Finance Bill

Debate between Andrew George and Chuka Umunna

Tuesday 20th July 2010 Commons Chamber

[Mr Umunna]

No I will not; I will make some progress first, and I will give way in a bit.

What we are witnessing now is a gross and distorted rewriting of history and repainting of the picture to justify the imposition of a Finance Bill and Budget that are less about economics and all about politics.

On 23 June, in an insightful piece in the Conservative house journal, The Spectator, its political editor described the Chancellor’s Budget thus:

“The mission, as Mr Osborne sees it, is to shrink the public sector and grow the private sector—the classic goal of the modern British centre-right.”

That is what the measures in the Bill and the emergency Budget are all about.

Let us address the Chief Secretary to the Treasury’s claims that the Bill is fair. He said:

“This is a Budget that protects the most vulnerable, especially children in poverty and pensioners, while ensuring that those with the broadest shoulders take the greatest share of the burden.”—[Official Report, 6 July 2010; Vol. 513, c. 203.]

Just a few weeks ago, a Liberal Democrat leaflet was pushed through thousands of letterboxes in my constituency under the headline, “Clegg delivers on promises”, proclaiming that the Government are reducing the deficit in as fair a way as possible. It made a series of claims in relation to the Bill and the emergency Budget. First, it claimed that there will be “more money for schools”. We have seen now how accurate that claim was: consider the Building Schools for the Future debacle that we have witnessed over the past few weeks.

Secondly, the leaflet claimed that

“tax credits for needy households”

will be

“saved”,

yet the emergency Budget, in fact, freezes child benefit, thus producing a real-terms cut for more than 14,000 in my constituency who receive the payment. Thirdly, it claimed that the emergency Budget included

“a tax cut for low and middle income families by raising tax allowances”.

That neglects to mention that the increased allowances are completely outweighed by the panoply of regressive measures in the Budget—most notably, the unfair VAT rise that will be introduced under clause 3.

During the general election campaign, my Liberal Democrat counterpart and I spoke at an international Save the Children event in my constituency and we both talked of the need to reduce child poverty. Save the Children is running an excellent campaign in opposition to the VAT hike—a hike that the Liberal Democrats now sanction. I note that there is but one Liberal Democrat Member, I think, in the Chamber at present.

[Andrew George]

Three.

[Mr Umunna]

Okay; three.

The charity said:

“A 20% VAT rate means that the poorest parents will see their VAT bill rise to at least £1,600 a year—affecting already overstretched budgets—and driving some into the arms of loan sharks”,

as my hon. Friend the Member for Wakefield (Mary Creagh) has just mentioned.

The fourth and final claim in the Liberal Democrat leaflet is that they stopped

“Tory plans for a huge Inheritance Tax give-away for the wealthy.”

Even if we accept that claim—I do not—the omission of that giveaway from the Bill pales in comparison with the appallingly regressive overall impact of the Budget, which the Institute for Fiscal Studies and others have looked into. It has calculated that the total effect of the tax rises and spending cuts will cost the average family in the top income decile £1,135 a year. It will cost the average family in the bottom income decile £1,344—£209 more in real terms. The poorest will be 20.5% worse off, and the richest will be 1.6% worse off. So when it comes to social justice, the Government have absolutely nothing to boast about.

The suggestion made in the leaflet that those who are on low incomes should rejoice at the fairness of a Budget that places a larger real-terms burden on the poorest than the richest is an utter disgrace. What is even more disgraceful is the fact that the measures in the Bill and the emergency Budget were a choice. Whatever rewriting of history the coalition indulges in, it cannot distract us from a simple fact: the coalition Government have actively chosen to do this to my community.