The Economy

Angela Smith Excerpts

Thursday 4th June 2015 Commons Chamber

[Angela Smith (Penistone and Stocksbridge) (Lab)]

May I start by congratulating you, Mr Speaker, on your re-election? I also congratulate the three Deputy Speakers, particularly my hon. Friend the Member for North East Derbyshire (Natascha Engel), who I think will be an excellent Deputy Speaker, fulfilling the potential she showed in the previous Parliament as an excellent Chair of the Backbench Business Committee.

I congratulate the hon. Member for Horsham (Jeremy Quin) on his eloquent maiden speech and wish him luck in his work of representing his constituents and his party in this place. I pay tribute to all the new Members who have made their maiden speeches so far. We have heard some excellent maiden speeches, delivered confidently and with real style and polish.

Today’s debate is broadly about fiscal issues relating to the deficit and debt, but growth, of course, has a key part to play in reducing the deficit. Indeed, our nation’s prosperity depends on robust economic growth. We in the Opposition absolutely understand the need for economic growth based on wealth creation. While the majority of Opposition colleagues were fighting hard for manufacturing in the previous Parliament, my hon. Friend the Member for Huddersfield (Mr Sheerman), joint chair of the all-party group on manufacturing, and my hon. Friend the Member for Hartlepool (Mr Wright) were also making the case for an industrial strategy to underpin and help manufacturing to grow its share of the economy. That has to be a key part of the way forward.

In that context, I welcome the Government’s northern powerhouse initiative. Indeed, I have long argued for the devolution of powers in England and believe that this country can be one nation only on the basis of a properly thought through devolution settlement for England. However, the real danger with the northern powerhouse project, as it currently stands, is that devolution, as promised by the legislation on the table, will become discredited unless it is accompanied by changes to the distribution of funding by central Government.

We all know that the north of England and large parts of provincial England lose out on local government funding. There are huge disparities in how local government is funded. The issue affects transport as well: transport funding from central Government is distributed on a really unfair and uneven basis—London enjoys transport investment way beyond anything enjoyed by the north of England. The danger affects the regions of the UK that are already disadvantaged in trailing behind London on GDP and economic growth; the disparities could become even more deeply entrenched unless there is an effective Government strategy to address the issue properly. We cannot ignore the danger. The north of England, Greater Manchester, South Yorkshire and the west riding of Yorkshire will not grow as they need to unless the Government address those disparities.

Finally, I want to develop a little further the argument for a more comprehensive, better thought through approach to devolution, because the other danger is that rural areas, as well as suburban areas, will feel increasingly alienated and left out by concepts such as the northern powerhouse. Every Member needs to take cognisance of that danger, and we need a non-partisan approach to dealing with it.

Let us take Greater Manchester and South Yorkshire as the classic example. Between those two city regions, there is the Peak District national park—what we call the “Dark Peak”. Nothing is on the table at the moment to integrate that area into a devolutionary settlement, yet it has a key role to play in the economic growth of the north of England. That issue must be dealt with. Of course it is true that big cities will always be the motor of our economy, but that must not mean that we ignore the contribution that smaller towns and rural areas can make or their potential for economic growth.

I finish with a good example of how this can be achieved. Among the biggest contributors to the manufacturing activity of this country are food and farming. Food manufacturing is a huge player that contributes billions to our GDP. There is no better example of how activities in rural areas and the produce of the land are transformed into the food on our plates. Those two activities, properly integrated in a devolutionary settlement, can help deliver for the economic growth of this country in future.

[Several hon. Members]

rose—

Energy-intensive Industries

Angela Smith Excerpts

Thursday 11th September 2014 Commons Chamber

[Angela Smith (Penistone and Stocksbridge) (Lab)]

Are not the industries under discussion also totally behind the drive towards a green economy, because that in itself creates opportunities for new products, innovation and economic growth?

[Chi Onwurah]

I thank my hon. Friend for putting very clearly—I should have done so myself—the position of many in the energy-intensive industries, who see the need for a long-term future for their significant investments and wish to see a more competitive transition towards it.

--- Later in debate ---

[Angela Smith (Penistone and Stocksbridge) (Lab)]

It is a pleasure to follow the hon. Member for Redcar (Ian Swales). I pay tribute to my hon. Friend the Member for Stockton North (Alex Cunningham) and congratulate him on securing this important debate. I echo his comments on the relative emptiness of the Chamber. To emphasise the point, the relative emptiness is not because Parliament does not recognise the importance of carbon taxes and energy-intensive industries, but because all hon. Members are aware of the huge constitutional issues we face. Many of our colleagues are in Scotland trying to save the Union, and I pay tribute to them for doing so.

The debate has included one contribution from an east midlands Member and three contributions from north-east Members. I shall try to balance that by giving the perspective of the manufacturing sector in Yorkshire and the Humber, which is one of the most important manufacturing bases in the country, alongside the north-east, the north-west and, importantly, Scotland. A conservative estimate is that at least 800,000 people work in energy-intensive industries in the UK. I will call them “foundation industries”—I do not like the term, “energy-intensive industries” and “foundation industries” is a much better description. Foundation industries are critical to the whole of our manufacturing base. Included in those 800,000 are the supply chains built around the key industries.

We are entering an era of shortening our supply chains—the production and supply of components for other industries are being re-shored in the UK, which is welcome. If we look at the supply chains of BAE Systems, one of our most important manufacturing companies, it is immediately obvious how well balanced the company and its supply chain are in the country. Its impact is felt not only in the north-west in Barrow-in-Furness and Warton, but throughout the country, particularly in Scotland, Yorkshire and the Humber and the broader north-west.

That illustrates an important point about Scotland. Manufacturing in Scotland is important not only to the Scottish economy but to the whole UK economy. The shortening of the supply chains and the building of stronger supply chains in our country is making the integration of our manufacturing base more important than it has ever been in our industrial history. From that point of view, UK manufacturing is stronger together, just as the UK is better together with Scotland. That point in the debate is often overlooked. All the talk is of the pound and everything else, but it is important not to forget that if we are to rebalance the UK economy, manufacturing is the best point at which to start because it is already well balanced. Manufacturing in Scotland is an integral part of that.

[Ian Swales]

The hon. Lady is right. One of the most important foundation chemicals is ethylene. There is a pipeline between the north-west of England to Teesside and then Scotland. That pipeline helped in the recent Grangemouth dispute.

[Angela Smith]

My hon. Friend the Member for Stockton North made the point about shale gas, which gives us the potential to supply a good, domestic feedstock for the chemical industry. It would be more efficient and better for us all round for that feedstock to be delivered throughout the UK, rather than having borders between Scotland and England. That is an obvious point, but it is important to put it on the record.

The definition of “foundation industry” varies, but broadly we mean steel, cement and lime manufacturing, chemicals, ceramics, glass and paper. The contribution those industries make to key economic activities such as transport and construction is fairly obvious, but their importance in other ways is often overlooked. For instance, the chemicals industry has contributed to the growth of food manufacturing in this country, and chemicals will continue to be important for agricultural use and in ensuring that we maintain a healthy food production capacity in this country. We thus realise how apt the term “foundation industry” is, as they are key industrial sectors.

At a conservative estimate, those industries make a contribution of roughly £15 billion to UK GDP per annum. Depending on the definition of “foundation industries”, their combined turnover varies between £70 billion and £95 billion per annum. They provide 11% of the UK’s gross value added. Their contribution to UK export capacity is very significant: they contribute at least 30% of our export capacity, but I have read somewhere that it could be as high as 54%. Again, that depends on the definition of “foundation industry”.

The foundation industries have a strong research and development profile, which is often underestimated and overlooked in terms of their importance to the UK. The future of the sectors is dependent on high-quality research and development profiles, on significant investment, and on ensuring that we stay ahead of the game in manufacturing capacity and at the high-value-added end of the manufacturing spectrum.

I pay tribute to the first of the catapult centres developed in the UK—in south Yorkshire, at the advanced manufacturing park at Catcliffe—more than 10 years ago by Yorkshire Forward and others in Sheffield and Rotherham. The park is focused on engineering, particularly steel engineering, and is going from strength to strength. A partnership in Sheffield between Boeing, Rolls-Royce, the university of Sheffield and Sheffield Hallam university is building a brand new factory, Factory 2050, alongside the original buildings, and is now investing heavily in research into nuclear capacity. It is a highly successful venture that provided the blueprint for the Government’s catapult centre strategy.

As a Sheffield and Barnsley MP, I am incredibly proud of the innovative work done in south Yorkshire in using the concept of catapult centres to promote the collaboration between academic institutions and our manufacturing centre to make us world class in innovation and the development of new technologies. Our foundation industries are also at the forefront of work force investment. They have a good record on paying their work force well—these are good jobs—and investing heavily in apprenticeships and ongoing professional development training. The country needs more of that. In many cases, our foundation industries provide a good example of best practice.

My constituency has many foundation industries within its borders. Fox Wire produces world-class cabling for the oil industry and many other applications. Tata Speciality Steels provides steel for the aerospace industry and is at the top end of steel manufacturing in this country. In fact, one reason it is headquartered in my area is that it cannot find elsewhere the skill sets it needs to maintain its position as the best in steel manufacturing. We are very proud of that. In addition to those industries, British Glass is headquartered in my constituency, and I also have cement, paper and ceramic interests, so I represent a range of manufacturing interests.

One of the ceramics companies in my constituency, Naylor, is a family company, not foreign-owned, and has been in existence for more than 100 years. Only this week, it secured six-figure funding towards a £2.5 million project to increase capacity, while reducing energy consumption, at its Cawthorne factory in my constituency, through a combination of smart metering and an in-house plastics reprocessing plant to make use of its own waste on site. There are limits to what can be done to reduce energy consumption, but these are practical, innovative ways of continuing to reduce energy use. In addition to energy efficient lighting, a new energy efficient kiln and dryer has created extra capacity, while reducing energy costs, and led to 30 new jobs. I am proud of Naylor. This superb company is increasing its exports profile and winning awards all over the place, while being dedicated to reducing its carbon footprint—because it makes financial sense. I think the hon. Member for Redcar made this point. The industry is already incentivised to reduce its carbon footprint because it will make business more efficient and cost-effective.

Briefly, Sheffield city region provided some of the funding for that project, which is a tribute to an important element in the ongoing constitutional debate—local decision making. We need some devolutionary thinking on getting investment in manufacturing in the rest of England, never mind the other constituent parts of the UK.

Industry is committed to reducing energy use. For example, Celsa, a recycled steel plant in Cardiff, is one of the most energy and labour efficient plants in Europe, and we have seen significant reductions in electricity consumption by the steel industry in the past 30 years. The figures are startling. I do not have them to hand, but the electricity consumption of steel making in my city has gone down significantly in the past 30 years. On that point, will the Minister respond to the request by steel makers across the UK that the Government reconsider the advanced capital allowances for energy efficiency? The scheme is based on generic lists of technologies and excludes the more specific but often large energy efficiency opportunities that our foundation industries want to engage with. I would be interested to hear whether the Treasury is prepared to reconsider that scheme and take the common-sense approach of applying it to these large-scale energy efficiency projects.

The role of foundation industries in developing a green economy should not be overlooked, as I said in an earlier intervention. I was not saying that we should move faster than the rest of Europe; in some ways, I was making the reverse point. We must be careful not to damage the competitiveness of the foundation industries in this country, precisely because they are critical to delivering the green economy we need, not just in the UK but across European and globally. We know that the foundation industries have an important role to play in developing renewable energies, such as carbon capture and storage, and we know that they play a valuable role in the production of energy-efficient construction materials, particularly in respect of chemicals. The chemicals sector is doing a good job of developing wonderful new materials for use in construction projects, not just for commercial but for domestic building, as I saw when I visited a research project at Nottingham university involving several chemical companies, including BASF. That project is doing impressive work to cut the carbon footprint of domestic building projects and to cut energy costs across the board, especially for home owners.

British Glass is developing new trading standards and is keen to see glass play its part in developing a green economy, and new glass technologies are being developed all the time. Let us not forget either that wind turbines require a lot of steel in order to help reduce our carbon footprint and produce green energy. The steel industry also points out that the development of the lightweight vehicles we increasingly see on our roads is largely down to work by the steel industry to reduce the weight of construction materials. The foundation sectors are doing a great deal of work to develop the green economy, but the costs being incurred by our industries as a result of our carbon-intensive industrial past must not be forgotten.

We are now paying the clean-up costs of an industrial legacy that has left many of our environments badly degraded. As an example, the water industry in Yorkshire has to pay out millions of pounds a year to clean up the water collected from a catchment that is badly degraded—by peat degradation. The water must go through multiple processes to remove the peat before it can be put into our catchment and our networks. A great deal of work is involved, and we have to recognise that the industry is paying the costs of carbon pollution in the past. That should not be overlooked when we reflect on the arguments in favour of transitioning to a green economy. It is very short-sighted to argue that the green economy is not important to our future; it quite clearly is.

Let me move on directly to the impact of carbon taxes and levies on our foundation industries. My hon. Friend the Member for Stockton North made the point, which should be reiterated, that Tata Steel, for instance, has estimated that year-ahead wholesale electricity prices are 70% and 45% higher than in Germany and France respectively. That is driven in large part by policy-driven taxes and levies for the most intensive users; those were 2.5 and 6.5 times higher than in Germany and France respectively in 2011.

The British Ceramic Confederation has pointed out that DECC’s own analysis shows that climate-related charges are already 19% of the industry’s base load price, which will rise to 47% in 2020. The manufacturers’ association EEF has stated that the Government’s own estimates indicate that industrial electricity prices will increase by 50% by 2020 and 70% by 2030. Moreover, Tata Steel is clear that the levies with the greatest impact today are the renewables obligation and the carbon price floor. The company also points out that many of its steel competitors in Europe will either be completely exempt from many of the levies or have their charges capped.

As far as I am concerned, the Government’s recognition of the damage inflicted on our manufacturing sector by the carbon price floor is most welcome, but why on earth they introduced the floor price in the first place remains a mystery. As I say, we welcome their acknowledgment in this year’s Budget of the mistake made. The proposals laid on the table represent something of a step forward in resolving the issues, but they do not resolve all the issues related to the imposition of the carbon price floor in particular on our sectors.

The 2014 Budget announced that the carbon price floor would be frozen at £18.08 from 2016-17 to 2019-20, saving all UK business an estimated £4 billion over three years. The Government will review the carbon price floor beyond 2020, once the impact of the reform of the EU emissions trading scheme is clear. They are extending existing compensation for CPF and ETS for 2019-20 and we of course have the compensation package in place.

It is my understanding, however, that the compensation package is underspending, so the Minister, who until a moment ago was busy on her mobile phone, might like to concentrate on providing an explanation of why the Government are underspending on their compensation package to industries that desperately need to see it delivered. She needs to explain, too, why it continues to be the case that the UK does not appear to be punching at its weight when it comes to making the case to Europe that more of our foundation industry sectors should be included in state aid guidelines. [Interruption.] I am sorry, but the Minister should realise that this is not a laughing matter.

We need to know why the Government are not working harder to make the case to Europe that more of the sectors affected by the carbon floor price should be included in European state aid schemes. That is at the heart of this debate. Sectors such as ceramics make intensive use of electricity—use of the electric arc furnace is not confined to the steel industry; it is used in ceramics, too—yet the ceramics sector has been almost entirely excluded from the compensation on the table at the moment. The Government should explain that, or at least make a commitment to ensure that that unfairness in the compensation schemes on the table is removed as soon as possible.

We need to see a commitment to introduce the announced mitigation measures for the renewables obligation as soon as state aid approval has been granted by Brussels. As I said, we also need to see a commitment to ensuring that the sectors included in state aid are extended as soon as possible. We need an approach that gives specific consideration to premier league energy-efficiency projects, or incentive schemes such as the enhanced capital allowances that I mentioned. We need to see UK support at the October European Council meeting for including the principle of the continuance of robustly protecting the competitiveness of the sectors most at risk at the level of best performance. We need to see, too, a commitment from the Government to support the industrial strategies developed by the foundation industries, such as the chemistry growth partnership and the developing UK metals strategy.

Finally, I want to hear the Minister’s response to the argument that a consolidation of the taxes and levies on the table at the moment would be a sensible way forward. A significant number of taxes and levies are being placed as a burden on our foundation industries. Indeed, one company in my constituency has to employ a highly skilled individual full time just to deal with compliance with the range of levies and taxes that need to be delivered year on year. The Government need to think again about the impact on industry of having to work through so many different schemes and so many different levies year on year. Nobody is arguing against the principle of carbon taxation—

[David T. C. Davies]

indicated dissent.

[Angela Smith]

That might not quite be comprehensive, but most Members in the Chamber today agree with the principle of carbon taxation. What we want is sensible carbon taxation, delivered efficiently but at the same time ensuring that we have a level playing field with the rest of the European Union. That is not the case at the moment. I hope that the Minister has listened carefully to what has been said, and that she will come up with some constructive responses in her speech.

[David T. C. Davies (Monmouth) (Con)]

The hon. Member for Penistone and Stocksbridge (Angela Smith) has just said that nobody will argue against the principle of carbon taxation. First of all, I am going to argue absolutely against the principle of carbon taxation, and I shall briefly set out why. It is interesting to note that while not many people will argue against that principle, everyone in the Chamber has been arguing about the practical consequences of carbon taxation.

It was wonderful to listen to the speech made by the hon. Member for Stockton North (Alex Cunningham). If I had shut my eyes, I might have believed that I was at a meeting of the Global Warming Policy Foundation, as he delivered a damning critique of the effect of the taxes that have been levied. He set them out far better than I could, but the point is that levying unilateral taxes on our manufacturing industries is absolutely crazy. It simply means that business goes elsewhere, to other countries, and the same amount of carbon dioxide gets pumped out into the atmosphere, so there is no particular benefit, if indeed there would be any benefit from reducing carbon dioxide; that companies are far less willing to come into the UK, because they do not know what our energy policy is; and as the hon. Member for Penistone and Stocksbridge has just pointed out, that many companies are having to employ people in order just to comply with all the taxes that are being introduced.

I look forward to hearing the speech of my hon. Friend—indeed, my friend in all senses of the word—the Member for Witham (Priti Patel). She certainly cannot take the blame for any of this, because she has only recently become the Minister. I am sure that she will take a very sensible view, and I am confident of her desire to support the UK manufacturing industry. However, I have no doubt that she will point out to us, as others have already, that the Chancellor has taken steps to cap the carbon price floor at £18, and that the compensation scheme will be extended.

We have all got our knickers in a twist. Having levied all sorts of taxes on our manufacturing industries, we are now going around saying “Hang on a minute, these taxes will damage these industries, so we will provide some compensation, but not for all of them, just for some.” So steel gets a bit of compensation, and cement and pottery do not. It is all done in a random fashion.

Surely there is a basic, fundamental question that we should be asking. If we all agree that these taxes are bad—and I think we do all agree that they are bad, or we would not be providing compensation in some instances—why bother with them in the first place? It does not make any rational sense to levy a load of taxes on carbon-producing industries and then give some of those industries some of the money back, but not quite enough. That, to my mind, is completely and utterly irrational.

The elephant in the room, however, is global warming. No one wanted to talk about that, but the whole rationale for these taxes is that we are going to stop runaway global warming. Why does no one mention it, given that it is the root cause of all these carbon taxes? We need to start thinking about the rationale for them, because there has been no increase in temperature since 1998. No one disputes the fact that carbon dioxide is a global warming gas—it is a scientific fact—and no one disputes the fact that there has been an increase in temperatures over the last 200 years, although the increase is less than 1° C; in fact, it is about 0.8° C. It is reasonable to assume that some of that increase is a result of the carbon dioxide that has gone into the atmosphere. However. it is equally reasonable to assume that not all of it is, and even that not much of it is.

At the time when we were becoming industrialised, we were coming out of a very cool period, the “little ice age”. We have always experienced fluctuations in temperatures. It was warmer in Roman times, it got cooler in the dark ages, it got warmer again during the mediaeval period, and then it got cooler again during the little ice age. Some of the very small increase in temperatures that we have seen is no doubt due to perfectly natural fluctuations, and that is borne out by the fact that there has not been a straightforward increase in carbon dioxide and temperatures. Between 1940 and 1970 it was getting colder, despite the increase in carbon dioxide going into the atmosphere, and since 1997 there has been no increase in temperatures. I asked the Met Office and environmentalists, who thoroughly support these green taxes, “How long must we have no increase in temperatures before you start to think again about the taxes that you want us, the Government, to levy?” The answer from the Met Office was “Another 50 years”, but it will be too late for all these industries in 50 years’ time.

[Angela Smith]

The hon. Gentleman clearly did not listen to my illustration of how careful we must be about swallowing that kind of argument. The water industry in my constituency is paying the cost of having to clean up pollution in the local water supply, which is a result of almost 200 years of unregulated industrial activity that badly polluted the catchment area from which we take our water. Does that not indicate to us that we must be careful about how we look at the future of industrial and energy activity in the UK?

[David T. C. Davies]

It indicates to me that we have got our priorities wrong. We certainly should be looking at water, and we should be looking at chemicals, but the hon. Lady is making the mistake of thinking that carbon dioxide is some sort of poison which should be equated with whatever chemicals were put into the water supply. Carbon dioxide is a perfectly natural gas, and it is vital to growth. Without carbon dioxide, we would not be able to grow anything at all, and it is far from certain that carbon dioxide is responsible for the 0.8° rise in temperature. We can only say that it is responsible for a small amount.

Let us be honest. We have a sort of pseudo-religion of global warming—no one can even begin to question it—and the Intergovernmental Panel on Climate Change publishes the bible of that pseudo-religion in the form of the report that it produces every couple of years. In its latest report, the IPCC itself says that it can only state with certainty that half the temperature increase in the second half of the 20th century is due to man-made carbon emissions. Well, in the second half of the 20th century the actual increase in temperature was 0.5°, so what the IPCC is saying is that it can only state with certainty that man is responsible for a 0.25° increase, which is about a quarter of the figure that we are constantly given. So what is the problem that we are trying to address with all these taxes on our industries?

I have the greatest respect for the Minister, and, as I have said, I am absolutely confident in her ability and her desire to support manufacturing industries. I suspect that she may share some of my concern, shall we say, although I will not embarrass her by putting her on the spot with comments like that. But I hope that she is taking note of something here. The reality is that Members in all parts of the House want to distance themselves from the consequences of policies that they themselves have called for.

A few years ago, no one was more enthusiastic about green policies than Opposition Members. What about that Liberal Democrat Member? I have forgotten his constituency now, but he is not in the Chamber. He was the most enthusiastic of all, constantly championing green policies, yet it was he who drew our attention to the fact that manufacturing companies in this country were paying twice as much as the Germans for their energy. Perhaps he is another one who should be invited to the Global Warming Policy Foundation some time. I think that if the hon. Member for Brighton, Pavilion (Caroline Lucas) had a steel factory in her constituency, even she would probably be whingeing and whining about the taxes that she herself had enthusiastically called for. None of these people will support the Front Bench when it comes down to it. They call for green taxes, but they do not want the consequences. The level of hypocrisy that comes out of the green movement is absolutely astounding.

Oral Answers to Questions

Angela Smith Excerpts

Tuesday 29th April 2014 Commons Chamber

[Mr Osborne]

We need to have competitive energy prices while at the same time building a sustainable energy mix. The major £7 billion package in the Budget to help with the cost of energy for manufacturers has been welcomed not just by the big energy-intensive industries, but by many small business and, of course, families.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

2. What recent representations he has made to the European Union on the proposed cap on bank bonuses.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

In September, the Government launched a legal challenge to the bonus cap provisions agreed under EU capital requirements directive 4. We feel that those rules were rushed through without any assessment of their impact and that they will undermine the progress we have made to try to align remuneration with risk by pushing bankers’ fixed pay up rather than down.

[Angela Smith]

The Chancellor has chosen to prevent the Royal Bank of Scotland from paying bonuses to employees that are worth more than double their salary, but he has not done the same with Lloyds. Will the Minister explain why what is good enough for RBS is not good enough for Lloyds?

[Andrea Leadsom]

RBS has made a good start on its return to growth under Ross McEwan. It now has a good strategy to be the best small and medium-sized enterprise bank in Britain, but it still has a very long way to go. Therefore, we felt, and United Kingdom Financial Investments Ltd agreed, that the right thing to do was to not allow RBS to do what other private sector banks have done, which is to go for the maximum of 2:1 in terms of bonus to salary. Lloyds, on the other hand, is much further along the road to recover, so it was fine to allow it, in line with other private banks, to go ahead with that 2:1 plan.

amendment of the law

Angela Smith Excerpts

Monday 24th March 2014 Commons Chamber

[Angela Smith (Penistone and Stocksbridge) (Lab)]

I do not intend to reflect on the broader points about the Budget in relation to deficit reduction and borrowing figures, because my hon. Friends have articulately made those points this evening. My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) did so particularly well in an excellent contribution. I wish to focus on the package of support that the Chancellor promised energy-intensive industries last week.

Before I discuss that, I wish to comment on how the Chancellor intends to balance the books in relation to his tax proposals. The Institute for Fiscal Studies has already raised that question, because the Budget is, of course, not quite as neutral as it looked at first glance. The measures on personal tax allowances and the doubling of relief for business investment, welcome as that is—I do support it—are apparently paid for by forecast savings within the budget from Whitehall itself, but they are not identified clearly in the Red Book. In addition, these things are apparently to be paid for by extra income from measures to reduce tax avoidance. Paul Johnson of the IFS has said:

“A set of definite and permanent tax cuts look to have been matched by more unspecified spending cuts, some changes in the timing of tax receipts, and our old friend tax avoidance measures.”

It is incumbent on the Government to explain to the House just how robust their plans are for reducing tax avoidance and, just as importantly, to give us clear details about exactly how these spending cuts will be made to balance the books and pay for those increases in the personal allowances. It is important that the House is made aware of exactly where the money is going to come from to pay for all this, and it is just showing respect for the House to set out those details.

I wish to discuss in detail the measures designed to help foundation industries, particularly those on the carbon floor price and the renewables obligation. The measures are welcome; my constituency is home to Tata Steel, ceramics companies, British Glass and the paper industry, in the form of SCA, so it is incredibly important to my local economy that these measures go through. However, we must put on the record the fact that the carbon floor price and its freezing from 2016 reflects changes to a policy that was introduced by the Chancellor and which became operational only a year ago. So we are, in effect, seeing a reduction in a tax that was introduced by this Government and which is already levying significant damage to manufacturing industry. It was a unilateral tax not felt anywhere else in Europe. Even when the freeze takes effect in 2016, UK manufacturing will still be paying more for carbon than is paid in any other country in the European Union. Even with the levy freeze in 2016, INEOS at Runcorn will face annual costs of £4 million as a result of the carbon floor price. With UK manufacturers facing wholesale prices for electricity 45% higher than those faced in France and 70% higher than those faced in Germany, the Government have to commit—I would like this from Ministers tonight—to ongoing support for foundation industries in this country, because of course the game is not over. The work that needs to be done to make manufacturing industry cost competitive is not finished, and we need to see much more from the Government. These industries are crucial for jobs and wealth creation in the future.

I wish to make a couple of other brief points. First, we need to hear whether the backdating of the compensation already announced for the carbon floor price will actually be decided. The decision date has already been delayed to 9 April and manufacturing deserves clarity about it. Secondly, we need to know the extent to which compensation for both the carbon floor price and the renewables obligation levies will apply: how many sectors of manufacturing industry will be included in that package? We know that the European Union state aid guidelines are restricting the number of industries that can benefit from that compensation. I want Ministers to say whether they will commit to going to the Commission to argue rigorously for an extension to the number of sectors that will be included in that compensation package. The points made about the EU were relevant; we need to see the Government batting for UK manufacturing within the EU and trying to ensure that we get as comprehensive a compensation package as possible, agreed within the Commission as soon as possible.

Amendment of the Law

Angela Smith Excerpts

Thursday 22nd March 2012 Commons Chamber

[Vince Cable]

The shift from a system based on tax credits to one based on tax allowances obviously benefits the middle and low-income population as a whole. The impact on particular groups depends on a variety of things, including the minimum wage, which we have just uprated, and the complex interaction of tax and tax credits.

However, let me turn to the point about pensioner income. I find it quite extraordinary to hear the shadow Chancellor expressing such alarm about the impact of the Budget on pensioners. I do not know whether he has looked at the scorecard, but it is clear. In 2012-13, the effect of the increase in the basic state pension and the pension credit minimum income guarantee will be to transfer £1.75 billion to pensioners. The impact of the changes on age-related allowances is £360 million—one fifth of the additional funding going to pensioners as a consequence of this Budget. When we look at the pensioner population, we of course see big differences. There are 5 million pensioners who do not pay tax, many of whom are poor, and who are not, of course, affected by the changes at all. There is a small group of people—frankly, my contemporaries—who have high retirement incomes and considerable asset wealth, and it is right in principle that they should pay a bit more. There is a group in between, as the shadow Chancellor rightly said, of people who are not wealthy and do not have particularly high incomes, but who could be affected to a limited extent, as a result of inflation eroding the value of the allowances—inflation is currently estimated at 2.5%. Those people will benefit enormously from the increase in the basic pension.

Let us just remind ourselves what is happening. We have an increase of £5.30 in the basic state pension for a single person. On top of the increase last year, we are talking about a £10 increase in the basic state pension, as a result of the protections that this Government have introduced. For many years, the pension steadily fell behind earnings as a result of de-linking, and, despite numerous promises, the previous Government did absolutely nothing about the problem. More and more pensioners were sucked into means-testing. This Government have corrected that problem. We have a triple lock system and, as a result of that, and of this Budget, the vast majority of pensioners on low and middle incomes will be considerably better off than they were before.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

What does the Secretary of State have to say to the Institute for Fiscal Studies, which has today described the Budget as a “hotch-potch of reforms” that are risky because they might be “less fiscally neutral” than the Chancellor is claiming?

[Vince Cable]

I am sorry; I do not follow the logic of the question. The Budget is of course fiscally neutral. I have just quoted figures, which the Office for Budget Responsibility has validated, which show that pensioners as a whole will gain five times as much from the increase in the pension and from pension tax credits as from the change in allowances.

--- Later in debate ---

[Alex Cunningham]

I am sure that my hon. Friend knows exactly what my choice would be—it would be on the part of working families.

I have mentioned the 1.5% cut. It might sound paltry, but even if it represents as little as £1 or less per week, it is still worth a lot for those on a low income who need to feed a family. It will also be the poorest families who are, or will be, hardest hit through the uprating of benefits in line with the consumer prices index rather than the retail prices index, through higher food and fuel costs, through the freezes to child benefit and working tax credit, and through the time-limiting of employment and support allowance.

We must not forget that for low-paid workers inflation is not 3.4%, as it was yesterday, but nearer 10%, because they spend proportionately more on food, fuel and transport. The Government’s raising of the personal tax allowance is welcome but sadly does nothing to help the one third of the adult population, including part-time workers and pensioners, who are too poor to pay income tax, yet still have to face those same challenges.

[Angela Smith]

Does my hon. Friend agree that the threat of £10 billion of further spending cuts to welfare after 2014 will only exacerbate the problems he is describing?

[Alex Cunningham]

I agree with my hon. Friend. I have people streaming through the doors of my surgeries, and e-mailing and phoning my surgeries, saying how worried they are now, let alone about the impact of £10 billion of cuts in the future.

In the borough of Stockton-on-Tees, 23% of children already live in poverty, and the Child Poverty Action Group has highlighted that the jobs shortage in the north-east region, exacerbated by further public sector jobs losses, will lead to even greater rises in child poverty. Quite simply, unless parents can access and remain in work, the economy will struggle to return to sustained growth and child poverty levels will be hard to reduce.

The Government’s changes to tax credit rules mean that 2,500 families with more than 5,000 children in the Tees valley alone, working between 16 and 24 hours a week, will have to work at least 24 hours a week or lose that working tax credit. That is as much as £3,870. What research have the Secretary of State for Work and Pensions and the Government done to find out how many people will be able to find those extra hours? Surely he understands that it is deeply unfair that a family already on a low income will lose vital cash to feed their families because their employer cannot provide them with more hours.

What about women? Some 72% of the Government’s changes to tax and benefits adversely affect women, and with 46% of working women being employed in the public sector in the north-east, they are bearing the brunt of the Government’s enforced public sector job losses. The number of women in work across north-east England has already fallen by 19,000, with unemployment among women increasing at twice the rate of men in recent times. I saw no hope whatever in the Budget that the hundreds of young people in my constituency would get the help to secure long-term employment. The Chancellor spoke of skills, but not how they would be delivered. He certainly did not talk about jobs for those young people.

I have tried to concentrate on poverty and the substantial increase in the number of families and individuals who are now facing the toughest of times. We desperately need economic policies that will deliver the jobs and growth that our people need. We do not want to see more and more people forced out of work in the coming months. We do not want to see pensioners penalised by having their personal tax allowance frozen. We do not want to see any growth in the number of soup kitchens and food banks springing up across the country, including at the New Life family centre in my constituency. We do not want to see women bear the brunt of the unfair cuts and rules being imposed on them. The Budget, read out to much cheering from the Tories and their Lib Dem allies yesterday, will not help to deliver any fairness whatever in our society; nor will it provide the platform on which to grow our economy.

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[Angela Smith (Penistone and Stocksbridge) (Lab)]

This is a millionaires’ Budget delivered by a Cabinet dominated by millionaires. It is regressive in what it does with tax, but it is equally a Budget that will do little, if anything, to deliver the jobs and growth that the economy needs. Exactly a year ago, the Chancellor told the House that he had just

“put fuel into the tank of the British economy.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]

He told us that we would see the economy turn the corner in this financial year, that positive growth figures were forecast, and that unemployment would stabilise as the private sector rose to the challenge as the public sector retracted.

[Mr William Bain (Glasgow North East) (Lab)]

Is my hon. Friend aware that the OBR is predicting that the effect of this Budget will be to increase unemployment by 100,000 this year and next?

[Angela Smith]

I agree with my hon. Friend; unemployment already stands at 2.67 million, and youth unemployment is at a record level.

Despite the Chancellor’s predictions a year ago, things have turned out very differently in the real world. As we enter spring 2012, it is clear that the British economy is flatlining, and the OBR is forecasting just 0.8% growth for 2012.

In effect, the economy will continue to flatline. The Government have conceded that they will overshoot their borrowing target by £150 billion. Consumer confidence is also at a record low. As people see their income squeezed while VAT increases push prices up and inflation runs ahead of wages, many are fearful for the future. VAT costs a family an average of £450 a year, and while the increase in personal allowances reduces tax for the low paid, that is completely outweighed by the VAT rise, cuts to tax credits and higher fuel duty—again, smoothed over by the Chancellor yesterday.

The major beneficiaries of this Budget are, of course, those 14,000 people earning £1 million or more, who are receiving a tax cut of more than £40,000 a year. Some 300,000—just 2% of earners in the UK—will benefit overall from the cut of the top rate to 45%, yet just 4,000 houses a year are sold for more than £2 million. That means that the vast majority of those who gain from this tax cut for the richest will be totally unaffected by the rise in stamp duty to 7%.

[Sheila Gilmore]

What we hear from the Government is that if people are avoiding those taxes, we should just give up on it. Is there are any reason, however, in my hon. Friend’s opinion, why we cannot bring in measures to clamp down on tax avoidance while retaining the 50p tax rate?

[Angela Smith]

I completely agree with my hon. Friend, and I shall come to the point a little later.

To put the tax reductions for top-rate earners in context, we need to understand that these are people who earn £2,900 a week—that is right, each week. That is more than an average worker in Sheffield earns in a month. It is quite ironic, is it not, that this Government should believe that the best way to make the poor work is to cut their income, while at the same time believing that the best way to get the rich to work harder is to boost their income. The reduction is also a massive gamble. As Jonathan Freedland points out in The Guardian, today, it is built on

“a hoped-for influx of returning top-rate taxpayers: to most people that looks like giving up hard cash in return for a wish.”

Since when has tackling tax avoidance qualified as a tax increase for the rich?

Pensioners are also hard hit. The granny tax—the £3 billion raid on pensioners by freezing their personal allowance—will mean that people who turn 65 next year will lose out by £314. On average, 4.5 million pensioners will lose £84 a year from next April.

One has to ask what influence the Deputy Prime Minister has had on this Tory Budget, when the personal allowance increase delivers less than the recent increase in VAT, so it amounts to a tax cut for the rich. Let us not forget that the Chancellor has pencilled in more tax increases for after 2014 and a further £10 billion cut in welfare costs. To people out there, that means even further potential cuts to child benefit, pension credit and tax credit.

In difficult times—and these are difficult times for many families—a Budget needs to be fair, and it needs to give people hope. Is it fair that a one-earner family on £55,000 will lose much of their child benefit, while a couple on as much as £99,000 can keep every penny of it?

As for jobs and growth, as the Business Secretary has said, this Government do not have

“a compelling vision of where the country is heading”.

For once, I agree with the Business Secretary. There are no measures of substance in the Budget to help rebalance our economy, either geographically or structurally.

Last year, the Chancellor told us he had put fuel in the tank of the economy. Unfortunately, he put the wrong fuel in the tank and the economy has stalled. If he does not do something soon for the many in this country, the economy will not only continue to splutter along, failing to fire on all cylinders, but will continue irreparably to damage the lives of those who need jobs and growth to improve their life chances.

--- Later in debate ---

[Mr William Bain (Glasgow North East) (Lab)]

In the past 24 hours, many people have attempted to provide a description of this Budget. Some have compared it to Lord Lawson’s giveaway Budget in 1988, others to the orthodox Budget of Philip Snowden in 1931, but in entrenching the disastrous mistakes in fiscal policy of its two immediate predecessors perhaps this Budget will deserve to be known as the great stagnation Budget. Despite the measures unveiled by the Chancellor yesterday, the verdict of the Office for Budget Responsibility was that they will make no difference to the levels of growth in this country in the next two years.

[Angela Smith]

Does my hon. Friend agree with The Guardian, which said this morning that the Liberals will live to regret the fact that they have moved so far away in principle from the Lloyd George Budget of 1909?

[Mr Bain]

My hon. Friend is entirely right. Staggeringly, in that year the Liberals introduced one of the most progressive Budgets—the people’s Budget. This Budget certainly does not compare to that remotely; it is a highly regressive Budget, as the Institute for Fiscal Studies has confirmed this afternoon.

The effects of this Budget are likely to be 100,000 more job losses—20,000 more in the public sector; £150 billion more borrowing than that forecast in June 2010; and a substantial rise in inequality across the country. Having choked off growth in the past two years, and having weakened both public and private sector demand with austerity cuts that strip eight times more public consumption from the economy this year and nine times more next year than even the eurozone average, the Chancellor is presiding over the weakest recovery from recession since the 1870s.

In addition, as the OBR revealed yesterday, despite the Chancellor’s rhetoric on diversifying the economy and promoting manufacturing, his plan for growth is based on the share of private consumption more than trebling, from 12% to 37.5% this year alone; half of all the new growth in the next five years is forecast to come from consumption. This is not an export-led recovery, but debt-fuelled consumption to maintain stagnant output, at a time when consumer spending has fallen in the UK by 0.8% in the past year. Small wonder that the OECD has found that domestic demand in Britain has slumped. It rose by 2.7% in 2010, when Labour was in government, but fell by 0.2% this year, under this Chancellor. The figure is massively below the 2012 OECD average increase in economic demand of 1.4%. It shows the crisis of the lack of demand that is in our economy, which the Chancellor did not begin to tackle yesterday.

On growth, the Chancellor has given up on fiscal policy as a lever of driving demand, even when the credit ratings agencies, the International Monetary Fund and his US counterpart warn him not to. We face a jobs crisis, and in a crisis of this magnitude, we need fiscal and monetary policy to work in concert to grow the economy out of a slump.

[Angela Smith]

Is it not also the case that the current use of monetary policy to drive growth—quantitative easing—is driving the markets but not necessarily the growth that this country needs?

[Mr Bain]

That is precisely the point that many small businesses up and down the country are making. What we should have had yesterday was a facility to securitise loans to small businesses and have them indemnified by the Treasury. That would mean that the quantitative easing money could flow directly from the Bank of England into small and medium-sized businesses, and not simply on to the balance sheets of the banks. That would have made a huge difference. As many businesses have said, the credit easing scheme launched by the Chancellor with great fanfare on Tuesday will barely scratch the surface of the £190 billion shortfall in credit financing from which our businesses are suffering at the moment.

The Chancellor is refusing to learn the lessons from Japan in the 1990s. He is placing all his eggs in the basket of long-term low interest rates, but in Japan that led only to a decade of stagnation because of similarly catastrophic mistakes in cutting spending too far and too fast.

Even on its own terms, the Budget was a failure for business, with levels of business investment £48 billion below their peak of 2008 and business investment growth having been slashed from 7.7% to just 0.7% in the OBR’s latest forecast. There should have been innovative ideas about promoting long-term investment; there should have been plans for a national investment bank; there should have been plans to bring forward more infrastructure spending; there should have been plans to enhance and boost the borrowing powers of the UK Green investment bank, which will not have those until 2016 because of the Chancellor’s failure on growth. But in yesterday’s Budget, sadly, there were no ideas that would really make a difference to business.

Shamefully, the Chancellor never even mentioned, much less produced, a plan to tackle youth unemployment. With 1 million young people out of work across the United Kingdom and with the figure approaching one in four in Scotland, he should have announced measures for a proper national insurance holiday for small and medium-sized firms employing young people. He should have repeated the bank bonus tax to help to create 150,000 youth jobs. He should have announced a temporary VAT cut, which would have boosted consumer demand, and he should have cut VAT for home repairs and maintenance to give the construction sector a much needed lift.

The test on which this Budget is found most wanting is that of fairness. We are told that the wealthiest 3% of the population require massive fiscal incentives to reward hard work, but it is a different approach when it comes to those on lower incomes or pensioners who have saved for their retirement. The poor are told to work harder and do extra hours of work that are not available in the depressed economy, but 14,000 millionaires will receive a permanent tax cut of £40,000. This Budget is highly regressive and I urge Members to vote against it on Monday.

We are told that the Chancellor has advised the Prime Minister on matters strategic, instead of focusing on the crisis of demand made in No. 11 Downing street—a flatlining economy, slumping business investment, rising unemployment and soaring inequality. The country will not forget that yesterday was the day when the part-time Chancellor produced a bit-part Budget.

--- Later in debate ---

[George Freeman]

I am going to plough on if I may. The move on the top rate of income tax from 50p to 45p has set a clear direction.

[Angela Smith]

Will the hon. Gentleman at least acknowledge that a significant proportion of the private sector jobs created are part-time and in that sense are doing much less than he suggests to drive growth in the economy?

[George Freeman]

If my constituents were given the choice between a part-time job in a sustainable private sector business or a full-time job in the public sector that was not sustainable, I know which they would choose.

More than 600,000 new jobs have been created in the private sector since the election.

--- Later in debate ---

[Stephen Gilbert (St Austell and Newquay) (LD)]

I welcome a Budget which shows that the coalition Government remain determined to tackle the deficit and to drive growth and job creation throughout the country, and that we will deliver tax cuts for millions of hard-working people and demand from the wealthiest in our society that they pay their fair share. This really is a Budget for millions of ordinary families throughout the country who are struggling to make ends meet, not a Budget for millionaires.

I welcome in particular, of course, the increase in the personal income tax threshold, the largest increase for a generation and a thoroughly progressive policy. It has gone from the front page of the Liberal Democrat manifesto and been turned into action under the coalition Government, and both parties deserve credit for introducing it. In terms of helping the families whom I represent in Cornwall, the measure sits alongside a freeze in council tax and the Government’s determination to tackle the injustice of water bills throughout the duchy. Some 19,300 people in Cornwall will be taken out of paying income tax, and more than 4,000 in my constituency alone will no longer pay it. I thoroughly commend the measure to the House and hope that in future years the Chancellor will be able to go further and faster.

[Angela Smith]

Will the hon. Gentleman not at least acknowledge, as my hon. Friend the Member for Glasgow North East (Mr Bain) said earlier, that the biggest beneficiaries of the increase in the tax allowance will be higher-income earners, not the lowest-income earners?

[Stephen Gilbert]

It is a bit rich when the Labour party talks about benefits to higher rate taxpayers, given that it abolished the 10p rate of tax, making 5 million of the lowest paid pay more tax. The coalition Government are taking the lowest paid out of tax, and that is a better direction of travel for the people whom I represent—and, I am sure, those whom the hon. Lady represents as well.

I am also keen to welcome the measures in the Budget to drive business growth—the cutting of red tape on small and medium-sized firms; the introduction of cash accounting; the enterprise management incentive scheme; and the fact that the Government are making available £20 billion-worth of additional funding to ensure that businesses across our country, from which will come the growth that will get us out of our financial difficulties, have the money to invest, expand and grow.

--- Later in debate ---

[Christopher Pincher]

I will not, because I do not have much time.

The corporation tax reduction sends a message that this country and its businesses are open for business.

[Angela Smith]

Will the hon. Gentleman give way?

[Christopher Pincher]

No, the hon. Lady has had enough time to get herself into Hansard. I am not going to give way to her.

The reduction in corporation tax also sends a message to business that the Government are on its side and want it to create the jobs that pay the taxes that fund the public services we want and need. It is unfortunate that we have heard the shadow Chancellor today, and the shadow Chief Secretary bestriding the airwaves yesterday, saying that they would not have made the cut and would reintroduce corporation tax at 26p. What a message that sends to businesses in this country—that Labour has learned nothing and forgotten nothing from its mistakes. It does not want to kill the fatted calf; it wants to starve the entire herd.

I wish to give Ministers an important message about bureaucracy. Small and medium-sized enterprises have said to me that when they apply for a slice of the Government procurement pie, as the Government want them to do, they find the online application process time-consuming. For small businesses, time is a form of tax. I hope that my hon. Friend the Financial Secretary, who is in his place, will work with my right hon. Friend the Minister for the Cabinet Office continuously to streamline the process, with a view to reducing the time needed for initial online applications by just a few hours. That would help many small businesses apply for the slice of the Government procurement pie that we all know they need.

In the past, Chancellors have had a tin ear. Conservative Chancellors have made Budgets for accountants by accountants. The last Labour Government, after a reasonable start, began to write Budgets by spinners for spinners. It seems to me that Budgets should be made for the people. The Budget that we heard yesterday was an authentic Budget that spoke to the people. It spoke to the strivers, who want to get up, get on and make something of themselves. It spoke to the grafters, who are trying to build a business. It spoke to mums and dads who want their kids to grow up in a country that is free of crippling debt. It spoke to the aspirants, and I am happy to support it.

The Economy

Angela Smith Excerpts

Tuesday 6th December 2011 Commons Chamber

[The Chancellor of the Exchequer (Mr George Osborne)]

I beg to move,

That this House has considered the matter of the economy.

I am pleased that the House has been given this early opportunity to debate last week’s autumn statement and to discuss the economic challenges that our country and continent face. Being conscious that many people have asked to speak, I shall try to tailor my remarks appropriately.

Seven days ago I set out the Office for Budget Responsibility’s latest independent forecasts and the measures that we would take to reinforce our country’s fiscal credibility and keep our interest rates low, increase the supply of money and credit to ensure that those rates were passed on to businesses and home buyers, and lay the foundations for a more resilient, more competitive and more balanced economy.

That was one week ago, and in the seven days since events have provided further confirmation of why these measures are necessary: countries such as Ireland and Italy have announced further budget measures from VAT rises to pension age increases, reminding us of the value of getting ahead of the markets not following them, and the credit ratings of 15 eurozone countries have been put on negative watch, while here in Britain interest rates have stayed low despite the deterioration of the fiscal forecast, which has meant that last week we continued to borrow at below 2.5%. [Interruption.] I thought that the shadow Chancellor was about to intervene, but we shall have to wait.

Last week I answered questions from Members who wished to ask me about the detailed policy measures in the autumn statement, and I am happy to answer such questions again today, but I thought this might also be a good opportunity to address three broader issues: first, the crisis in the eurozone; secondly, how we believe that the UK banking system should respond to the ongoing crisis and the advice that we received on Thursday from the Bank of England’s Financial Policy Committee; and thirdly, given the eurozone debt crisis and the banking issues that we face, why the credibility of our fiscal policy must be constantly reinforced. Let me take each in turn.

On the eurozone, our overriding responsibility is to protect and advance the interests of the United Kingdom. Those interests are best served by the countries of the euro finding a path out of the crisis, while also ensuring that our economic interests in the single market are protected. There is no doubt that the crisis is having a chilling effect on the British economy and destroying jobs here. In the words of the Governor of the Bank of England last Thursday, it is, in his judgment, the primary cause of the downward revision of the British growth forecasts, as it was one of the primary causes of the OBR’s downward revision of its growth forecast. Of course, the OBR warned us that it had assumed an orderly resolution of the crisis over the next two years. This impact sadly comes as no surprise, when 40% of our exports are to the euro area and £1 in every £7 that Britain exports goes to Ireland, Portugal, Greece, Spain or Italy. Although we must plan for all contingencies—and we are—we should not lose sight of the truth that Britain has a fundamental national interest in the eurozone sorting out its problems, even though we are not in the euro and will not be while this Government are in office.

Action is required by the eurozone on three counts. First, as Germany has argued, and as I made clear in July, there needs to be much tighter fiscal discipline within member states and much tighter fiscal co-ordination within the euro. This is the remorseless logic of monetary union. Secondly, those reforms to economic governance should provide the confidence in the future discipline that the European Central Bank requires to take whatever action is necessary to protect financial confidence. We have been calling consistently for a big firewall, properly capitalised banks and lasting structural reform, and we now need that delivered. Thirdly, all this will succeed only if there is an improvement in the competitiveness of the whole of Europe, and also, crucially, in the competitiveness of the peripheral eurozone countries vis-à-vis countries such as Germany. That will involve difficult change, but it is encouraging to see some European Governments, such as Ireland and Italy, now starting to take the necessary steps on issues such as pensions and labour market reform.

Britain has a huge interest in all that happening and has put forward specific proposals to ensure that our entire continent is not priced out of the world economy. As an open, trading nation, we benefit from the single market. We would like it strengthened and deepened, but we will also insist that our interests in the single market are protected from any future developments, including our interest in financial services. That is the approach that Britain will take to the European Council later this week. We need better regulated financial services to protect our economy when things go wrong, which is one reason why we commissioned John Vickers’s report. We want a single market in Europe so that our banks, our insurance companies and our pension companies can sell their products abroad, but 70% of Europe’s financial services are based in London. We will ensure as we approach this European Council that the interests of the European Union 27 are protected and that Britain’s national interests are protected too. That is our obligation to the British people.

Let me turn from the eurozone crisis to what all this means for our banks. British banks are well capitalised and liquid. Not one of them was identified as a cause for concern in the recent exercise by the European Banking Authority. I remind people that retail deposits in British banks or the subsidiaries of foreign banks here in Britain are protected by our country’s Financial Services Compensation Scheme, which ensures that £85,000 per person per bank is protected. Individuals with deposits in a UK branch of a European bank are protected by their national schemes.

The eurozone crisis is tightening credit conditions across the world and across Europe. The Bank of England announced today the introduction of a new contingency liquidity facility—the extended collateral term repo—which it will make available if needed. In addition, to protect small businesses from the higher costs of credit, we are pursuing the credit easing policy that I set out last week. I have set a ceiling of £40 billion on those operations, and have committed to £20 billion of guarantees through the national loan guarantee scheme, and £1 billion through the business finance partnership. Although the means are different, the ends we seek are the same.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

Is not the Chancellor’s credit easing scheme an admission that his earlier deal—the Merlin deal—has completely and utterly failed?

[Mr Osborne]

The Merlin deal was for this year, and it was a commitment to increase gross lending to small businesses, which is what the banks have done. Of course, the previous Government, having tried net lending targets, then had gross lending targets with just two banks. The Merlin deal extended that to all the main high street banks. It was a one-year-only deal; the credit easing package that I have set out is, I think, what is required—not least in view of the tightening credit conditions across the continent of Europe and, indeed, across the world at the moment. The Government are using the credibility they have in the financial markets to borrow at low interest rates and passing those rates on to small businesses. As I said at Treasury questions, we are seeking state aid clearance and hope to have the national loan guarantee scheme operational by early next year.

At a time like this, we also have to be alert to risks across the financial system. One of the weaknesses of the tripartite regime is that no one felt they had a particular responsibility for monitoring the overall health of the financial system or felt they had the tools to do anything about it. We have created a Financial Policy Committee to do just that. We have established it on an interim basis to get it operating as soon as possible, instead of waiting for next year’s primary legislation. The FPC reported last week. Let me put it on the record that it is absolutely the job of the Governor of the Bank of England to be frank with the country about the challenges we face.

As the Financial Policy Committee warned very starkly:

“Sovereign and banking risks emanating from the euro area remain the most significant and immediate threat to UK financial stability.”

The committee encouraged banks to improve the resilience of their balance sheets in a way that does not exacerbate market fragility or reduce lending to the real economy. Given what it calls

“the current exceptionally threatening environment, the Committee recommends that, if bank earnings were insufficient to build capital levels further, banks should limit distributions and give serious consideration to raising external capital in the coming months.”

That is the point put to me by the Chairman of the Treasury Select Committee just an hour ago at Treasury questions. Limiting distribution includes restricting bonuses. Excessive pay in the financial sector is a concern at any time because of the perverse incentives it creates.

When it comes to linking pay to performance and being transparent, we are implementing the most comprehensive regime of any financial centre anywhere in the world. Today the Treasury launches a consultation that will extend transparency arrangements at large banks by requiring the eight highest-paid non-board executives to disclose their pay and bonus arrangements. This will cover an estimated 15 banks, including the largest UK banks and the UK banking operations of large foreign banks.

--- Later in debate ---

[Helen Goodman]

Will the Chancellor give way?

[Angela Smith]

Will the Chancellor give way?

[Mr Osborne]

I have given way to both hon. Members, and I know that many people want to speak in this debate.

The permanent savings we have made reaffirm Britain’s commitment to dealing with its debts. Who backs this commitment? The international organisations do. The OECD says that

“the ambitious fiscal consolidation has bolstered credibility and helped maintain low bond yields”.

The head of the IMF, whom the shadow Chancellor was talking about, said when she came to the UK that

“strong fiscal consolidation is essential to restore debt sustainability”,

and that the Government’s “policy stance remains appropriate”.

During Treasury questions, the shadow Chancellor was, I think, quoting The New York Times. What he did not quote was the Financial Times, where he actually worked. It said that

“the Government’s plans for fiscal consolidation have allowed Britain to regain the confidence of investors at a time when all too many countries have forfeited it”.

That is the kind of editorial he would have written when he was a leader writer there. The Economist says that the credibility the Government have achieved is “priceless”. The CBI has supported what we have done. The Institute of Directors said that we did the right thing. The Federation of Small Businesses, which the shadow Chancellor often quotes, and the British Chambers of Commerce have both welcomed the measures we announced for business.

--- Later in debate ---

[Gordon Banks]

The Scottish Minister’s decision is responsible for the cuts that could also impact on investment and delivery in the construction industry. The flipside is that if we are prepared to invest in the construction industry, it will deliver; if we cut public spending, it will destroy the industry and with it the economy.

For businesses to grow, they need access to affordable funding. Historically, most small business funding has been generated from our banks, but the Institute for Family Business and the Federation of Small Businesses tell us that, due to the actions of the banks and small businesses’ distrust of them, many such businesses are seeking funding from family members or not seeking it at all. To do the latter damages the business and the economy; to do the former may place limitations on the business, with the same impacts.

However, what is clear is that small and medium-sized enterprises are not at ease with the banking sector. The much-hailed Project Merlin has been a resounding failure. The British Bankers Association has declared that lending targets have been met; however, the FSB and the Federation of Master Builders have other ideas. I have been told of banks meeting their Merlin targets by re-signing existing, unexpired deals. But the truth is, we will never know how much of Merlin is re-signed and regurgitated arrangements. Indeed, this is smoke and mirrors that the Merlin of folklore would be proud of, but I suppose we should not be surprised: the clue is in the name.

I know of financing arrangements that have long been in place being removed with immediate effect, leaving a business in turmoil. Then, the bank returns to the business a few days later with the offer of a term loan that is new business for the bank to write—no doubt adding to the Merlin figures—at increased rates and with arrangement fees, all paid for by the business and with less capital provision for the lender, but leaving the business without any long-term funding in place.

Small businesses in the construction sector have been victimised on two fronts: for being small, and for being in the construction sector, which is deemed toxic by many lenders.

When considering finance, however, we should not forget first-time buyers and the crisis in mortgage lending. In 2007, there were 357,000 first-time buyers in the UK, and as a result the British high street was boosted by some £2.1 billion when these people kitted out their homes. However, today, young people, who are the majority of would-be first-time buyers, are unable to purchase their own home. Now, the average age of a first-time buyer without parental support is 38. With 25 or 30-year mortgages, these first-time buyers could still be paying off their mortgages as they approach their 70s. Surely, pensioners paying mortgages is not something we want to see in Britain in years to come.

In my business, where investment in vehicles can cost up to £130,000 each, and where forklifts and loading shovels cost tens of thousands of pounds, the real driver for investment is the footfall of customers and the profit margin. Both have taken a tumble in recent years, and nothing that I have seen this Government do or promise to do will result in more customers or a rise in profit margins.

[Angela Smith]

My hon. Friend is making a very strong case against the Government’s economic policy. Does he agree with Will Hutton’s comments in The Observer on Sunday? He said that the Chancellor

“is operating within a framework that permits no vision for how the British economy can be re-energised and reimagined.”

[Gordon Banks]

I agree with that, and I would add to that the comments of my hon. Friend the Member for Glasgow North East (Mr Bain) in his intervention a moment ago: there is a lack of vision in both Scotland and No. 11.

Falling business opportunities equals reducing margins and cuts to investment and employee numbers, which add further to the decline in the economy. Businesses in my constituency and in the construction sector want to know whether this Government see themselves as a driver for growth, or not.

It is all about priorities. As far as the SMEs in the construction sector are concerned, the comments on the report card, sadly, are not “could do better” but more like “shows no interest in the subject”.

--- Later in debate ---

[Phil Wilson]

That is absolutely right. If a regional pay structure went ahead, in whatever variety it may take, it would just exacerbate that situation. The regions would become silos, and people would not be able to move around the country.

It is also a myth that there are major variations in the cost of living around the country. The reason why the variation is less explicit outside London is because major retailers have national pricing policies, and internet shopping is having a similar effect in ensuring that the cost of living is more convergent around the UK than it would otherwise seem to be. In addition, major private sector companies—BT, British Gas, Waterstone’s, First Great Western and Santander, to name but a few—have national pay structures, although they have, for example, allowances for workers in London. When the previous Government examined this issue they came out against regional pay bargaining for the following reasons, which were quoted in a Treasury guidance note in 2003. It said:

“At the extreme, local pay in theory could mean devolved pay…to local bodies. In practice, extremely devolved arrangements are not desirable. There are risks of workers being treated differently for no good reason. There could be dangers of leapfrogging and parts of the public sector competing against each other for the best staff.”

That illustrates the point that has just been made by my hon. Friend the Member for Darlington (Mrs Chapman).

The wage disparities do not arise from an overactive public sector displacing private sector jobs; that cannot be so, given that 700,000 public sector jobs are to be lost in the coming years. I want to see a vibrant private sector, with skilled jobs that are well paid and full time, but to achieve that we need growth.

[Angela Smith]

Does my hon. Friend believe for a minute that the Government have thought through the complexities of moving to local pay scales, given that it will inevitably involve consultants in establishing exactly where on the new pay scales the public sector employees will belong?

[Phil Wilson]

My hon. Friend raises an important point. I do not think the Government have thought all these things through; I know they will be looking at them in more detail, but the process seems ideologically led.

One North East was a dynamo for private sector job creation in the north-east. To abolish it was the wrong decision. We need the expertise of the public sector to generate private sector jobs in the area. That is how Hitachi Rail was attracted to Newton Aycliffe in my constituency, creating hundreds of direct private sector jobs and thousands in the supply chain. Hitachi did not come to the north-east because of the public sector, but it did have the help of the public sector. I want more Hitachis coming to the north-east, bringing highly skilled jobs that will deliver good wages. That is how we shall redress wage disparities in the north-east; not by suppressing the wages of a section of the community but by raising the wages of all employees, through investment, training and skills. With that will come good wages, and I call on the Government to promote a living wage, not a regional wage, for the north-east and the rest of the UK.

There is no evidence that regional pay will rebalance the economy. Driving down wages will only exacerbate economic disparities, not resolve them. Driving down relative wage costs and taking money out of the economy is as bad for the private sector in areas such as the north-east as it is for the public sector. That is why I make a special plea, not for the public sector but for all employees in the north-east of England, whatever they do and wherever they work.

Public sector employees face a two-year pay freeze and then two years with only a 1% increase. It has been estimated that between 2010 and 2015 public sector workers will see their incomes decrease by 14%. Average pay in the north-east is just over £19,000. How low do the Government want it to be? The policy is wrong, and I believe it is ideologically led. The answer is a living wage, not a regional wage.

--- Later in debate ---

[Damian Collins]

She was very dismissive of the significance of the review the Chancellor announced last week on whether the habitats regulations are being used to hamper growth and business development and whether they are being unfairly and unreasonably applied. A particularly pertinent case in my constituency is whether Dungeness nuclear power station in Kent should be allowed on the list of new nuclear power sites, and I have written to the Chancellor to ask him to give it special consideration in the review. There is a huge amount of local support and there are two nuclear power stations there already.

Land was set aside for the creation of a third power station in the 1960s, most of which was disturbed during the building of the first two. The land is within a special protected area next to a Ramsar site that gives special protection not to butterflies, but to vegetation that grows on the shingle banks and to birds. The bird sanctuary was created largely after the building of the existing power stations. The area of development for the new nuclear power station is less than 1% of the protected area, so it would be difficult to claim that building it would damage the integrity of the whole site or destroy the habitats totally. They remain within a large, protected and conserved area and will be protected.

Nevertheless, based on Natural England’s interpretation of the habitats regulations, it was recommended to the Government that a third power station should not be built on the site, and that is the only reason why it cannot be built. It would create thousands of jobs during the construction phase and 500 permanent jobs for its operation. It would be an incredibly important investment, and that is an example of how the interpretation of some of these regulations is impeding growth and investment in our economy. The power station would be built not on a greenfield site in a protected area, but next door to two existing power stations and on land that was set aside for the purpose. I obviously feel strongly about this example because the new power station would help my constituency directly, but it would also be a new energy source in an area of high demand in the south-east of England, close to south-east London.

Another local example is Lydd airport. Extending or building new regional airports is a controversial issue. In my constituency the local council decided some time ago to approve a planning application to expand the airport. There had been a previous public inquiry on that in the 1990s, which had lapsed, so the process has to be gone through again. A private developer who is willing to invest money with the support of the local council, which approved the planning decision, is being put through a costly and lengthy process, wasting hundreds of thousands of pounds, with the prospect of possible judicial review at the end. That is also because of the way the habitats regulations have been interpreted, and during the course of the most recent planning inspector’s inquiry many of the objections were set aside. It is frustrating that these rules and regulations are hampering investment and growth.

[Angela Smith]

I thought that the hon. Gentleman’s party was going to form the greenest Government ever.

[Damian Collins]

The hon. Lady seems to think that there is something incompatible between sensible investment in growth that respects environmental regulations and having no jobs or investment at all. I think that that is possible in this area. The contention in my constituency and those of many hon. Members is that the rules are being applied in a way that restricts growth and investment, largely from private investors and operators, where it is really needed, and that is unacceptable.

The regional growth fund is a big help for constituencies, such as mine, where extra support is needed to attract investors to create new jobs. That is certainly something we welcome in east Kent. Another point about infrastructure investment, which I touched on at the beginning of my remarks, is the importance of the Government’s commitment to invest in broadband and improve the extent of mobile phone networks and coverage. I was pleased to hear in the Chancellor’s statement that, thanks to the extra £150 million that has been made available for new masts in rural areas, the coverage target for mobile operators is now 99%, rather than the 95% target in the last Parliament. That is good news for people in rural communities who are excluded from current coverage and something we should welcome. It is an important investment in our infrastructure for the future.

--- Later in debate ---

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

I have listened to this debate with interest. My experience is that the problems that my constituents bring forward for me to deal with are a reliable barometer of what is happening in our economy. At present my constituents are getting it tough—very tough. They are not alone. Earlier this month, The Guardian reported that half a million people will be forced off incapacity benefit. Additionally, child poverty, youth unemployment and fuel poverty have increased and are set to rise further. At the same time, fuel and food prices are rising to unprecedented levels.

[Angela Smith]

I wonder whether my right hon. Friend feels insulted that, given the seriousness of the debate, no Minister could be present on the Front Bench.

[Mr Clarke]

The Chancellor likes to hear himself, but I do not see him often when others are speaking.

We are entitled to be extremely worried given that over the past three months unemployment has reached its highest level in 17 years. There are now more women unemployed than at any time since 1988. All of this is a consequence of this Government’s austerity measures—and what improvement has there been as a result of the hardship?

--- Later in debate ---

[Mr McFadden]

I agree with my right hon. Friend that the economic times that we are in should make us reassess what we think of as normal.

The human implications have been laid out by the Institute for Fiscal Studies in its analysis of the impact on households. As was mentioned earlier in the debate, the IFS has shown that the distributional impact of the measures is geared so that the greatest losses come in the lowest-income deciles, and that there are particularly harsh effects on families with children. The shadow Chancellor in his opening speech referred to the impact of the tax credit measures on individual constituencies. The most striking figure for me is that the IFS forecasts that between 2009-10 and 2012-13 there will be a 7.4% fall in real median net household income, which is about the same as the largest fall since records began.

[Angela Smith]

In the context of what my right hon. Friend says, can it be fair that while £1.2 billion in tax credits for low-income families is taken away, only £300 million extra will be required from the bankers?

[Mr McFadden]

Anyone who looks at the IFS distributional charts would certainly not judge the impact of the Government’s measures as fair.

The background, therefore, is less disposable income, weaker growth, more unemployment and more borrowing. Against that, it is little wonder that there is such low confidence among families and businesses alike.

The question, therefore, is what to do to promote the economic growth that we so urgently need to create jobs. The Chancellor set out a number of measures in the autumn statement—more lending to small businesses, more spending on infrastructure and so on—to try to boost growth. Some of those individual measures are perfectly sensible and should be welcomed. Of course small businesses want more lending, and more capital spending will create jobs, but the real question is whether those measures will contribute to economic growth.

The OBR has already given its verdict. Paragraph 1.14 of its report states:

“We have not made any material adjustments to our economy forecast on the basis of these policy announcements”,

meaning the ones in the autumn statement. Its verdict is that however worthy the individual measures are, they will not make a material difference to the overall picture. Therefore, if growth will not come from consumer spending because the consumer is being squeezed in the way that the IFS has set out, and if it cannot come from Government expenditure because that is contracting, it must come from trade and investment.

The Government should ask what more they can do to encourage business to invest. My contention is that that is not a matter of putting one or two measures suggested by business lobby groups into such statements. Rather, it is a matter of making a sea change in our thinking of how we get growth in these economic times.

I shall focus on one particular issue on which I have spoken before in the House. Although industry welcomes the change announced on R and D tax credits, there is real concern about why the Chancellor is pressing ahead with his plan for a £3 billion-a-year hit on manufacturing industry through his cuts to capital allowances. It is not enough to argue for enhanced capital allowances in enterprise zones when manufacturing in the economy as a whole is putting up with that £3 billion tax hit. How does it help us to generate a low-carbon economy if the Government make investment in the equipment and machinery that will get us there more expensive through their tax policy? Even the excuse that that is a necessary deficit-reduction measure is not available, because the money is not being used to reduce the deficit; it is being recycled in a give-away to businesses in those sectors of the economy that do not invest, including the very banks that will not lend to manufacturing businesses in the first place.

If we really want to rebalance the economy, our manufacturing tax stance should recognise the shortened lifespan of machinery, help businesses to invest, and ensure that British companies have an incentive to invest and that they are not hindered in their efforts to keep ahead of the game. That is made more urgent by the sharp downgrading last week of the forecast for growth over the next couple of years. That shows that the Government need to be more, not less, ambitious in their plans to promote trade and investment.

We have twice heard Government plans that have been billed as plans for growth, yet at each economic statement, growth has fallen, and it is projected to fall further. If we should have learned one thing in the past three or four years, it is that assumptions of snapping back to so-called normal trend rates of growth have been consistently over-optimistic. These are not normal economic times. The downturn has been longer lasting than we feared and hopeful projections of future growth have a habit of retreating into the middle distance.

My contention, therefore, is that the era of the politics of less poses challenges for us all—Government and Opposition. How do we secure economic efficiency and social justice in an era of lower growth and squeezed household incomes? If the Government’s spending is to continue on a downward path for some years, and if households face the kind of squeeze in their incomes set out by the IFS, the circumstances demand an industry policy on a scale and ambition way beyond what we saw in the autumn statement last week. They demand a resolve from the Government, industry and all levels of education to make the rebalancing that we talk about happen, and to put weight behind those areas where Britain can succeed. The situation demands more than a regional growth fund at half the level of spending of the regional development agencies; more than a tiny fraction of the €5 billion-a-year relief for energy-intensive industries that is available in Germany; and tax policies that support the rebalancing effort rather than pull in the opposite direction.

--- Later in debate ---

[Angela Smith (Penistone and Stocksbridge) (Lab)]

Follow that, as they say.

There is no doubt that the economic news of the past few weeks has been appalling. In last Tuesday’s autumn statement, the Chancellor finally admitted what the shadow Chancellor and many economists had been telling him for months—that the massive gamble that he took in June 2010 has failed.

Last week, the Chancellor announced not plan B but plan A-plus. Over this Parliament, the Government will now have to borrow £158 billion more than they said just 18 months ago. That is despite the pain of cuts worth £40 billion imposed on the economy and tax rises imposed on ordinary families up and down the country.

[Mr Bain]

Is my hon. Friend aware of the figures from the OBR which indicate the scale of the Chancellor’s disaster? There has been £15 billion less in tax revenues coming into the Treasury. Does that not explain the scale of his under-achievement on growth?

[Angela Smith]

It absolutely does explain the scale of it. Let us make real-life sense out of some of these figures. They mean that 700,000 public servants had to be cast aside, 300,000 more than the Chancellor said would lose their jobs just a few months ago. Some £1.2 billion has been taken off tax credits while bankers suffer a mere £300 million increase in the take from their pay packets by the Treasury.

Any pretence of fairness and of our all being in this together went out the window last Tuesday. Ordinary families are taking a massive hit: already more people are unemployed than at any time since 1994—the current figure is 2.6 million—and to make matters worse the number of people out of work for more than a year is 868,000, with the long-term rate for 16 to 24-year-olds standing at a staggering 30%.

[Mr McFadden]

My hon. Friend refers to the cuts in tax credits in the autumn statement. Since they entered office, the Government have made great play of increasing the incentive to work. How does she think that the incentive to work will be affected by cutting tax credits for low-income families?

[Angela Smith]

It can only have a regressive impact because it will mean that families are less able to provide for their children and to develop the aspirations that are so important in later life.

One in three young people have been unemployed for more than one year and youth unemployment stands at a staggering 1 million, with the figure for those not in education, employment or training standing at a terrifying 1.2 million. The Government are creating another lost generation similar to the one that they created in the 1980s. Clearly, the Chancellor’s policies are hurting the British people, but they are certainly not working. The young in particular are paying a high price for his failures.

There is worse to come as the OBR now states that, at best, the British economy is set to stagnate next year and the year after, with growth broadly remaining flat. Even worse, if the well-respected OECD is correct, the economy will dip again into recession early next year. The British economy has been stagnating for the past 15 years, and the growth and jobs crisis has its roots firmly planted at No. 10 and No. 11 Downing street. Real incomes are being squeezed like never before, with high inflation and rocketing fuel bills not helped by the Government’s decision to increase VAT in January.

Last week’s statement gave hard-pressed families two more years of austerity, with real median incomes set to fall by 7.8% according to the Institute for Fiscal Studies. That means that real median household incomes will be no higher in 2015-16 than they were in 2002-03 and that we will have suffered the longest period of austerity since the second world war.

The Government inherited an economy that was fragile but nevertheless in growth, yet they gambled that recovery on the basis of tired ideas that have been tried before and found wanting. The right-wing prescription failed in the ’30s and is failing again now, with the consequence that the economy could dive into a double-dip recession. The level of unemployment in Yorkshire is almost twice what it is in the south-east and is growing at twice the rate. It is entirely possible that Yorkshire is already in recession.

The autumn statement did not announce any new resources to be injected into the economy—all it announced was a moving around of the money. It will be families with children who will pay for the back to the future jobs fund—the youth contract—through the £1 billion cut to the child element of family tax credits. If this country is not to face a lost decade, or even worse, we need a strategy for growth, and we need it now. The stakes are high and we urgently need to get people back to work before another generation has to pay the same price as mine for an ideologically driven Government who refuse to learn the lessons of history.

In particular, we need as a starting point Labour’s five-point plan, which would reverse the damaging rise in VAT temporarily and give a one-year national insurance tax break for every small firm that takes on extra workers. And crucially, it would bring forward long-term investment projects for schools, roads and transport to get people back to work. What we do not need is what has been recently proposed: a shopping list of projects here and there paid for by redistributed money. Instead, we need a rigorous, strategically driven investment regime designed to drive long-term economic growth.

In the medium and long term, we need a better economic way forward. On that point, I echo the points made by my hon. Friends. The Thatcher-Reagan consensus is crumbling before our eyes. Will Hutton put it even more starkly in a recent article when he said that

“we are about to experience economic, social and political tectonic plates on the move”.

We desperately need to develop an alternative economic paradigm, which means changing the way our capitalist structures work. We need to go back to making things and to give manufacturing a much bigger role in our economy. We need a capitalism that looks to the long term, not just to short-term profits, and we need a society where reward and risk are shared and where it is understood that the state has a role to play in pioneering and driving strategic investment. And we need to invest in innovation

The Government’s strategy of cutting and hoping that growth will magically reappear is not working now and did not work in the past. The Government are bankrupt of ideas for our future and lack the imagination and the bravery needed to take our country forward to its next phase. These extraordinary days require extraordinary solutions, but the fear is that it could soon be too late for many millions of British families who are paying the price for this out-of-touch, ideologically driven Government who seem determined to follow their chosen course no matter what damage it does to the British economy and to families in this country.

Eurozone Crisis

Angela Smith Excerpts

Thursday 3rd November 2011 Commons Chamber

[Mr Hoban]

We have said we are not against a financial transaction tax in principle, but it does need to be applied globally. The EU’s own impact assessment demonstrates that an EU-only financial transaction tax would destroy jobs and increase unemployment. It is a bad idea at a time when Europe needs jobs and growth.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

Faltering economic growth is damaging economies not only in the EU, but across the globe, yet the Financial Secretary has today refused to acknowledge the damage his Government are doing to economic growth. When will they come up with a plan B?

[Mr Hoban]

Well, the plan B proposed by the Labour party would increase borrowing by £20 billion a year, potentially lead to higher interest rates—which would affect families throughout the country such as by adding to their mortgage payments—and increase the costs on business. I do not think this economy needs a plan B from the Labour party.

Arch Cru Compensation Scheme

Angela Smith Excerpts

Wednesday 19th October 2011 Westminster Hall

[Tom Greatrex]

I thank the hon. Lady for her intervention. That all points to the case for a section 14 investigation to get to the bottom of these events and to prevent them from ever happening again.

To return to the payment scheme, it sounds like the FSA cannot work out what went wrong and why, and where the liability was.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

My constituent Linda Marsh is particularly exercised by the fact that she is being pressured to accept the payment offer on the table because of the looming November deadline. Is it not really urgent that we remove that deadline and allow a proper inquiry to take place?

[Tom Greatrex]

I thank my hon. Friend for her intervention. She makes an important point about people being able to make the right decision when they are offered this payment deal, particularly given that it seems to bind in the Financial Ombudsman Service in a way that makes it impossible for it to take a case subsequently. My hon. Friend makes an important point.

Finance (No. 3) Bill

Angela Smith Excerpts

Tuesday 5th July 2011 Commons Chamber

[Nic Dakin]

The hon. Gentleman makes a cogent and sensible point. [Interruption.] Indeed, I note that the Economic Secretary is writing it down, so I hope that she will respond to it later.

We are in danger of exporting UK jobs to places such Ukraine and Russia, thereby boosting global warming rather than reducing it. As we have heard, my community in Scunthorpe faces serious challenges after Tata announced that 1,200 jobs were at risk. We have also heard the chief executive of Tata Steel, Karl-Ulrich Köhler, quoting the carbon floor price as part of the context of the decision. However, other, local companies are equally concerned. Richard Morley of Caparo Merchant Bar in Scunthorpe said to me:

“As well as supporting growth and jobs, companies like mine are well-placed to provide many of the technical and material solutions necessary to address climate change”—

the point that the hon. Member for Cleethorpes (Martin Vickers) made a moment ago—

“but we can only do so if we are able to remain competitive. The unilateral introduction of the”

carbon floor price

“at too high a level could threaten this.”

Richard Stansfield of Singleton-Birch has examined in more detail what the carbon floor price means:

“The CFP does not actually set a…price of £16 in 2013 as has been implied. The figure of £16 has been arrived at by using a 2009…carbon price of £11.06 and adding a £4.94 tax, called the carbon price support, to reach the £16. The current forward price of carbon in 2013 is already around £16, so adding this £4.94 will make the price of carbon £20.94. This will be £4.94 more than our European competition will be paying and £20.94 more than the rest of the world.”

Only last month we heard the new director general of the CBI, John Cridland, expressing concerns about the impact of the carbon floor price on high-energy manufacturing.

In a written answer to a parliamentary question, the Economic Secretary confirmed that the carbon price support provisions would put up consumer energy bills and deliver windfall profits of £50 million a year from 2013 to existing nuclear reactor operators. Greenpeace has calculated that the figure exceeds £1.3 billion up to 2020. The Government’s proposal is therefore a bad deal for bill payers. Almost £1 billion will be given to the nuclear industry for doing absolutely nothing new. The proposal will add nothing to energy output or Britain’s energy security, and there will be no requirement for the companies to invest the windfall in national priorities such as energy efficiency programmes or meeting our renewable energy targets.

I am afraid, therefore, that in its present form the carbon floor price is a badly designed tax. It will not drive the significant investment needed to develop clean, safe alternatives to fossil fuels or the technological improvements needed in energy-intensive industries. As research by Waters Wye Associates concluded:

“The outcome of implementing policies as they are currently conceived will…be poor both economically and environmentally. Global greenhouse gas emissions may well increase as well as hitting both investment and jobs.”

The current approach risks penalising British industry and endangering British jobs. It will hurt the consumer and fail to deliver our green ambitions. I urge the Government to think again.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

I want to speak in support of amendment 12 for three reasons. First, the Government’s statements on subsidies for nuclear power have been absolutely clear. The amendment calls for a report, so that the Government can at least be transparent about how they will use the subsidies raised through the carbon floor price. Secondly, the impact on fuel poverty has to be measured and so, again, has to be transparent. Finally, like the hon. Member for Redcar (Ian Swales) and my hon. Friends the Members for Hartlepool (Mr Wright) and for Scunthorpe (Nic Dakin), I particularly support proposed new subsections (4)(c) and (f) of clause 78, which relate to the impact on energy-intensive industries.

The report should detail the impact on energy-intensive industries and make clear how the revenues will be used. The Government should commit this evening to using some of the revenues raised from the carbon floor price to mitigate its impact on the competitiveness of our industries. If we look at the numbers employed in energy-intensive industries across the UK, we see that at least 225,000 people are directly dependent on such industries, with around three times as many indirectly dependent on them through the supply chain.

The impact of the proposed measures would absolutely be felt in my constituency of Penistone and Stocksbridge. Tata Steel in Stocksbridge is a major employer, currently providing more than 800 jobs, and has recovered from its hiatus in 2008, when it was on the brink of going bankrupt and out of business. Tata Steel is now back in profit, employing as many people as it did in 2008, if not more. That is a success story for UK manufacturing and a vote of confidence by Tata Steel in the capacity of UK manufacturing and its ability to compete globally. In my constituency we also have Fox Wire, which makes world-class cabling for drilling and welling operations globally, and Naylor Industries and Hepworth, which manufacture clay pipes for all sorts of applications across the world. We also have Pilkington glass and Georgia-Pacific, which produces paper. That makes well over 1,500 jobs that are directly dependent on energy-intensive industries.

As my hon. Friend the Member for Scunthorpe set out in detail earlier, the impact of the carbon floor price is clear: the cost of carbon will increase from £16 a tonne, rising from 2013 to £30 a tonne by 2020. As he pointed out, that will create a significant risk that the industries that we are talking about this evening will be placed in an uncompetitive position globally, not just in relation to Europe, but in relation to the US, China, Ukraine and Russia. We share the view of the head of Tata Steel’s European operations that this will threaten the future of those industries in the UK.

What is it about those industries that makes them so special, and why should a special case be made for them? The argument is crystal clear: it would be very short-sighted to damage those industries in relation to the rest of UK manufacturing because their products are increasingly being geared towards improving fuel efficiency, and they are reducing their carbon emissions in their manufacturing processes.

The Economy

Angela Smith Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Mr Osborne]

I have just taken an intervention from that side.

The first requirement to fix the mess is a plan to deal with the deficit. The second requirement is the plan for growth. While the shadow Chancellor was letting the debt build up, the underlying competitiveness of our economy declined and the UK fell from fourth place to 12th in the international rankings. More than 1 million jobs were lost in manufacturing. Regional inequality, which we heard about during Prime Minister’s questions, worsened during Labour’s 13 years in government as the gap between the regions increased. As I pointed out earlier, private sector employment in the west midlands fell. Those imbalances have become deeply entrenched and cannot be fixed overnight, but we are undertaking the long-term structural reforms necessary to make that happen.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

It is emerging that there has been a 17% increase in home repossessions. How can the Chancellor justify his plan to the families affected and say that it is working?

[Mr Osborne]

We have extended the mortgage interest relief scheme—I inherited a plan for it, too, to end—and of course are trying to avoid repossessions, but there was a large number of repossessions under the Labour Government, and that is because—[Interruption.] I certainly inherited a huge economic mess from the Labour party. The truth is that one of the problems we are having to deal is the enormous housing boom, which was bigger than that experienced in any other major western economy, including the United States of America. We are putting in place those structural reforms, cutting corporation tax, creating more apprenticeships than the country has ever seen, lifting the low paid out of tax, reforming our planning system, reducing the burden of regulation, accelerating education reform, introducing the green investment bank and passing the landmark welfare legislation.