Baroness Burt of Solihull
Main Page: Baroness Burt of Solihull (Liberal Democrat - Life peer)Department Debates - View all Baroness Burt of Solihull's debates with the HM Treasury
(14 years, 4 months ago)
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Mr Byrne
Let me come to that point in a moment because—[Interruption.] I will answer the right hon. Gentleman’s question after touching for a moment on some of the questions that we will raise in this debate and in Committee next week. We will want to press the Government on their clause without a mandate. We will want to know what studies have been conducted, as will many Back-Bench Members in the coalition party, on the impact of the new VAT on Britain’s poorest families. We will want to know the impact on pensioners, children and child poverty. We will want to know whether all zero-rated goods will remain zero-rated for the course of the Parliament. We will want to know whether all exempt goods and services will remain exempt for the course of the Parliament. We will want to know how much the Chancellor has short-changed our pensioners by uprating pensions this September and then legislating for higher prices in January. We will want to know his estimate of the growth in black market trading by increasing the rewards for unregistered traders. We will press the Government on those questions during discussion of clause 3.
We will also want to know the answers to questions on other clauses. Why does clause 1 make corporation tax less certain when we were promised clarity? Why is the measure silent on the regime for North sea oil? Why does clause 2 complicate the tax system when we were promised simplicity? In respect of clause 4, what assessment has been made of the impact of insurance costs for low-income families? Will the reform of pension tax relief bring in as much as Labour budgeted for? Will the plan be as fair?
The great tragedy of the Budget and the Bill is that there is an alternative, so let me deal directly with some of the questions raised by Government Members. In March, my right hon. Friend the shadow Chancellor set out the fastest and clearest deficit reduction plan of any country in the G7.
Mr Byrne
I hear what the hon. Lady says, but she has of course read chapter 6 of the Budget of March 2010 and, like me, she will remember that there was £3.5 million in savings by holding down public sector pay; there was £1 billion in savings through the reform of public sector pensions; there was £5 billion in savings through cuts to lower-priority programmes; and there was £11 billion in savings by revolutionising Whitehall. There was also the promise of a benefits bill that would have been £14 billion lower through falling unemployment, which was only possible as a consequence of growth. She will also remember the precision with which we set out £19 billion-worth of tax increases, which unlike this Bill, did not hit the poorest in her constituency or mine.
We know that Governments have to govern, so our opposition to the Bill will be careful, but Labour Members will stand up for jobs and for fairness. That is why we will vote against the Second Reading of the Bill.
Lorely Burt (Solihull) (LD)
The Bill is short, and I will keep my remarks short in keeping with the Bill’s size. This is a coalition Bill, just as the Budget was a coalition Budget. It incorporates Liberal Democrat policies such as our policies on capital gains tax, raising the earnings threshold and the restoration of the earnings link. It also incorporates elements of Conservative policy, which is right because that is what a coalition does. In some respects it is a bit like Hovis, which calls its mix of white and brown bread “Best of both”. That is what we have in the Bill.
Among the Bill’s main elements is the capital gains tax increase from 18% to 28%. The Liberal Democrat policy would have taken it further, but we could run into the law of diminishing returns. We need to be not only practical but fair. It is fair because the well-off, who pay less tax than those who clean their offices, will start to pay a lot more tax. That loophole was never closed by the Labour party, and the measure will make a big difference in fairness and in the level at which those well-off people pay tax.
The entrepreneurs relief should be welcomed by hon. Members on both sides of the House.
Mr Kevan Jones
Does the hon. Lady agree with the Deputy Prime Minister, who before the election, on the Radio 4 “Today” programme on 7 April, described VAT as a “regressive tax”?
Lorely Burt
I am grateful to the hon. Gentleman for that intervention. I am dealing with entrepreneurs relief at the moment, but I will be pleased to deal with VAT, which I will speak about quite fully, later. I know that the Labour party has had great fun bashing the Liberal Democrats over VAT, so I look forward to being taken to task on that.
The entrepreneurs relief is the reward that business owners are due. They often put everything into building a business. That should be recognised. We greatly welcome the continuance of the 10% rate and the increase in the lifetime limit for gains from £2 million to £5 million.
On corporation tax, the reduction from 28% to 27% in 2011, the 1% reduction in each of the following three years to 24%, and the small business rate tax cut, contrast greatly with Labour’s tax on jobs. It means that we now have the ability to stimulate business, which generates the wealth that we need to pay for the services that we need. We need secure growth for business. Business needs the confidence to invest in that growth.
I come now to VAT. I am sure that the hon. Gentleman—
Mr Jones
Will the hon. Lady answer the question put by my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne), who said that the measure in the Bill is for one year only? How will that give confidence to any business wanting to invest? It will have to take decisions on a one-year basis.
Lorely Burt
I am glad that the hon. Gentleman raised that point, and that I gave way to him. This is a commitment. The four-year commitment is in the statement. It is in the Budget.
Lorely Burt
The four-year commitment is in the Budget itself. As the Chief Secretary said, the normal way of doing it is one year at a time. The hon. Gentleman can look forward next year, and the year after that and the year after that, to a further 1% reduction.
Jonathan Edwards
Does the hon. Lady agree that the regionalisation of corporation tax would be a more helpful way to assist the most disadvantaged parts of the United Kingdom?
Lorely Burt
The hon. Gentleman asked me about the regionalisation of corporation tax, but these are UK taxes so it is inappropriate to regionalise. He makes an interesting point that I have not considered before, but I am sure that my hon. Friends will take an interest in the idea if it has merit.
Simon Hughes
My hon. Friend is right. I just wish to say to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) that, as he knows, my party has been supportive of increasing autonomy and self-government in Scotland and in Wales. That has happened in Scotland and it is on the agenda for Wales, and he knows—[Interruption.] It is on the agenda for Wales; it is not agreed and it is not committed, but it is under discussion in relation to Wales. He knows that my party has always been positive towards the idea of allowing greater self-government, both in Scotland and in Wales, but that is different from the regionalisation of UK taxes such as corporation tax.
Mr Deputy Speaker (Mr Nigel Evans)
If I had seen anything out of order, I would have called hon. Members to order myself.
Lorely Burt
Thank you, Mr Deputy Speaker. The hon. Member for North Durham (Mr Jones) has intervened on me twice, so perhaps he would like to join me on these Benches and make his contribution. I am sure that he will be making his speech later, and I will have the greatest pleasure in intervening on him then.
VAT is to increase to 20% with effect from 4 January 2011. This is another issue on which the Liberal Democrat bashing by the Labour party has been lengthy.
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 previously, so I ask hon. Members to allow me to make a little progress. A lot of people want to speak—[Interruption.]
Lorely Burt
Thank you, Mr Deputy Speaker. The other point that I want to make is that the purchases that represent more disproportionately a part of the income of lower-paid people tend to be zero-rated.
Kate Green
It is clear that this is the story that we are going to hear again and again: we are going to be told that the items that the poorest need to buy are zero-rated, so the VAT rise does not hurt them. How can the hon. Lady say that essentials for families, such as saucepans and clothes for work, are items that the poorest do not have to find the money for? This is a regressive tax.
Lorely Burt
The hon. Lady misunderstands me. I understand that people have to buy all those capital items, and I know that this is going to be regressive in that respect. [Hon. Members: “Oh!”] There is no question or doubt about that. I said to the House a moment ago that nobody likes the idea of having to increase VAT.
John Cryer (Leyton and Wanstead) (Lab)
The hon. Lady says that the VAT increase is the least worst option. Could she list the worst options?
Lorely Burt
Well, we could have some further job cuts; that would not help. We could just not stimulate business; that would not help. We could charge lower earners more income tax. Hon. Members should not forget that this is the coalition Government who have raised the level of tax for the lowest-paid earners—something that the Labour party did not do in 13 years of government.
Income tax is a very important area in addressing issues that the hon. Member for Stretford and Urmston (Kate Green) and several other Labour Members have raised. We want to ensure that people can keep more of their own money that they have earned. The raising of the income tax threshold towards our Liberal Democrat target of £10,000—it increases to £7,475—takes 880,000 people out of tax altogether and means that 23 million people will gain an average of £176. That is really important to local people.
Mr Iain Wright
Does the hon. Lady think that the coalition Government’s policy on personal allowances for the over-65s is the right approach?
Lorely Burt
As I understand it, they are unaffected. I wish to say a word about pensions: is it not strange that in Labour’s 13 years in government the earnings link was not restored? This coalition Government have introduced that in their first weeks in government. We have the triple lock: we have 2.5% or earnings or prices—
Lorely Burt
I am going to make a bit of progress. Before Labour Members leap to their feet to criticise, they should reflect on the fact that they had 13 years in power and they leave a shameful legacy. It required this coalition Government to come into office to introduce that, and we are doing so in such a short period.
Lorely Burt
I have given way to the right hon. Lady already, so I shall give way to the hon. Gentleman.
Mr MacNeil
I have listened to the hon. Lady’s arguments for accepting the VAT increase, but over the financial year the projected deficit fell by about £15 billion to £20 billion. Surely that blows apart the Liberal Democrat case for accepting a 2.5% increase in VAT.
Lorely Burt
Yes, the hon. Gentleman is right in saying that, but at the same time we have since discovered that a lot more money is not available to us for use. It is not there. Therefore, in order to balance the books it has been necessary to increase VAT.
Lorely Burt
I am not going to indulge the hon. Gentleman again, I am afraid.
We also welcome the postponement to 77 of when an individual can take an annuity, and of course we welcome the closing of loopholes and the anti-avoidance legislation; everyone should pay their share. That is something that we as a coalition Government will work hard to ensure.
We need tax to be simple and fair and to help us along the road to recovery. We need the stimulus for business, because business will be the engine that pulls us out of recession. We need fairness on income. We need to close the loopholes; they are already partially closed, although more work needs to be done. The least well-paid will at least be able to spend more of their own money. So we on these Benches support the Bill.
Toby Perkins
Was my hon. Friend as surprised as I was that during the Budget debate the hon. Member for Bromsgrove (Sajid Javid) said:
“Opposition Members have accused us of being ideological about the matter, but how can we be anything else? They are absolutely right, and there is no shame in it”?—[Official Report, 24 June 2010; Vol. 512, c. 515.]
He was clear that it was a Thatcherite Tory Budget that he was proud of. The Liberal Democrats are being used as a sort of human shield to defend a Budget that in other circumstances would have appalled them.
Clive Efford
Well, I am sorry, but the hon. Lady will hear it again and again, because it happens to be true.
During the general election the Prime Minister—he was Leader of the Opposition at the time—said to Jeremy Paxman on “Newsnight” on 23 April:
“We have absolutely no plans to raise VAT. Our first budget is all about recognising we need to get spending under control rather than putting up tax”.
In his closing remarks in the leaders’ debate, he said that he believed that the test of a good society is how it looks after the poorest and most vulnerable in difficult times. Well it did not take him long to fail that test. He promises good times ahead and a clean break. Who for? It is certainly not for the poorest in our communities.
The Deputy Prime Minister—I remind the House that he was the leader of the Liberal Democrats in opposition—said during the election campaign:
“The Conservatives have made a series of uncosted tax promises, tax bribes.”
That was referring to Tory promises to recognise marriage in the tax system, limit the national insurance rise, freeze council tax, and raise inheritance tax thresholds. He continued:
“The only way that they are going to deliver their tax promises is by dropping a tax bombshell, a VAT bombshell of £389 a year on every household in this country.”
What changed his mind? Was it when the ministerial Prius turned up outside his house or was it before that?
The Liberal Democrats launched their London election manifesto claiming that under them Londoners would save some £700 a year. They said that tax cuts would be paid for by “closing loopholes” and “increasing aviation pollution taxes”. They said their tax reform would be the most radical in a generation—any takers on the Conservative Benches for a radical change from the Liberal Democrats? I think not! Their manifesto also included a pledge
“to put 600 more police on the capital’s streets and an extra £520 million a year in London schools.”
Instead, however, we have seen a cut in Building Schools for the Future and in police numbers, and we are going to see a rise in unemployment as a result of their support for the Budget.