Finance (No. 3) Bill
Debate between Angela Eagle and Danny Alexander(13 years, 7 months ago)
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Danny Alexander
I believe that the reduction in corporation tax will benefit businesses in all sectors. As for the question of capital allowances, the changes in relation to short-life assets have been welcomed throughout the business community, and particularly by the Engineering Employers Federation.
In 2007 the last Government reduced the writing down allowances from 25% to 20%, and we are reducing them from 20% to 18%. That is a balanced move which will ensure that firms in all sectors, including manufacturing, benefit from the new corporation tax environment that we are introducing.
Ms Angela Eagle (Wallasey) (Lab)
The Chief Secretary has mentioned small business. It is clearly agreed throughout the House that the SME sector will make a vital contribution to future growth in the economy. Does it worry him that, once again, it has been demonstrated that lending to small business fell in the first quarter of this year, despite the attempts to boost it in Project Merlin? What is he going to do about that?
Danny Alexander
Of course I am worried if lending to small businesses is falling. The Merlin agreement, which we announced at the end of February, was an agreement with the major United Kingdom banks to secure an additional £10 billion of lending to small businesses this year. We will monitor the position, the figures will be made available, and we will watch the banks like a hawk to ensure that they deliver on the agreement. That is critically important: this Government have acted as the last Government did not manage to.
Danny Alexander
I am going to press on now. I want to deal with the issue of fairness.
Although growth is key to improving everyone’s prospects in the medium term, we know that many families face real financial pressure now. The Bill therefore includes measures to help hard-working people with low and middle incomes, and to support families who are struggling to make ends meet. The Government are committed to real increases in the personal allowance every year, until no one earning less than £10,000 is caught in the income tax net. Clause 3 takes the first step towards meeting this objective by increasing the personal allowance by £1,000 for this tax year. That is the largest single rise in history. It means that 23 million taxpayers in Britain will be £200 better off this year in cash terms, and that more than 800,000 people will be taken out of income tax altogether.
The Budget also revealed the next step in the process. An increase of £630 next year will keep us on track to deliver the £10,000 allowance by 2015, as promised. That is progressive action by a coalition Government who recognise that those with the broadest shoulders should continue to bear the largest burden, and that those on the highest incomes should pay their fair share.
The Bill includes 11 new measures to close tax loopholes that have remained open for too long. For example, clause 26 will help to end the unfair practice of disguised remuneration. No longer will highly paid employees be offered virtually tax-free lifetime loans which, in truth, will never be repaid. Such arrangements are completely unacceptable. We will ensure that they cannot continue, and that all income is properly taxed. We have consulted to ensure that the impact of the legislation on commercial arrangements is limited, and we intend to make further changes when the Bill is considered in the Public Bill Committee.
Those measures will give us more resources to help families who pay their taxes, but who are struggling with the daily cost of living. The same motivation lies behind clause 7, which increases the supplementary charge on the large profits being made from oil and gas extraction in the North sea.
I understand that the increases in the supplementary charge are controversial, at least in the oil and gas sector. Given that the sector is benefiting hugely from the rapid rise in the world oil price, which currently stands at $124 a barrel, it was right to ask it to share some of its profits with motorists, but we are listening carefully to its concerns about specific investments. As we said in the Budget, we are discussing with several firms the possibility of using the field allowance regime to continue to support investment. The industry is understandably concerned about the stability of the tax regime, given the long-term nature of investments in the North sea. That is why we committed ourselves in the Budget to working with the sector to provide certainty about the long-term future of decommissioning relief, and why we announced a fair fuel stabiliser to reduce the supplementary charge if oil prices fall below an agreed trigger level.
However, we should not lose sight of the fact that this money is financing a much-needed package of support for motorists. First, it is funding the 1p reduction in fuel duty to which clause 19 refers. Secondly, it has helped to cancel Labour’s inflation uprating until January next year. As a result of these two changes, fuel is 6p a litre cheaper now that it would have been under the plans we inherited.
I should also remind the House that this Government inherited plans for above-inflation increases in fuel duty for 2011, 2012, 2013 and 2014. The increase in the supplementary charge has allowed us to abolish this fuel duty escalator, so that duty will not rise above inflation for the rest of this Parliament. As with fairness, so in understanding the issues facing hard-pressed motorists it is this coalition Government who are looking to share the burden of higher oil prices.
Let me now turn to the issue of taxing Britain’s banks. The previous Government announced and implemented a temporary tax on bonuses for one year only. Indeed, it was the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), who advised against repeating that. Clause 72 introduces a permanent levy on bank balance sheets, which will raise £2.5 billion in each and every year of this Parliament. That amounts to £10 billion of additional tax from the banks over the next four years, and, thanks to the decision announced by the Chancellor in February, an extra £800 million for this year too. There will be extra money to help us support jobs and growth this year, such as by providing the finance for an additional £100 million of investment in new science facilities at Cambridge, Norwich, Harwell and Daresbury, and £250 million of investment in the FirstBuy scheme for new-build homes, giving a helping hand to 10,000 people as they climb the first rung of the property ladder.
The Bill will also deliver fairness over the longer term. The changes to the requirements on annuitisation set out in clause 65 have long been called for, and will give people more control over their finances. They will allow those approaching retirement to make their own choices about how they use their pension savings, and they will offer greater flexibility in planning for old age. The introduction of automatic enrolment that is supported by the taxation changes in clauses 68 to 71 will help ensure that a low-cost pension scheme is available for the 5 million employees expected to save in the National Employment Savings Trust. The simpler, fairer rules on pensions tax relief in clauses 66 and 67 will limit the amount of tax relief received by those who make the highest pension contribution. From this year, the annual allowance will be set at £50,000 and the lifetime allowance will be reduced to £1.5 million. That will generate about £12.5 billion by the end of this Parliament, and it will ensure that the pension system remains generous for savers, is fair to taxpayers, and is affordable for the Exchequer. At the other end of the age range, clause 40 introduces individual savings accounts for children, offering a simple and tax-free way to save for a child’s future
Turning to the environment, the introduction of a carbon price floor in clause 77 is a revolutionary move. It demonstrates this Government’s commitment to being the greenest Government ever, and it makes us the first country in the world to introduce such a measure for the power industry.
Amendment of the Law
Debate between Angela Eagle and Danny Alexander(13 years, 7 months ago)
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Danny Alexander
I am not going to give way to the right hon. Gentleman. I must press on. I have answered his point.
Small businesses, in particular, have been the innocent victims of the credit crunch. They have seen the flow of affordable credit dry up, which is why we have agreed with the banks a £10 billion increase in the availability of—
Ms Eagle
Will the Chief Secretary turn his attention to page 44 of the Red Book, and the “Measures announced at Spending Review 2010”? Measure d states:
“Disability Living Allowance: remove mobility component for claimants in residential care.”
It is scored to save £155 million in 2013-14, £160 million in 2014-15 and £160 million in 2015-16, so how could the Prime Minister say that it was not happening when it is still scored in the Red Book?
Danny Alexander
As I said in answer to the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke), that question is a subject of the review that my right hon. Friend the Secretary of State for Work and Pensions has announced and we are carrying out. We have made it very clear that we are looking at that question, and we will provide the mobility component at a level that is necessary in care homes when we have removed the overlaps and the issues quite rightly identified.
The Government’s third ambition for growth is to encourage investment in exports as a route to a more balanced economy. In “The Plan for Growth”, which we published last week, we set out specific measures to help out a range of businesses. In life sciences, which the hon. Member for Macclesfield (David Rutley) mentioned, we will radically reduce the time it takes to get approval for clinical trials; in our digital and creative industries, we will improve the intellectual property regime; and in manufacturing, which the hon. Members for Wolverhampton North East (Emma Reynolds) and for Warrington South (David Mowat) addressed, we are launching Britain’s first technology and innovation centre for high-value manufacturing, creating new export credits to help smaller businesses, doubling the limit on the capital allowances for short-life assets from four years to eight years and investing in infrastructure, which my hon. Friend the Member for Manchester, Withington (Mr Leech) referred to. These are some of the measures that we are taking to ensure that growth is more balanced and more sustainable, and supports employment across a wide range of sectors.
On green growth, first, we have announced that we will become the first country in the world to introduce a carbon price floor for the power sector. The price will start at around £16 per tonne of carbon dioxide in 2013 and move to a target price of £30 per tonne in 2020. That will provide the incentive for billions of pounds-worth of new investment in our dated energy infrastructure.
Danny Alexander
I will not give way.
The second step that we are taking is to create the green investment bank, as the hon. Member for Stroud (Neil Carmichael) mentioned. As part of the spending review we committed £1 billion to this new facility. Last week, we announced £2 billion more, funded from asset sales and underwritten by the Treasury. This is another step to ensure that we are the greenest Government ever.
Danny Alexander
I will not give way.
That leads me to our fourth ambition for growth—a better educated work force who are the most flexible in Europe.
Oral Answers to Questions
Debate between Angela Eagle and Danny Alexander(14 years ago)
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Danny Alexander
Of course, the European Court of Auditors report, which fails to qualify the accounts for the 16th year in succession, is disappointing, as my hon. Friend observes. We will continue to champion reform through engagement with European institutions and other member states. It is worth him bearing in mind that the Government’s most important priority for the forthcoming budget negotiations is to reduce and to keep under control the EU budget, not just next year, but in subsequent years, in recognition of the fact that many EU countries are facing tough financial circumstances, as we are.
Ms Angela Eagle (Wallasey) (Lab)
The Chancellor’s reckless choice to cut deep and fast at home means that UK jobs and growth are now reliant on achieving booming exports on a scale not seen for more than 60 years. We know that Europe is our single largest export market. Will the Minister share with the House the latest evidence of the growth of demand in that market?
Danny Alexander
There is evidence of export growth in many sectors of the economy, and the Government have played a significant role in promoting exports, as the recent trade delegation to China showed. The hon. Lady has a poor record of predicting the economy. In April 2008, she was engaged in a debate that observed that there was an extreme bubble in the housing market. She described that as a “colourful and lurid fiction” that
“has no bearing on the macro-economic reality.”—[Official Report, 2 April 2008; Vol. 474, c. 825.]
I would rather take the forecast of the Office for Budget Responsibility than hers.
Comprehensive Spending Review
Debate between Angela Eagle and Danny Alexander(14 years ago)
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Danny Alexander
My hon. Friend makes a very important point. The NAO has indeed criticised the effectiveness of the previous Government’s so-called efficiency programme. Many of those criticisms are well founded, and we will proceed on a very different basis. To give an example, the single indicator that they set out for local authorities to report on their own efficiencies had 66 pages of guidance for them to follow, thereby creating a huge industry in local authorities just to meet the reporting requirements.
Ms Angela Eagle (Wallasey) (Lab)
The right hon. Gentleman has been talking about detail, and there is one detail that I am interested in. There was a leak from the Ministry of Justice demonstrating that it has set aside £230 million to pay for the redundancies that it has announced in its front-line staff. Can he tell the House, because he must have this figure, how much he has set aside to pay the redundancy bills for the job cuts that he has announced?
Danny Alexander
I welcome the hon. Lady to her place. I think that it is the first time we have had an exchange over the Dispatch Box, and I congratulate her on her appointment. Departments will set out their work force plans in due course. They are working on those things, and there are many things that they can do to avoid excessive redundancies. [Interruption.] I am not going to go into individual departmental figures.
Danny Alexander
I am not going to give way again. These figures will be for Departments to set out.
Danny Alexander
I am going to press on with this section of my speech, and then I will give way in a moment.
In June’s emergency Budget, we set out the road map to recovery and took the country out of the danger zone. The independent Office for Budget Responsibility examined our plans in June and forecast the economy growing and unemployment falling in every year. It also assessed that we were on course to eliminate the structural current deficit and see debt fall by the end of this Parliament, one year ahead of our mandate. The recovery will be choppy, but we are confident that our plan will see us through.
Danny Alexander
My hon. Friend asks a very good question. Over the course of the spending review period, our plans will save £5 billion in debt interest, which the Labour party was very happy to pay.
Ms Eagle
I thank the right hon. Gentleman. We know that he will know the answer to this question. He has set out a plan that will lead directly to 490,000 people losing their jobs in the public sector. We know that the Ministry of Justice has already made an allowance of £230 million to cover the cost of redundancies. He must have a figure for the rest of Whitehall put together, and he should now give it to us.
Danny Alexander
The hon. Lady is the shadow Chief Secretary, and we read in a memo directed to the Leader of the Opposition that the Opposition had a plan for £44 billion of cuts, but she has not set out a single piece of detail on that. As I said, Departments will set out their work force plans in due course.
The previous Government’s plan was not a serious plan to deal with the deficit and support growth. It was not a fair approach. It would have led to more, not fewer, cuts in the end, because of higher debt and higher interest payments—more interest on the debt, and more interest on the interest. Compared with the plans that we inherited, we will save £5 billion in debt interest payments over the course of this Parliament.
The emergency Budget set out our plan to balance the books, and now we have shown how we will find £81 billion of savings by 2014-15. Let me put that in some context. Even at the end of that period, public spending as a share of gross domestic product will be 41%.
Danny Alexander
I shall give way at the end of the section on welfare because I know it is of interest to many hon. Members, but let me explain our position.
The welfare budget accounts for nearly £1 in every £3 spent by the Government. The cost of the welfare system has increased by 45% in the past decade. In some cases, those increases were necessary—it is right that the Government should help those who need it most—but in many cases the previous Administration’s over-complicated bureaucracy trapped people in a system in which it does not pay to work. Worse still, many were simply dumped on benefits by previous Administrations and left there. That is not fair on them or the taxpayer. No one can deny that reform is essential, but the question is how the right balance should be struck.
Our approach is to move to a universal credit system over the course of two Parliaments to do away with the complexity of the current system so that it always pays to work. We will introduce a new work programme to provide personalised support to those who need the greatest help with getting back into employment, with private and third-sector providers being paid for the additional benefit savings they secure. We will fund significant above-indexation increases for the child tax credit to ensure that the spending review has no measurable impact on child poverty over the next two years. Through the welfare reforms in the spending review, we will find £7 billion of net savings on top of those identified in the Budget. Some £2.5 billion comes from removing child benefit from households with a higher-rate taxpayer. That is the largest welfare measure in the spending review and the most progressive, but it is the one that the Opposition have most vocally opposed.
Ms Angela Eagle
I thank the right hon. Gentleman for giving way on that point. There are press reports out on the wires that a source in Her Majesty’s Treasury is saying that the child benefit cut is “unenforceable” and will be dropped. The press report says that it is
“panic stations in the Treasury.”
Is that true?
Danny Alexander
I think it is panic stations on the Opposition Front Bench if they do not have a single answer to a single question about the action that they would take to reduce the deficit. The story that the measure is unenforceable is nonsense; it will be introduced as planned. The savings were signed off by the Office for Budget Responsibility, which considered the compliance risk involved as well. Higher-rate taxpayers are of course required to disclose all relevant information.
Ms Eagle
No. I have given way to the hon. Gentleman before.
No priority is to be given to the services that we rely on, day to day. That is the choice that the Government have made. Let us have a serious debate about the differences between us, and let us have no more nonsense from the Government about the four myths on which their entire defence of the scale of their cuts is based. Let us hear no more nonsense about the deficit being the result of the decision of one party or the fault of spending on our public services, rather than the inevitable result of a global economic crisis and the greed and recklessness of the banks.
Danny Alexander
The right hon. Lady has said that she is opposed to the welfare cuts that we have proposed, opposed to the pupil premium, opposed to the savings in the Ministry of Justice and opposed to the savings in the Home Office. Can she name one single saving that she would propose to help to tackle the deficit?
Ms Eagle
I have not said that I am opposed to all the changes in the social security budget. My right hon. Friend the shadow Chancellor supported some of the changes in welfare spending. Indeed, it was we who developed them: the Government are putting our changes into effect. Let us hear no more of this nonsense about the scale of the Government’s cuts being unavoidable, rather than the result of a decision that they made on the balance between taxes and public spending cuts.
Danny Alexander
This really is quite a simple question. Can the hon. Lady name a single cut that she supports?
Ms Eagle
If the Chief Secretary had answered my questions, I might answer his. [Hon. Members: “Incredible!”] What I find incredible is the fact that the right hon. Gentleman has the figures for redundancies and the costs of redundancies across Whitehall in his books. We know what the Ministry of Justice figure is, but he knows what the overall figure is, and he refuses to give it to the House. That is a disgrace.
Let us hear no more nonsense about how the spending cuts that the Government have announced were, as a result of some magical accounting trick, less than those that we planned when we were in government. The truth is that this country faced the gravest of economic challenges. The truth is that our party, in government, rose to meet that challenge, and averted a catastrophe for our country by making tough decisions to protect jobs and homes in our economy. The truth is that whatever party was in government, it would now be making decisions to pay down the deficit. Any party, including ours, would be having to make tough decisions.
It is also true that there is a clear choice in relation to what to cut, and the balance between cuts and measures to bring in revenue. My right hon. Friend the shadow Chancellor has set out the different approach that we would be taking, which would protect not only front-line services but jobs, growth and the recovery. The Government, for ideological reasons alone, have used the deficit as a fig leaf for an assault on our public services of a kind that they had previously only dreamt of. They can talk of fairness as much as they like; they can spread myths as much as they like; but we are not fooled, and, more important, the British public will not be fooled either.
The spending review document sets out the Government’s choices. Those choices were freely made. What the Government have presented is their vision of a future for our country. What we have seen is not the big society but the blueprint for a smaller, meaner and nastier society, and we reject it.
Oral Answers to Questions
Debate between Angela Eagle and Danny Alexander(14 years, 4 months ago)
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Danny Alexander
Businesses in rural areas will have the opportunity to benefit from the regional growth fund that we are establishing and which will help to support business growth in the regions of the country, particular those areas where dependence on public sector employment is greatest. Also, new businesses in rural areas will benefit from the cut we have announced in national insurance for new employees in new businesses.
Ms Angela Eagle (Wallasey) (Lab)
Is the Chief Secretary aware that, as part of the growth drive, the Treasury has set up a spending challenge website asking for ideas and assistance for the future, and that it is currently featuring issues such as sterilising the poor; reopening the workhouses; asking single parents who cannot finance their children to terminate the pregnancy; benefit claimants to work in sweatshops; and immigrants to be moved out of cities? Is he happy that such racist and offensive drivel is being hosted by one of his websites, and will he give the House an undertaking that the site will be moderated and that this stuff will be removed immediately?
Finance Bill
Debate between Angela Eagle and Danny Alexander(14 years, 4 months ago)
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Danny Alexander
The hon. Gentleman has misunderstood what is being discussed, which is no surprise, given the previous Government’s attitude to the idea, as the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) knows. We are not talking about a VAT derogation; the proposal relates to fuel duty.
Ms Angela Eagle (Wallasey) (Lab)
I was involved when the Treasury last looked at that idea. As the hon. Member for Na h-Eileanan an Iar knows, there are real hardships and we were very sympathetic. However, the Chief Secretary must admit that there are difficulties with developing such a policy, not least because of the potential for smuggling and fraud.
Danny Alexander
The hon. Lady says she was sympathetic—I attended a meeting where she expressed that sympathy—but no action by the previous Government resulted, despite the matter being pressed for a number of years. I am sure that my hon. Friend the Exchequer Secretary will look at all the issues as the question is investigated.