as an example of a country with an approach to the economic challenges that we face that should be applauded. There is less talk of Ireland now, as that economy spins into double-dip recession and loses its triple A rating, as we heard earlier. The Irish Government’s debt has increased rather than decreased, as a result of over-aggressive cuts in public expenditure, and the economy is now in serious peril. The last time we had a peacetime coalition, the then Governor of the Bank of England’s advice—to take an aggressive approach to reducing spending—was followed, precipitating the great depression of the 1930s. I am afraid that Governors of the Bank of England, like politicians, are only mortal and do not always get it right.
There is something very pessimistic about the Government’s approach. Where once they were optimistic, now they see only negatives, hence the biggest rise in VAT—the most unfair and regressive of all taxes—in a generation, despite cast-iron promises from the leaders of both parties in the coalition during the election that this would not happen. Representing Scunthorpe, I know a bit about cast iron: it should last a bit longer than a few months. There has been further pessimism, with the attacks on universal benefits signalled by last week’s breaking of another promise—the promise not to cut child benefit.
Mr Binley
I do not accept that point of view. This is not just about the size of the national debt; we need to consider its size in relation to the economy. Therein lies one of our problems. The fact is that ours is one of the worst situations in the G20. I should like to advise the hon. Gentleman that, as long as he and his party remain in denial, they will be unable to move forward, and that, for the good of politics, they need to move forward just a little.
Alec Shelbrooke
I should like to expand on my hon. Friend’s point about the national debt. Is it not true that the size of personal debt in this country, which was encouraged with a quiet wink by the previous Government, has also held back our ability to recover from the recession?
Mr Binley
My hon. Friend’s intervention takes us back to a Chancellor of the Exchequer—later Prime Minister—who suggested to the Financial Services Authority that it should apply a light touch. A light touch meant 125% mortgages, self-assessment of mortgage requests, and people with five, six and seven credit cards with their credit up to the hilt. My hon. Friend is absolutely right.
Let me return to the subject of the banks. I made the point that banks had to be soundly based, but that it was a question of the balance. As I said, research by the Federation of Small Businesses suggests that 24% of small and medium-sized enterprises are already experiencing difficulties in coming to terms with current increases in the cost of money, and the new capital requirements will compound the problem.
This could not have come at a worse time. More businesses are in danger of going to the wall through overtrading. I want to explain that a little more, because it is not readily understood in the House. Business growth costs businesses money: it is as simple as that. The more orders a business gets, the more employees it needs and the more raw materials it requires. Those are all up-front costs that simply cannot be recovered in the short term. Cash flow drag must be financed if growth is to be sustained, and growth will not be sustained if working capital is not forthcoming. That may be a simplistic view, but it is a very honest view of the reasons for which people are more likely to go to the wall during an upturn than during a downturn. They overtrade, and find that they do not have the capital to sustain that overtrading.
Owners of SMEs have spoken in their thousands of the collapse of their relationships with the banks. The number of complaints to the banking ombudsman about draconian demands placed on loans and overdrafts has increased by 119% in this year alone. So what should the Government do? First, they should recognise that the new capital requirements called for by global regulators should be balanced, and that their implementation should be sensibly programmed to ensure that real money is freed to support real growth in the SME sector. If that means getting tough with the banks and the regulators, so be it. Governments still have to get tough on occasions, and this is the area in which they need to start.
However, the Government need to go further. They need to provide greater choice and competition in the high street, particularly in the banking sector. They might even consider the creation of post banks, as suggested by the Federation of Small Businesses. That is not a quick answer, but it will help to sustain growth through the third, fourth and fifth years if the Government get down to it now. Both moves should increase available credit, and reverse the decline in local lending resources.
The Government could also encourage the mutual sector to play a greater role. I find it regrettable that Nationwide, the country’s largest building society, has chosen to restrict its banking services to just 30,000 small businesses, a minute fraction of the total. It has also decided to close its business investor account to new customers and to limit the number of account transactions to just two a month, levying 30 days’ notice of account closure for any customer who breaks that limit. Members may agree that that is a particularly unfortunate trend at a time when greater competition, wider options and a more flexible approach are needed. I hope that the Chancellor will talk to the mutuals collectively, because they have a role to play and can be more effective than they are being at present.
Recent reports suggest that Barclays, HSBC, Lloyds, HBOS and NatWest collectively handle 85% of the SME banking market. The Bank of England financial stability report suggests that banks are capable of consolidating their capital while at the same time improving their lending to the real economy, which suggests that there is an attitude among banks that needs to change. We have said that in the House week in week out, month in month out: when are the banks going to listen?
I appeal to the Chancellor to talk straight, talk tough and talk honest to the banks, many of which we now own. They have a responsibility, not only because we helped to bail them out, but because they were a major factor in getting us into trouble. The message should be sent loud and clear from the Chamber that they should face up to their responsibilities, and recognise that it really is time that they came to the aid of their nation.
Alison McGovern (Wirral South) (Lab)
First, may I congratulate the hon. Member for Skipton and Ripon (Julian Smith) on his fine maiden speech? As a railwayman’s daughter, my recollections of being forced as a small child to suffer the Settle to Carlisle railway as a holiday are still with me. His is an extremely beautiful part of the country and he made an excellent maiden speech.
I welcome many of the measures in this Bill. As has been said, many of them will receive cross-party support and were due from the previous Government’s Budget in March. A good, effective tax system, well resourced, is the mark of an excellent democracy, so it is important that Members of Parliament take care to ensure that our tax system functions well. I therefore want to say something about tax and its collection, and to highlight two vital points where this Government have missed an opportunity to implement change that could benefit our economy at this very difficult time.
Hon. Members may not be aware that many employees of Her Majesty’s Revenue and Customs work in Liverpool, the Wirral, Merseyside and the Liverpool travel-to-work area. Many such staff now work in my area as a result of the shifting of Government work to areas where wages are lower and it is more effective to locate staff. Their work is largely not commented on, especially in this place, even if it is good, high-quality work. We often talk about public servants, but few of us ever think to congratulate those working to ensure that our tax system functions well—that is part of what I want to do today.
I hope that the House will permit me to share the fact that one of my first experiences as a newly elected Member of Parliament was of some HMRC staff coming to see me at my newly opened constituency office. They were very fearful of changes that the new Government looked as though they might implement and they wanted to raise some of their concerns with me, particularly those relating to the resources that might be available in the future. As has been mentioned, over the past three years they have increased the yield from interventions by 60%. That is a good record and all of us want to see that continue. We legislate in this place—we debate and we pass Bills that become law—but that is all just words; we are dependent on the good work of HMRC to make real our choices and decisions. So we should not treat those staff with scant regard and we should take seriously the problems that they might have. In fact, my experience of meeting and speaking to HMRC staff has revealed that, like many in the public sector at this time, they are operating under a cloud of uncertainty.
I appeal to Ministers to act with transparency as much as they can, to keep in consultation with staff at all times and, in particular, to pay attention to whether HMRC has sufficient resources to act out the consequences of the choices that they make. The child benefit changes might place further work burdens on HMRC staff and we politicians owe it to those staff to ensure that they have enough resources to act on the consequences of our decisions.
I wanted to discuss a couple of opportunities that the Government have allowed to pass them by. One main feature of the Budget that concerned me greatly was the VAT rise to 20%, and I believe that Grant Thornton has estimated that that increase will cost individual households about £500 a year. There is sincere concern among many people about the harm that that could do to our economy. In my area, the recovery is fragile. I am very grateful for the intervention of Deloitte, which has put on record where business and consumer concerns lie. However, I know from speaking to people in my constituency that business confidence is still fragile and I worry what the increase in January will do. I worry what the increase in the cost of the contents of their shopping baskets in January will do to families, and I worry that because of the VAT rise many small businesses in my constituency will face a tougher time after Christmas than they have in the past 12 months.
Let us be clear that we have every indication that that measure is a permanent rise—it is a permanent shift in who pays what tax. We debated earlier the contrast with Labour’s temporary VAT reduction. I remember very well the restaurants in my area putting out temporary notices amending their menus—it was very clear to everybody that it was part of the stimulus and part of the Government’s work to get us through that time. That is not the case with the current VAT rise, which is a totally different thing. It is a regressive increase in tax.
I absolutely believe that, over time, we must seek to reduce the deficit, but I do not feel that raising VAT is the way to do it. One thing that has not been mentioned so far is the impact of a lower tax take on the deficit. We need to recognise that part of that lower tax take has come from unemployment caused by the global downturn. We need to make strategic investment in this country in the things in which we have a competitive advantage—in high-tech areas—so that we can increase employment and bring the budget back towards balance. That is the way to do it, rather than introducing a permanent shift in who pays tax in this country. It will hit families in my area harder than many; in fact, it will hit families harder in Wirral than it will hit those who live down the road in Cheshire, in the Chancellor’s constituency.
My second point builds on some of the debate that we have had this evening about businesses of all sizes. I am thinking specifically of small to medium-sized businesses in my constituency, representatives of which I have met recently. In fact, since I was elected in May I have been speaking with businesses in my area, which—hon. Members might not know this—are science-led. We have an excellent part of the knowledge economy in my constituency as well as many high-tech businesses that supply the electronics industry in Korea and other places. We have Unilever, which carries out high-end research; staff at Unilever’s research and development lab in my constituency have more than 200 PhDs among them. There are also many feeder businesses to those science and high-tech industries. Investment allowances are no small fry to us.
In two cases recently, I have been called in to meet a business that is about to move jobs out of my constituency. In both cases, after having analysed the situation, it has seemed that capital investment in new technology could have stopped that. The motivating factor for the removal of those jobs is the lack of capital investment and I want the Government to pay great attention to what more they can do to incentivise business to make capital investment in our country, because that will make our economy sustainable in the long run.
Let me contrast that with corporation tax, which helps big businesses that are already in profit to keep their profits. A corporation tax cut across the board does nothing to incentivise business to make capital investment. Only this morning I was speaking to people at a business in my constituency. I asked what one thing I could tell the Government to do that would help their business to invest for the long term, and they said, “Help us make those investments: introduce more allowances that enable the investment that will help to protect our employment for the long term.”
Alec Shelbrooke
Does the hon. Lady not agree that competitive corporation tax would attract international investment into this country and develop jobs for our economy? We must play on the global stage, not just in Britain.
Alison McGovern
We have competitive corporation tax. The hon. Gentleman is right that we must play on the global stage. Many of the companies in my constituency that I am talking about play on the global stage. I have seen the difference that other countries have made in working with business to ensure that they invest in their technology, which keeps them here for the long term. Let us consider, for example, the historical difference in the German automotive industry, where the Government did just that. We came very late as a country to that approach—to that industrial activism and to that investment in high-tech industry to secure employment for the long term.
I ask Ministers to consider their role. When we are dealing with global companies, the Government must always discuss with them the changes in their industry and what the next move needs to be in investment. I do not feel that an across-the-board corporation tax that hands profits back without any discussion about what is done with them is the way forward.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I start by welcoming the hon. Member for Nottingham East (Chris Leslie) to his party’s Front Bench. He has been in the Chamber for most Finance Bill debates, and we have sparred a little bit along the way. I am glad to see him taking part from the Front Bench, but what a baptism of fire this is for him. You were not here earlier, Madam Deputy Speaker—one of your colleagues was in the Chair—but the hon. Gentleman heard an unfortunate tirade from his hon. Friend the Member for Bassetlaw (John Mann), who gave one of the most entertaining speeches that I have heard in this Chamber.
The hon. Member for Bassetlaw had us all going. At one point, we wanted to cheer, but almost immediately afterwards we wanted to boo—and that goes for Members on both sides of the Chamber. His argument developed in quite an incredible way. As my hon. Friend the Member for Northampton South (Mr Binley) said, the hon. Member for Bassetlaw is the only Member who could play for both teams during a football match. It was quite an incredible speech. However, he did talk about deficit deniers, a term illustrated quite well by the hon. Member for Scunthorpe (Nic Dakin) and even better by the hon. Member for Sefton Central (Bill Esterson), who has just spoken.
The hon. Member for Sefton Central spoke about capital spend and investment, but surely he recognises that the previous Chancellor of the Exchequer also wanted to cut capital spend. We understand that the new shadow Chancellor and the shadow Cabinet are following the former Chancellor’s plans for deficit reduction, which involved a reduction in capital spend. It would be fascinating to know whether the hon. Gentleman totally disagrees with his Front-Bench colleagues and thinks that they are completely wrong, or whether his argument was just confused. I really do not know where his argument was going.
Alec Shelbrooke
In one moment; I just wanted to draw on your comment about the US economy. You said that it was a model to follow. There has been an $800 billion investment—or stimulus, if you will—put into the US economy, yet unemployment rates there have grown quite significantly. That is why President Obama’s popularity ratings have fallen.
Bill Esterson
I am sure that I did not mention the US economy, but we can check that in Hansard later. I want to pick up the point about capital investment. We need to be clear about the differences between the two sides on that issue. We Labour Members were clear that we would keep Building Schools for the Future and a number of other major projects going. We were looking at a long-term process for reducing the deficit. Those on the Government Benches proposed cutting all capital spending more or less straight away.
Alec Shelbrooke
I am glad that I gave way to the hon. Gentleman, because he makes my point. You say that you want to keep the investment going on these capital projects, but you also say that you will reduce the capital budget. How? That does not add up. You simply cannot go on saying that you will spend money here and there, not raise taxes, and carry on borrowing. The argument simply does not add up. I became confused halfway through the speech made by the hon. Member for Bassetlaw—
Alec Shelbrooke
Yes, so did he. He seemed to be saying that unless the Government employ everybody in the country, no money will ever be spent. He said, “You can’t reduce the number of people in the public sector, because they’re the people who have to go to the sandwich shop.” Of course, people in the private sector do not eat or buy anything; they have a robotic existence. I wonder what happened before there was such a large public sector. The hon. Member for Sefton went on to give examples of private industry in his constituency that have benefited from loans from the regional development agencies. That is where I think the confusion lay. He was talking about Government investment, not Government spending on public sector jobs and so on.
The hon. Gentleman talked about the regional development agencies, but there was provision for a regional growth fund in the Budget. The Government have also put measures in place in the Budget to reduce national insurance contributions for those setting up companies outside the south-east, and have reduced capital gains tax. As I pointed out in my intervention on the hon. Member for Wirral South (Alison McGovern), that helps investment from international business to come in.
Yorkshire Forward, a regional development agency, says at the bottom of its e-mails, “We have created more than 52,000 jobs.” No, it has not. Private business creates the job. If Government money is used, the job is not “created”; there was a subsidy that eventually has to be paid back.
Government money is just private money that the Government have nicked and are trying to put back. It is not our money. We do not earn it. We take it from the wealth creators. If we are not creating that wealth in the first place, how can we go on and spend it? The deficit deniers do not understand or do not accept that every one of us would like to stand here and say, “Do you know what? I’m going to replace every school in my constituency, and I want a first-class service.” Every one of us wants a first-class service—that is why we went into politics—but we must be realistic. We must be pragmatic. We must understand that we cannot go on spending money as we have been doing.
I take issue with the suggestion that the move to a 20% rate of VAT is permanent and that we have no intention of lowering it because ideologically we want to tax more. Ideologically we want to tax more? I have never heard such nonsense. We are the party of low taxation. We made it clear in every speech that at each Budget we would review and lower taxation if we could. It has never been said that VAT would remain at 20%. One would hope that we may be able to move to a lower taxation rate.
In the short time that I have left, I shall move on to a specific topic. The Bill refers to closing tax loopholes. Everybody in the Chamber wants to achieve that because there is a great deal of revenue out there that the Government are not getting. Let us look at the way money circulates in the economy. Representations have been made to me that red diesel be used in emergency service vehicles. We can see the sense in that. Emergency vehicles are paid for through Government money, VAT is paid, and money is being circulated and coming back. That is a sensible argument and would impose no cost on the Exchequer.
I make a plea to the Minister to consider something else. I am proud that we have an excellent Yorkshire air ambulance—indeed, we have two. They are on BBC 1 every day at 9.15 am, relating their exploits in rescuing people who have got into difficulties in areas such as the Yorkshire dales. That leads me to say what an excellent maiden speech my hon. Friend the Member for Skipton and Ripon (Julian Smith) made, describing that countryside, where people like to go hiking. We know that accidents can happen, so we have the air ambulance.
Yorkshire air ambulance costs £2.628 million a year to run and not one penny comes from Government. It is all raised through charitable giving. I therefore urge the Minister to consider, when the time is right, exempting from fuel duty Yorkshire air ambulance, the other air ambulances and the people who contribute to the emergency services? They would still raise their money through charitable giving, but that exemption on the 162,632 litres of fuel that the Yorkshire air ambulance used last year would help greatly to reduce overall costs.
I close with a further plea. We have had several Finance Bill debates and all we hear, all the time, is cherry-picking: “We don’t want to do this bit. We don’t want to do that bit. The Government are hitting the poorest here. They are not doing enough for the rich there.” Can we please start to look at the Finance Bill holistically? We have raised tax thresholds. We are reducing national insurance. We have raised capital gains tax. We are reducing corporation tax to bring in more businesses and create more jobs. We are putting in place regional growth funds. Can we please stop the cherry-picking, have a sensible debate and look at the arguments sensibly, holistically and in a grown-up way, and can we please stop denying that the deficit exists?
Sheila Gilmore (Edinburgh East) (Lab)
In the course of the debate, yet again, we have heard an awful lot of myths and legends. One of the biggest of those is the notion that because the Opposition have a different view of the economy, we are deficit deniers. You do not have to be denying a deficit to hold a different view of how it arose and the background circumstances, and a different view of how we get out of the situation that we are in. That is quite reasonable.
It is healthy that we have politics within which there are different viewpoints. The proof of the pudding will be apparent in a few years. If you are right, I will have to eat my words. I do not believe that those on the Government Benches are right, but we cannot tell just by throwing words at each other. It is not correct to say that somehow the Opposition hold the view that there is no deficit. That would be plain nonsense.
There are other myths and legends that we have heard today. One, which we heard from the hon. Member for Northampton South (Mr Binley), is that the previous Government were guilty of not mending the roof when the sun shone. We hear that repeatedly. If building schools, hospitals and roads was not mending the roof, I do not know what it was. If by that Conservative Members mean that we should have saved the money and put it in a reserve somewhere, that may be a legitimate criticism, but to suggest that we were not investing in the country’s infrastructure is plain wrong.
The hon. Member for Northampton South also suggested that the economic crisis was entirely our fault because of light-touch regulation. I may have been asleep through the years of the Labour Government, but I always thought I heard Conservatives saying that there was too much regulation, that we were the party of red tape and regulation, and that we over-regulated not just financial services, but everything. We heard an excellent maiden speech from the hon. Member for Skipton and Ripon (Julian Smith). Although I disagreed with the entire political content, it was a good speech. The hon. Gentleman said that in his view there was too much regulation.
It is easy to say with hindsight that there should have been more regulation of the financial services industry, for example. I believe that there should have been, but when people say that we were over-regulating the economy, that is one of the myths and legends.
We are told that we do not want to leave our children and grandchildren in a big financial mess by not paying off debt, but equally, and perhaps more importantly, do we want to leave our children and grandchildren in the position that generations have been placed in by previous economic failures, by destroying jobs and creating long-term unemployment in various parts of the country? I do not want to leave that to my children and grandchildren.
We are allowed to differ and to hold different points of view and different economic theories. The difference is not about whether there is a deficit, but about how we got into the present situation and how we get out of it.
The previous Government managed to stop the rise in unemployment reaching the levels that had been predicted. That was the cause of economic stimulus. Far from the deficit spiralling, as we heard earlier from the hon. Member for Stratford-on-Avon (Nadhim Zahawi), the deficit did not rise as much as had been expected. Therefore, we were not in some sort of new crisis—that is what has been suggested—which justified an emergency Budget which had very little in it. The Finance (No.2) Act 2010 that we passed in a great hurry before the summer also had very little in it, and we lost an opportunity to make some important changes.
The public and private sectors are inextricably linked, and slashing jobs in the public sector will further reduce the tax-take, increase the demand on benefits and, in itself, increase, not decrease, public borrowing and the deficit. Equally, reducing our investment in infrastructure—not stopping it entirely, but reducing it more than we need to do—will ultimately put us in a more difficult position.
Just last week I visited two constituent households at their request. The problems that they asked to see me about had nothing to do with jobs; nevertheless, by no coincidence in both households there was a working-age construction worker who was desperate to work but could not find any in my city. One said that the last job on which he had worked was now a complete university building in the city, but we will not see much more of that kind of building by our educational institutions. He is very keen to work, but the jobs are simply not there.
Alec Shelbrooke
Everybody would like to see that investment, but, and this is the point that I tried to make in my speech, the previous Chancellor would also have cut the capital budget. I talk about deficit deniers because I do not understand how you can ask for capital investment to carry on when your shadow Front Benchers would, as I understand it, follow that plan to reduce the capital budget.