Finance (No. 2) Bill

Alex Cunningham Excerpts

Thursday 18th April 2013 Commons Chamber

[Catherine McKinnell]

It is a pleasure, Ms Primarolo, to serve under your chairmanship this morning. I shall speak to the Opposition amendment to clause 1 and about clause 16, which relate to income tax rates and reliefs.

The Opposition believe that politics is about priorities—about providing support to those who need it most, rather than to those with the broadest shoulders. This has never been more the case than in the country’s current economic climate—a parlous economic climate which, let us remind ourselves, has seen just 0.8% growth since autumn 2010, compared with the 5.3% that was forecast at the time. The economy continues to stagnate under this Government, leading to the independent Office for Budget Responsibility halving its predictions for 2013 and anticipating growth of only 0.6% this year, compared with the 1.2% forecast just four months ago.

We have surely now reached the stage where we must ask ourselves what further evidence the Chancellor needs before he accepts that his economic plan is catastrophically failing. Once again, I note the lack of Conservative Members on the Government Benches. Perhaps Back Benchers are demonstrating their lack of confidence in the Chancellor’s plan which, I am sure they would agree, is far from acceptable.

The latest criticism of this failure came on Tuesday, with the International Monetary Fund downgrading its forecast for UK economic growth to 0.7%, in contrast to its view a month ago, when the IMF said that growth of 1% could be expected. Having subjected the UK to the biggest downgrade of any developed country for 2013 and 2014, the IMF commented:

“In the United Kingdom, the recovery is progressing slowly, notably in the context of weak external demand and ongoing fiscal consolidation.”

It went on to say:

“Greater near-term flexibility in the path of fiscal adjustment should be considered in the light of lacklustre private demand”.

In simple terms, it is time for plan B.

[Alex Cunningham (Stockton North) (Lab)]

I am grateful to my hon. Friend and fellow north-east MP for giving way. Does she share my view that yesterday’s unemployment figures showing an increase of 70,000 were disgraceful? The north-east of England has suffered a disproportionate increase in unemployment, and 12,000 of those 70,000 are from the region that she and I both represent. Does she agree that this is further evidence of the need for change, particularly in regions such as the one we share?

[Catherine McKinnell]

I very much share the deep concern expressed by my hon. Friend about the figures published yesterday. I hope the Chancellor will start to pay attention to the effect that his economic plan is having on people throughout the country but, I agree, particularly in the north-east, where unemployment is above 10%, which is a shocking figure and spells deep trouble for the long-term entrenchment of unemployment. I will come to that shortly.

As we have heard so often from this out-of-touch Chancellor, he is not for turning, despite the fact that the consequence of his economic failure means that Government borrowing is rising, not falling, with the Tory-led coalition set to borrow £245 billon more than it forecast in autumn 2010. His promise to balance the books by 2015 will not be met and the national debt will not fall until 2017-18 at the earliest. Who knows how many times that will need to be pushed back before the Chancellor realises that his plan is not working?

Of course, that dire situation has led to the downgrading of Britain’s triple A rating by Moody’s and the more recent decision by Fitch to place the UK on rating watch negative, both of which had been prized by the Chancellor and used as cover for the austerity measures he introduced back in 2010.

At a time when living standards are being squeezed, average earnings are rising at their lowest rate since the end of 2009, Government borrowing is up, growth forecasts have been downgraded again, the public services on which people rely are being cut or threatened up and down the country, and ordinary people are being asked to pay the price for the Chancellor’s economic failure, what we needed was a Budget that was on the side of ordinary, hard-working people and families, increasing numbers of whom are clearly struggling to make ends meet.

As my hon. Friend the Member for Stockton North (Alex Cunningham) noted, unemployment is rising again. What we needed was a Budget that would back Labour’s jobs guarantee, using money raised from the tax on bank bonuses to fund a guaranteed job—a real job—for every young person who has been out of work for a year or more. I am not sure whether Government Members have had a chance to analyse the long-term unemployment figures published yesterday, but I can tell them that in March this year 167,345 adults over the age of 25 had been claiming jobseeker’s allowance for more than 24 months. Let me repeat that figure: 167,345 adults had been out of work for more than two years, compared with 84,765 in February 2012 and 52,895 in February 2011. That is a disturbing rise of 97% since February 2012 and 216% since February 2011.

Targeted and urgent action is required if the unemployment situation is not to become dangerously entrenched. We believe that it is a totally unacceptable state of affairs and that action is needed now to stop people being put on the scrap heap and left there, as they were under the previous Conservative Government—and, of course, so that we do not continue building up long-term costs for the taxpayer.

What we needed from the Budget was a reversal of the Government’s decision to stop tax relief on pension contributions for people earning over £150,000 being limited to 20% to fund Labour’s compulsory jobs guarantee for long-term unemployed adults.

--- Later in debate ---

[Mr Jackson]

Exactly. We could argue at length about the progressiveness of various taxes—no doubt others would want to—but my right hon. Friend makes an astute point.

The final example is council tax. That depends on the local authority, but in general, most councils have frozen council tax. Therefore, the suite or portfolio of the Government’s fiscal changes that have helped working people is quite significant.

Let me say in finishing that we expect more from an Opposition two and a half years into a Parliament. We expect them to come up with policies that are credible. We expect them to move on from policies that just tick the box of opposition. No doubt the hon. Member for Kilmarnock and Loudoun, who is well connected in the Labour party, will have read the comments of Tony Blair, a three-time election winner, in the 100th anniversary edition of the New Statesman. He cautions the Labour party not to fall back into the comfort zone, not to be a repository of anger, but to be an outward-looking, forward-looking progressive party. I am sure that the Labour Whip on the Front Bench, the hon. Member for Sedgefield (Phil Wilson), would agree with his predecessor and say that that is sage and intelligent advice. It is so because we expect proper, costed policies. What we have had today is an unfunded tax cut that does not help the people I believe the Labour party genuinely wants to assist to have a better life. I would caution the hon. Member for Kilmarnock and Loudoun to come back with more coherent, more intelligent and more credible policies. That is why I will not support new clause 2.

[Alex Cunningham]

Some Members have chosen to talk about billions of pounds. I will speak about the odd pound and the odd penny, because that is what makes the difference to many of the people I represent.

The cost of living is one of the defining issues of this Parliament not only because of what the Government are doing but because of what they are not doing. Following the announcement yesterday of a huge increase in unemployment—12,000 in the north-east of England—in the last hour, we have learnt that another 160 jobs are going at SABIC, a pharmaceuticals company on Teesside. That is not good news.

The Chancellor’s VAT hike has been shown to be a mistake and it is hitting the vulnerable and those on the lower end of the income scale the hardest. Yes, one of the millionaires who uses his £100,000 tax cut under this Government will pay more VAT than the vast majority of other people when he buys himself a luxury car, but that will not make the difference to whether or not he can buy an extra loaf of bread or a pound of mince for his family’s evening meal. A cut in VAT of 2.5% may just buy some extra peanuts when the banker buys his champagne to celebrate his latest million-pound bonus, but it is the people earning peanuts for working hard to support their families who can put the extra pound or two from a cut to good use.

The previous Labour Government showed that that works when they temporarily reduced VAT to 15%. The reduced tax on sales provided an effective stimulus to the economy. Likewise, a VAT hike was always going to suppress consumption, and hit ordinary families in places such as my Stockton North constituency hard.

[Jonathan Edwards]

As the hon. Gentleman is aware, the rise came in the emergency Budget in 2010. There was a vote on the rise and the Labour party abstained. Can he explain the voting record of the Labour party?

[Alex Cunningham]

That is a very difficult question to answer but easy enough to ask. I regret that that happened.

The Chancellor once spoke of the liberal credentials of his public school, so he could change and understand a bit more about the people out there. At the time, The Guardian quoted him talking about St Paul’s. He suggested that everyone was treated the same and said:

“It didn't matter who your parents were. Your mother could be the head of a giant corporation—or a solicitor in Kew”.

I have news for the Chancellor. Contrary to his blinkered view, solicitors and captains of industry do not encompass the full imaginable spectrum of socio-economic status. Not everyone out there can absorb VAT increases and not notice the difference. One has to add teachers, police, social workers, canteen cleaners, domestic staff, joiners, bricklayers, call centre staff, health care assistants and so many more to one’s list of acquaintances if one is really to understand the impact of his policies on people.

The statistics speak for themselves. The impact of the VAT increase will cost the lowest-paid workers four times more than any gain from the £10,000 personal allowance, when it is introduced in 2014. Like other Labour Members, I approve of the allowance being at that level. It is good that hard-working families can get extra money, but when the Government take it away with the other hand and people end up paying more, that is not a good thing.

Food prices are also up. I know it has probably been a long time since the Chancellor has nipped around the supermarket to do his weekly shop, if he ever has done so, but if he did so regularly he would see that food and other grocery shop prices are somewhat higher than he imagined and, for many items, way ahead of what his inflation figures are suggesting. Whether it is the price of caulies or a budget chicken, my constituents tell me they are having to pay more, or sadly just do without. Families at the bottom of the income scale—on average, on £53.81 a week—will suffer a 6.3% drop in their overall income following the VAT rise, personal allowance increase and other minor tax changes.