Anne McGuire
Main Page: Anne McGuire (Labour - Stirling)Department Debates - View all Anne McGuire's debates with the HM Treasury
(14 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Byrne
I will in a moment.
If Members go to the Deputy Prime Minister’s website—for those who do not have the address, let me be helpful, it is nickclegg.co.uk; it is not a site that I visit quite as much as I used to—they will see that that famous poster saying, “Tory VAT bombshell” is still on the website, available to download. The Liberal Democrats cannot kick the habit of saying one thing and doing another.
Mrs Anne McGuire (Stirling) (Lab)
Does my right hon. Friend share the astonishment of the 87% of the electorate in the Chief Secretary’s constituency who did not vote Tory at the last election but see him fronting up a VAT rise to 20%?
Lorely Burt
Perhaps the hon. Gentleman would allow me to make a little progress first. [Interruption.] I am not giving way now, but I promise that I will do so. I might even say something that he likes; one never knows. Like my hon. Friend the Member for Bermondsey and Old Southwark, I do not think that anyone on either the Conservative Benches or the Liberal Democrat Benches is filled with any enthusiasm for increasing VAT. However, I am not going to rehearse all those arguments, because we know that Labour left the finances in a far worse state than we originally anticipated. The structural deficit is £12 billion greater than we were led to believe, so whichever way we look at it, the options are invidious. A VAT increase has therefore had to be the least worst option, as my hon. Friend has said. There are mitigating factors, because the VAT rise will not come into effect until 2011. Therefore there will be a short-term boost; consumers who want to spend money, particularly on large items, will be able to do so before that increase comes into effect.
Mrs McGuire
Is the hon. Lady seriously recommending that to mitigate the impact of the VAT increase to 20%, consumers should wander round Currys and all sorts of other places before Christmas buying up all the washing machines, tumble dryers, fridges and all the rest of it, just to salve her conscience?
Lorely Burt
The right hon. Lady answers her own question, although I was just coming on to this subject. When I had lunch with the manager of my local branch of John Lewis last week I asked him what difference the VAT increase would make to purchases at his store. He said, “Well, when it went down it didn’t make a whole lot of difference to sales. When it goes up we don’t necessarily think it’ll make a whole lot of difference, either.”
Lorely Burt
I have given way to the right hon. Lady already, so I shall give way to the hon. Gentleman.
Helen Jones
My hon. Friend is right. It is often forgotten in the discussion on VAT that much of the spending of the richest households is discretionary, while the spending of the poorest households is necessary. That is what the Government propose to tax.
Mrs McGuire
Given what my hon. Friend has said, and what my hon. Friend the Member for North Durham (Mr Jones) said about the Library note, was she not as surprised as I was that when I asked something similar of the Prime Minister, he tried to suggest that somehow the increase in VAT would not disadvantage the poorest 10% and that the top 10% spent more not only in real terms but as a proportion of their income in VAT? That has obviously been discredited by the Library note.
Helen Jones
My right hon. Friend is absolutely right. That serves to show us the ignorance on the Government Benches of the lives of some of the poorest people in this country. I could forgive them if their Budget and Finance Bill were simply the product of ignorance, but they are the product of ideology. It is the Government’s decision to take £40 billion out of the economy, to raise VAT and to cut investment allowances for business, and it is a purely ideological decision. They pin their hopes on an increase in growth, yet even their own leaked Treasury figures tell us that we will lose 1.3 million jobs as a result of these measures, not only in the public sector but in the private sector.
We know already the plans of the Government parties for jobs. They began early on by cutting the future jobs fund—118,000 jobs for young people, 18,000 in a region such as mine, wiped out. I want to quote what the Liberal Democrat candidate in my constituency, described on his leaflet as the strong local candidate, said before the election. He was so strong that he managed to come third in the parliamentary election and third in what was previously a Liberal Democrat council seat. He said:
“Lib Dems believe that if you are unlucky enough to lose your job you should be helped there and then to get another one.”
Yet the measures in the Bill and the Budget will destroy jobs and introduce no measures to create them.
Mr Jones
My hon. Friend is right, but in Canada people fell for the trick, because they cut back and did not reinvest.
The Budget is ideologically driven. It is not about deficit reduction, but about driving down the state and ensuring that we can somehow con the British public into accepting the unthinkable.
We must always have someone with whom to compare ourselves and say, “We could be like that.” The current tendency is to compare us with Greece, whereas in Canada in the 1990s, New Zealand was used an example. The process followed the same pattern as today. The starting point is to convince the public that the debt is so horrendous that there is no alternative to ideologically driven debt reduction; some hon. Members have claimed that today. The next step is to whip up the media and get a friendly think-tank or other supportive organisation to put forward selective facts about the size of the deficit. To crank up the national debt as high as possible, everything is added in, including future private finance initiative funding. Revenue accounting is added to capital costs, without explaining to people that capital investment is investment in this country’s economy. That is how to try to scare the public.
As happened in Canada, the next step is to say that if the cuts are not made, the consequences will be dire. Guess what the Canadian Liberals did? They threatened, “If we don’t do this, the IMF will come in tomorrow.” We heard that during the election campaign. There is nothing new about what is happening here. The Conservative party has clearly copied the Canadian model, and even adopted the playbook. Unfortunately, it has been able to con the Liberal Democrats into being its human shield.
Mrs McGuire
Does my hon. Friend agree that some of the leaks that apparently came out of the Government in the past two or three days concerning 40% cuts are designed to set the context of fear that he is describing? When interviewed at the weekend, one senior Government Minister said that nobody would be asked for 40% cuts, and that that was only scenario planning. Are the Government trying to set the context so that people might be relieved that the cuts are less severe than those paraded in the media?
Mr Jones
As a former trade union negotiator, I can tell my right hon. Friend that that is an old trick. People go into negotiations asking for 50% knowing that they will come out with 5%. It is exactly as she portrays.
If anybody wants to read about the Government’s game plan, or war plan, I recommend an excellent book—someone sent me a copy from Canada—called “Shooting the Hippo” by Linda McQuaig. It is nothing to do with wildlife, and I say to the more delicate individuals in the Chamber that it is not actually about murdering hippos, but where the title comes from is interesting. Part of the media hype in Canada centred on the example of the baby hippo that would have to be shot because the zoo could no longer afford the size of compound it needed. We thereby get into a self-fulfilling prophesy, in which there is somehow no alternative.
Hon. Members have mentioned the comparison with Greece; the Canadians used the example of New Zealand. The Tories and the Liberal Democrats have justified the emergency Budget by talking about our “sovereign debt crisis” as though it were the same as Greece’s, or that of some other southern European country. That has been the entire justification for the proposals. The hon. Member for North East Somerset referred to gilts and other investments as though they would be at risk if nothing were done, and actually claimed credit for the Government for the change in the gilt yield. However, the 10-year bond yield in the UK today is around 4.5%, but it actually dropped to 3.5% in February, way before the election.
Mr Jones
Yes, we did, and that was the responsible thing to do. My right hon. Friend the shadow Chancellor set out what our Government reductions were going to be.
On the recession, if anyone says we are out of the woods, they should look at the provisional gross domestic product figures: 0.3% growth in the first quarter of this year, and 0.4% growth in the final quarter of 2009. The new Office for Budget Responsibility thinks that the economy will grow by 1.2% in 2010, and by 2.3% in 2011. So the Budget is a great gamble. However, this is not just about what is in the Budget and the Finance Bill, which will take money out of the economy at this crucial time when we need to put money in; the Government are also gambling on the complete and utter nonsense that there are two different economies in the country—the private sector, which is good and which we look up to and say, “It’s a wonderful thing,” and the public sector, which is bad and which we boo whenever we talk about it—and that somehow we can separate the two. I shall return to that point in a minute.
On the proposed deficit reduction, the Government’s fox has been shot by their own Office for Budget Responsibility. Its independent analysis is that Labour’s deficit reduction plan would have more than achieved the target of halving the deficit over four years, from 11.1% in 2009-10 to 5% in 2013-14. The OBR also said that the Labour plan would reduce the structural deficit by nearly three quarters, from 5.2% of GDP in 2010-11 to 1.6% in 2014. The plan as outlined to halve the budget deficit within four years would have met the timetable set out at the recent G20 summit on 27 June 2010. Government Members and commentators say that the previous Government did not have a plan, but they did, and even the Government’s own Office for Budget Responsibility recognise that. That plan, however, is now being crammed into two years, which cannot be done without a cost to jobs.
Mrs McGuire
Does my hon. Friend agree that, given the scenario he has painted and the fact that the previous Government’s budget deficit plan would meet the international criteria, one would suspect that the current plan is more about ideology than economics?
Mr Jones
I will come to that in a moment. Let me be honest—I have never considered shopping a leisure activity, and I think people are quite strange if they do. Unfortunately, my family and large numbers of my constituents think that it is. The VAT increase will have an effect on that leisure activity, which will have a direct effect on jobs that occupy a large proportion of the local economy in many areas. My hon. Friend’s constituency has been affected by events at the Corus steelworks, and one possible result of that is that people will be looking for other jobs, including in retail, but those jobs simply will not be there.
Mrs McGuire
My hon. Friend said that we needed to look at the whole package. Will he reflect on the fact, linked to some of the cuts in maternity benefits, that new parents will have to pay 20% VAT when they buy a pram, for example? The VAT increase will apply not only to the big common items such as fridges, washing machines and cars but to basic goods that families have to buy daily.
Andrew George (St Ives) (LD)
It is a pleasure to follow the hon. Member for North Durham (Mr Jones). If I pick my way through the hyperbole and the political points that he sought to make, I find that there were a number of very telling and important facts and figures. Indeed, it was a thoughtful and constructive contribution in many ways, if a rather encyclopaedic one. When he opened his remarks, he described it as his first speech—his maiden speech—since the general election, but next time he is about to speak, I must remind myself not to be the next speaker.
This debate about the Finance Bill—and I accept your strictures, Mr Speaker—can probably be characterised by the to-ing and fro-ing between Members on the Treasury Bench and Opposition Members. Members on the Treasury Bench have characterised the emergency Budget and the Finance Bill that underlies it as an unavoidable and regrettable necessity, given the public finances and the circumstances in which the country finds itself. On the other hand, Opposition Members have predictably and quite understandably characterised it as entirely ideologically driven and an example of political opportunism.
In my brief contribution, I want to try to acknowledge that, first, as Members on the Treasury Bench have said, we are all in this together. The nature of today’s debate is that we are all in a political mire of tribal point-scoring and translucent evidence, and that has not shown the House or this debate in a good light. We should be trying to get to the nub of the evidence that drives us towards the correct answers; we, as politicians across the political spectrum, are seeking to assist the country. People witnessing the debate will not have been enlightened by many of the contributions because of the tribalism into which the House has fallen. [Interruption.] Hon. Members may well not like that comment.
Having said all that, I should add that there were four beacons of hope in the maiden speeches this evening, made by the hon. Member for Scunthorpe (Nic Dakin) and my hon. Friends the Members for North East Cambridgeshire (Stephen Barclay), for Ipswich (Ben Gummer) and for Weaver Vale (Graham Evans).
I suppose that I have been implying that I oppose any ideologically driven contribution, but I actually want to make one myself.
Andrew George
I shall give way to the right hon. Lady, but I want my contribution to be short.
Mrs McGuire
I fully understand some of the hon. Gentleman’s comments about matters of judgment. I also understand that he thought that the £1,000 increase in the personal tax allowance was important. I have observed him for many years in the House, and he is an honourable person. Will he help Opposition Members to understand why since April and early May, when he was so violently against any increase in value added tax, he has started supporting a regressive increase in that tax? It would help break down some of the barriers that he senses if we could understand the thought process involved and the discussions that drew him into the VAT spider’s web.
Andrew George
I am grateful to the right hon. Lady for that intervention. She has come to the nub of the dilemma in which a number of other hon. Members and I find ourselves. Yes, the VAT increase was not part of the coalition agreement. I presupposed that it would inevitably be regressive and that I would automatically oppose it. The right hon. Lady will be aware that last Monday, I tabled an amendment on the Order Paper that sought to get the Treasury to provide the necessary impact assessment of the 2.5% VAT rise as it applied to families across the income spectrums, to charities and to businesses. There was mention of the rural travelling public as well.