Andrew George
Main Page: Andrew George (Liberal Democrat - St Ives)Department Debates - View all Andrew George's debates with the HM Treasury
(14 years, 4 months ago)
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Stewart Hosie
As my hon. Friend says, it will mean £26 million extra on the bill to the NHS in Scotland alone. We can easily add up the figures for all the public bodies and find out what the real cost of the VAT rise will be area by area, but we know that it adds up to £13 billion in total. It makes up more than a quarter of the additional £40 billion of fiscal tightening that the Government wish to see in 2014-15. That is £40 billion in that single year, on top of the cuts and tax increases inherited from the Labour party that they intend to keep. There is a huge problem with the VAT component of this Finance Bill.
Andrew George (St Ives) (LD)
By and large, I must commend the hon. Gentleman for a constructive contribution to the debate—we have not had many so far. Given the amendment that I tabled last Monday about impact assessments on VAT, what alternative would he recommend to fill the hole that would be left by not increasing VAT by 2.5%, or does he not recommend an alternative?
Stewart Hosie
I suffer from the advantage of tabling many new clauses and new schedules to the Fiscal Responsibility Bill to establish a medium-term fiscal consolidation precisely to avoid the slash-and-burn approach of a massive hike in the most regressive form of tax. Instead of the VAT increase, I would not tackle the deficit and debt over a fixed term—certainly not a short fixed term such as the Government propose—but do it in the medium term, not least to benefit from the £50 billion of medium-term savings from cancelling and not replacing Trident. The Liberals appeared to be in favour of that midway through the election campaign, but were not towards the end, when it looked as if their leader would be in a position of some influence and power. I will stop there because the Liberals have had a hard enough time, but I will return to the subject shortly.
It is not simply what is in the Bill that causes problems, but what is not in it, and the missed opportunities that that represents. The reasoned amendment outlines those. For example, the Bill could have taken its lead from the second and final report of the Holtham commission—the Independent Commission on Funding and Finance for Wales—which repeated its call for an immediate “Barnett floor” on departmental expenditure limit payments to Wales. My hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) mentioned that earlier. That came a year after the commission’s first report recommended that such a floor, which would prevent further convergence between Wales and the England average, should be a multiple of 114% spending in Wales for every 100% in England. The Scottish National party and Plaid Cymru were delighted that the Chief Secretary confirmed earlier that there would be no further convergence in funding for Wales in the next few years at least. I am sure that my hon. Friends in Plaid Cymru will hold the Government to that.
The Bill also missed an opportunity to deliver real progress on intergovernmental relations with Scotland. The Government could have ensured the release of the fossil fuel levy—nearly £200 million sitting in a bank account—without a corresponding cut to the Scottish block. Such a move would have been welcomed, and have provided a much-needed boost to the Scottish Government’s attempts to secure economic recovery and kick-start jobs in the green economy. Better still, the Government could have moved to a position of full fiscal responsibility for Scotland, so that Scotland would make all its tax-and-spend decisions and find its own solutions to ensure that we did not enter another recession.
There was also an opportunity to deliver a fuel duty regulator—a fuel duty stabiliser—and fair play on fuel, not least for the haulage sector. Instead, the Chancellor plans to go ahead with Labour’s inflationary package of three fuel duty increases in the next year. The Road Haulage Association’s chief executive said that that
“will simply further widen the gap between UK diesel duty and that of our EU competitors.”
As my hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil) said several times, the Government have missed an opportunity for a fuel duty derogation now for remote and rural areas. I hope that that idea has not been kicked into the long grass, never to be seen again, and that the Liberals in the Government might find a little steel before they are ground down completely, and deliver something beneficial to remote and rural areas throughout the UK.
Andrew George (St Ives) (LD)
It is a pleasure to follow the hon. Member for North Durham (Mr Jones). If I pick my way through the hyperbole and the political points that he sought to make, I find that there were a number of very telling and important facts and figures. Indeed, it was a thoughtful and constructive contribution in many ways, if a rather encyclopaedic one. When he opened his remarks, he described it as his first speech—his maiden speech—since the general election, but next time he is about to speak, I must remind myself not to be the next speaker.
This debate about the Finance Bill—and I accept your strictures, Mr Speaker—can probably be characterised by the to-ing and fro-ing between Members on the Treasury Bench and Opposition Members. Members on the Treasury Bench have characterised the emergency Budget and the Finance Bill that underlies it as an unavoidable and regrettable necessity, given the public finances and the circumstances in which the country finds itself. On the other hand, Opposition Members have predictably and quite understandably characterised it as entirely ideologically driven and an example of political opportunism.
In my brief contribution, I want to try to acknowledge that, first, as Members on the Treasury Bench have said, we are all in this together. The nature of today’s debate is that we are all in a political mire of tribal point-scoring and translucent evidence, and that has not shown the House or this debate in a good light. We should be trying to get to the nub of the evidence that drives us towards the correct answers; we, as politicians across the political spectrum, are seeking to assist the country. People witnessing the debate will not have been enlightened by many of the contributions because of the tribalism into which the House has fallen. [Interruption.] Hon. Members may well not like that comment.
Having said all that, I should add that there were four beacons of hope in the maiden speeches this evening, made by the hon. Member for Scunthorpe (Nic Dakin) and my hon. Friends the Members for North East Cambridgeshire (Stephen Barclay), for Ipswich (Ben Gummer) and for Weaver Vale (Graham Evans).
I suppose that I have been implying that I oppose any ideologically driven contribution, but I actually want to make one myself.
Andrew George
May I make this point about the ideologically driven element of the debate? I strongly endorse an element of it. There is a welcome on the Government Benches, and even on the Opposition Benches, for elements of the Finance Bill and the Budget that preceded it. I am thinking of the rise and ultimately the further ratcheting up of the personal tax allowance, of the triple lock that will ensure that pensioners get a decent annual pension increase and of the closing of the tax loophole that has existed for many years.
The loophole was created by Labour’s reduction of capital gains tax to 18%. That has now been increased to just 28%, and we will certainly have an opportunity to debate that issue in the coming weeks. It was an important contribution. Furthermore, a banking levy has been introduced. It is important that the sector that dropped us into the mess should make a significant contribution towards helping us get out of it; I would argue that at this moment its contribution is still not sufficiently significant.
The hon. Member for North Durham’s last comments were about public sector pay. In the Budget, we have been seeking to protect the lowest-paid in the public sector.
Andrew George
I shall give way to the right hon. Lady, but I want my contribution to be short.
Mrs McGuire
I fully understand some of the hon. Gentleman’s comments about matters of judgment. I also understand that he thought that the £1,000 increase in the personal tax allowance was important. I have observed him for many years in the House, and he is an honourable person. Will he help Opposition Members to understand why since April and early May, when he was so violently against any increase in value added tax, he has started supporting a regressive increase in that tax? It would help break down some of the barriers that he senses if we could understand the thought process involved and the discussions that drew him into the VAT spider’s web.
Andrew George
I am grateful to the right hon. Lady for that intervention. She has come to the nub of the dilemma in which a number of other hon. Members and I find ourselves. Yes, the VAT increase was not part of the coalition agreement. I presupposed that it would inevitably be regressive and that I would automatically oppose it. The right hon. Lady will be aware that last Monday, I tabled an amendment on the Order Paper that sought to get the Treasury to provide the necessary impact assessment of the 2.5% VAT rise as it applied to families across the income spectrums, to charities and to businesses. There was mention of the rural travelling public as well.
Andrew George
I will just make this point, if I may.
There are very significant questions to be asked about this issue. On page 67 of the Red Book, the changes to VAT are described as “progressive”. I question whether it is entirely accurate to describe a VAT rise as being, on balance, progressive. [Interruption.] I am trying to make a constructive contribution to the debate; I am not taking a tribal view of this issue.
Andrew George
I am going to finish making this point about VAT, if the hon. Gentleman does not mind.
The best source that most people pray in aid when engaged in Treasury and Finance Bill debates is the Institute for Fiscal Studies, so I looked at the evidence that it has gathered on VAT. The hon. Member for North Durham referred to that in the context of the graph on page 3 of the Library note. The IFS makes it clear that, taking a snapshot in time, those who are engaged in the highest expenditure will be most affected by changes in VAT.
Andrew George
I will take more interventions when I have responded to the right hon. Member for Stirling (Mrs McGuire), who asked a very significant question that deserves an answer and is the nub of the point that I wish to make.
The IFS says that not only do the highest spenders pay the most VAT, but that it is in relation to their incomes. Therefore, as the useful graph in the Library note shows, the highest contribution is made by the lowest-income households, which inevitably, under its definition, are those with the highest expenditure in relation to income. The IFS goes on to say that we should look at the impact on lower-income households from the perspective not just of a snapshot in time but across a longer period, if not entirely a lifetime. In other words, its conclusion is much more equivocal. In view of that, we need to understand to a far greater degree the extent to which the VAT rise is regressive or progressive. I think it is reasonable—
Andrew George
Just let me finish my sentence. When I have made this point, I will give way to the hon. Member for Stretford and Urmston (Kate Green).
I welcome annex A of the Red Book and congratulate those on the Treasury Benches on introducing it. For the first time, it provides an impact assessment and evidence of the kind that Labour Members must accept that they did not provide in the past. However, I still do not think that it is enough—it is too superficial. I have asked a large number of questions of the Chancellor of the Exchequer, as hon. Members will know, because I believe that it is important that we understand a great deal more about the impact of the VAT rise on low-income households, charities, businesses and others.
Kate Green
I am very grateful to the hon. Gentleman for giving way, and I hope that my sentences will be a little shorter than his.
Is it not the case that in a complex argument, we are beginning to unpick the cumulative effect on lower-income households? It is a combination of a hit on their expenditure—not on their luxury spending but on their essential spending—and a reduction of their income if they rely on safety-net benefits, because of the future link with the consumer prices index, as well as the risk of their falling out of work and having at least a period of unemployment. I believe that the hon. Gentleman is rightly striving to describe that cumulative effect. I very much welcomed his amendment on looking at the impact of the VAT measures on those households.
Andrew George
I am very grateful to the hon. Lady, and we will have to compete on sentence lengths in future. Given her experience on the issue, it is worth while to quote once again the Save the Children briefing note that was circulated to the House, as the hon. Member for North Durham did. As the hon. Lady says, there is a cumulative effect, but if any amendments are tabled to the Finance Bill, they will be directly related to VAT and other matters will have to be considered in other ways, not necessarily under the Bill.
The Bill is rather narrowly set, and the Budget mentioned other measures, which must presumably come forward in another Finance Bill that will be presented to us in the autumn, so I assume that there will be a further opportunity for those issues to be examined, because only seven measures are contained in the 11 clauses of this rather narrowly drawn Bill.
I realise that I have just committed myself to another very long sentence with an enormous sub-clause in it, but I said that I would quote from the evidence presented to us by Save the Children, which is important. It states:
“Increasing VAT will simply widen inequalities and entrench the unfairness that exists in the tax system...It is also worth noting that data from the Office for National Statistics shows that, on average, the wealthiest households contain fewer children than poorer and middle income households, meaning that the unfairness of the tax system is weighted against children.”
Further to the point about whether the increase will have an impact on low-income households, Save the Children therefore rightly raises another issue. I should like the Treasury Ministers, in response to my questions and those that others will no doubt raise, to elucidate on that a little further.
What we need in this debate and in the further stages of scrutiny that the Bill will necessarily go through is a lot more information. I would describe the situation as a tribal mire in which there is translucent evidence, and that evidence needs to be much clearer.
Glenda Jackson (Hampstead and Kilburn) (Lab)
I am most grateful to the hon. Gentleman for giving way, and I admire his mea culpa—is it St Sebastian, the man who stands there with all the arrows? Certainly the hon. Gentleman has portrayed that for us this evening. However, with respect, the issue is not simply VAT. In his opening remarks he said he supported the Budget and the Finance Bill because we are all in this together, but we are not.
No one sitting in this Chamber or within the environs of this Chamber is in danger of losing their home because of the changes that his Government are bringing in with regard to housing benefit, but 303 of my constituents are in danger of losing precisely that. They are not alone in London or the country at large. The hon. Gentleman gave a very good mea culpa on VAT, but the complicity of his party with what the Conservatives are going to do to our country is not absolved, however long his sentence.
Mr Speaker
Order. May I just say to the hon. Lady that I could listen to her, almost without interruption, for some hours, but that shorter interventions would be helpful? It is always a pleasure to listen to her fantastic enunciation.
Andrew George
I think that we are all competing in sentence length—perhaps the hour is causing us to use sub-clauses. [Interruption.] I know that I am not the most articulate Member—I have a speech impediment; please bear with me.
The hon. Member for Hampstead and Kilburn (Glenda Jackson) made a decent point. If she listened carefully to my opening remarks, she would realise that my reference to the “we’re all in it together” theme was intended to criticise us all for being in it together by missing the point and making tribal remarks about the other side, but not being in it together with the country at large, which will suffer through some of the Budget measures. She made further points about my keeping narrowly to the subject of VAT. Interventions in my speech have been only about VAT, and I wished to make a brief contribution, which turned out to be much longer than I expected, on VAT. It is important, having commenced on that path, to continue on it and examine that provision in isolation. I know that it cannot be taken in isolation by the families, businesses and charities that it will affect. However, I still believe that it is important to consider it on its own.
The other issues, such as housing benefit, that the hon. Lady mentioned, are not in the Bill. I hope that the House will have a good opportunity to debate public sector spending and benefits, including disability benefit issues, which were announced in the Budget and clearly need to be debated later, with all the facts made available to us. We currently have a translucent position with regard to the evidence before us.
Andrew George
The hon. Gentleman has obviously not been listening. He is incapable of listening to anything.
We require honest and transparent information from the Treasury to help us reach a conclusion about the VAT measure’s other impacts. I hope that Treasury Ministers will revisit the issue, perhaps having undertaken further modelling and commissioned further studies on its impact on low income families, charities and businesses. I hope that they will be prepared to revise their position, if necessary during the Bill’s passage.
Several hon. Members have mentioned the rural fuel derogation and the opportunity for that to be introduced. The Chief Secretary promised to go away and make some further inquiries about that. I encourage members of the Treasury Bench to examine that carefully because the impact on rural areas will clearly be significant. The Chief Secretary made a commitment this evening to undertake further studies.
Mr MacNeil
While awaiting the big answer to why the hon. Gentleman is supporting the VAT increase, I ask him whether he agrees that a rural fuel derogation should be introduced before the VAT increase. After all, the rural fuel derogation is mentioned in the coalition Government’s programme, whereas the VAT increase is not. The Government have moved lightning quick on VAT; let us hope that they move as quickly on the rural fuel derogation. Will he support me on that at least?
Andrew George
The hon. Gentleman makes a good point. I remain agnostic about the process whereby the goal is achieved, but I wish him well with the aim and share his view, because the issue affects the very rural communities of west Cornwall and the Isles of Scilly in the same way as it affects the Scottish islands.
Andrew George
I am going to draw my remarks to a close, so I will take no further interventions. My proposal was purely for VAT impact assessments, and through questions to Ministers, I am seeking further information on the impact of the VAT increase.
Mr Byrne
I am grateful to the hon. Gentleman for giving way—the House has been following his remarks with some care. Before the Liberal Democrats gave their consent to the proposals in the Budget, they will have discussed the matter. In the interests of the debate that he is trying to stimulate, was it ever explained in those discussions that an extra £9 billion of tax must be raised by the Budget because its overall effect is to slow the recovery to such a serious extent?
Andrew George
If the right hon. Gentleman does not mind, I will move on. That is part of the debate that he will no doubt continue with Treasury Ministers. If Labour Members wish to avoid a VAT increase such as that proposed in the Bill, they need to propose alternatives. Those might include a further increase in the banking levy or an increase in capital gains tax, or perhaps VAT increases could apply to luxury goods but not to others, but alternative measures to fill the £13 billion hole in the public sector accounts would be needed.
I hope that future stages of the Bill will provide a more constructive environment in which to debate VAT and other matters.
Clive Efford
We have seen so many unexpected changes from the parties opposite, and my right hon. Friend is absolutely right to draw our attention to the fact that they have been silent on that issue.
I have another question about the Bill. Where does it mention the tax on the banks? When can we expect to see that measure before us? Why is it not part of the Bill? Perhaps the Liberal Democrats would like to intervene on me to tell me when we can expect to see it. We are told that it will be consulted on. If that is the case, is it going to go up or down, or is it going to stay as it is? What is the point of consulting the bankers—I assume that that is whom the Government are going to consult—on something that they would rather did not happen?
The Liberal Democrats told us that they were going to break up the casino banking system. The Secretary of State for Business, Innovation and Skills wanted the banks to be broken down into smaller banks, separating casino banking from normal banking. Yet we are told that the Chancellor opposes this and has set up a commission to look into it, which will take at least a year, thereby kicking it into the long grass. [Interruption.] I hear a sedentary intervention that we are dealing with the Finance Bill. Yes we are, and this is not in the Finance Bill, but it is an integral part of the Budget. It is therefore legitimate to ask where it is, when it is going to happen and what the consultation will be about, because it impacts on what taxes we raise on the people we represent. [Interruption.] I say to the hon. Member for St Ives (Andrew George), who did not make a very good job of defending his position on the increase, that that includes VAT.
On 12 March the Deputy Prime Minister called for a 10% tax on bank profits and a £2 billion job creation scheme to rescue the victims of recession. We keep being told by the Liberal Democrats that they have had an enormous impact on this Budget, so perhaps they could explain the impact they made here. I would have supported and voted for a 10% tax on bankers’ profits, instead of for taking people’s benefits away from them or for poor families paying VAT increases. After all, where did the financial problems start?
The Deputy Prime Minister kept digging during the general election, and on 20 April accused the bankers of behaving like “Arthur Scargill in pinstripes”. He then went on to say:
“The banks have basically been given untrammelled support by Labour and Conservative governments to do exactly what they like, and take massive risks with our livelihoods and our savings. They have been holding a gun to the economy. A progressive liberal like myself is not going to be squeamish about blowing the whistle on a vested interest.”
Well, where is it? Where is the whistleblowing on those vested interests?
The Liberal Democrat website—I do not know whether Liberal Democrat Members ever look at it—still says that they are going to bring “fundamental change” to our banking system.
“We will break them up and break them down.”
It continues:
“Until such a time, the taxpayer will have to continue underwriting the banks”—
well, we know that from this Budget.
“To recognise this, we are proposing a new levy on bank profits at a rate of 10%...This levy would be supplementary to corporation tax”.
Well, where did that happen? If we look at corporation tax outcomes—[Interruption.] The hon. Member for Cheadle (Mark Hunter) intervenes from a sedentary position. Would he like to repeat what he just said? I think he said that the Lib Dems did not win. Well, we all know that; that is why we are complaining about what they are doing.
If I look at what the banks are saying about corporation tax, I find that they are rewarded and compensated for the £2 billion levy that the Budget wants to raise. We have some more juicy quotes here; the Lib Dems might want to listen to them. Here is one:
“Bankers were relieved that the chancellor’s speech failed to repeat the coalition government’s threat to end ‘unacceptable bonuses’”.
Deutsche Bank analysts noted the significance of the corporation tax change:
“Taking 2% off the 2012 tax rate for the five banks listed in the UK would increase profit by £1.16bn, that is it should almost offset all of the banks’ tax. Overall a good outcome for the banks.”
A number of bank analysts calculated that some banks could benefit from the Chancellor’s measures. As I have said, Deutsche Bank concluded that it was a “good outcome” for banks, while an analyst at UBS expected Lloyds and HSBC to benefit by 2012 because the cut in their corporation tax bill was larger than the hit that they sustained through the bank levy. HSBC banking analysts concurred:
“We’d expect most domestically-orientated banks, for example Lloyds, to be better off after four years than they were pre-budget”.
How has it come about that a party that went through the general election giving all those quotes about how they were going to break the banks up and break them down, and make the bankers pay until the pips squeaked, has come to support a Budget that takes from the bankers with one hand, pays it back with the other and rewards the banks with a tax benefit at the end of it? And at the same time they will be marching through the Lobbies to the drumbeats of the Tories, voting for cuts in benefits and an increase in VAT, and making the poorest people in our communities pay, when the banks are not paying.
It was all puff and wind from the Liberal Democrats during the election. We have heard it all before, and we are hearing it again. This time, however, they have actually got to vote for something. They are actually in charge and responsible for what they are voting for, and they are going to pay a very heavy price indeed.
Clive Efford
Perhaps the hon. Gentleman would like to intervene. I think he was shouting about the 10p tax rate. There were problems with that, and I will tell the House what they were. I will be quite frank. The 10p tax rate did not direct enough money to the poorest people in our communities. When we hear about the uprating of the lowest tax threshold from the Benches opposite, what we do not hear about is the clawback from the poorest people, who will lose housing benefit and other benefits. We never hear the full story from the Liberal Democrats when they are spinning on a pinhead to try to protect themselves from the charge of having said one thing and done another.
I could go on. The Liberal Democrats are such an easy target that I could be here all night. However, I will end by saying this. It is clear that what is before us tonight is not about the deficit, whatever excuses we hear from the Government Benches. This is an ideological change. Either Members believe that the state should intervene and assist, in particular, the weakest in our communities, or they do not. A stark choice is involved in terms of what Members support in this Bill.
There are 61 million people employed in the public sector. Some 3.9 million work in health, education, defence and social work, and roughly 2 million are employed in other services, including 530,000 civil servants. Those figures are huge, and those people are essential to many of our communities and to our economy. Moreover, 25% of public sector expenditure goes on private sector goods and services. The private sector will find it impossible to fill the gap left by the reduction in the public sector, as those who support the Budget try to claim it will. That 25% that feeds the private sector will be taken away from it when it is trying to grow. Expecting the private sector to grow at a rate that would enable it to fill that gap is just a pipe dream.
In its document “The Jobs Gap”, the Work Foundation predicted that the private sector could possibly absorb 500,000 job losses in the public sector, but that any plausible private sector recovery would be overwhelmed if the number approached 1 million. According to the predictions, it will considerably exceed 500,000. The foundation also warned that it was risky to assume that big cuts in public sector payrolls could be effortlessly absorbed by the private sector. There is often a mismatch in skills, which creates a delay in people finding jobs in the private sector, and the recovery tends to come in the most prosperous areas at the expense of the most impoverished. The Chartered Institute of Personnel and Development has estimated that 725,000 jobs will be lost in the public sector alone by 2015, although the number could be lower if the Government succeeded in pushing through pay cuts.
It is clear that these changes go further than is necessary to deal with the deficit. They do little or nothing to recoup money from the banks that have put the country in its present position, and they are clearly unfair on the poorest in our communities. This is the last point that I shall make to the Liberal Democrats. If they fundamentally believe that cutting back the state is what the country should do, they will come back for the national health service. It is not consistent with the measures in the Budget that it is possible to protect the national health service—a public service that intervenes at every level in people’s lives—and cut back other aspects of the state.
The Liberal Democrats and the Tories will have to come for the NHS. We only have to look at people such as Mr Daniel Hannan and the speech that he made in America. He was personally invited by the Prime Minister to speak at the Tory party conference, lauds the private sector and wants to cut the NHS and to move to a private health insurance system. Those are the people at the heart of the thinking of the Tory party. I suggest that the Liberal Democrats think very carefully before they vote for the Budget. It is an ideological Budget to cut back the state. They will not be able to defend the NHS once they have gone through the Lobby and voted for this Budget.