Budget Resolutions and Economic Situation
Barry Gardiner Excerpts(15 years, 9 months ago)
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The Secretary of State for Energy and Climate Change (Chris Huhne)
I am delighted to open this day of the Budget debate and I want particularly to do three things in this speech. One is to argue why the Budget strategy—what used to be called the Budget judgment—is an essential and correct response to the balance of risks that the economy faces. The second is to address the question that always arises at this stage of the business cycle, which is from where the jobs are likely to come during the recovery. The third is to outline why, like all other recoveries from deep recessions, we will build a new economy. Indeed, a large part of the answer as to where the jobs will come from are the new low-carbon industries which represent our third industrial revolution. In five years’ time, the outlines of a sustainable and resilient economy will be clear, thanks in part to the route map that we begin to sketch out in the Budget—the carbon price floor, the green investment bank and the green deal.
Let me start with the point about the balance of risks, and pick up where we left off in the last debate, when the right hon. Member for Doncaster North (Edward Miliband) was disparaging me for the “Greek defence” as he put it. This determines the timing of measures to cut the budget deficit. The last time that we debated these issues, the right hon. Gentleman accused me of performing a U-turn on whether there should be cuts in this year. I conceded that we in the Liberal Democrat part of the coalition had changed our minds. I also pointed out that we had done so on the basis of events in international capital markets, which have dramatically raised the risks of our being engulfed in a firestorm. If that were to occur we would not be looking at a proactive plan decided by Government, but at a forced reaction to market pressure, which would be unplanned, unconsidered and deeply damaging.
When I last made that point, the right hon. Gentleman said that there had been no change in circumstance that justified a change in judgment. So I looked up the figures for the key public finance borrowing interest rate: the 10-year bond yield for each of the afflicted economies and for our own. The 10-year bond yield determines the cost at which we finance our own borrowing, but it also sets the tone for interest rates in the rest of the economy. The 10-year yield for the Greek Government on the day the election was called in this country, 6 April, was a little less than 7%; it was 6.98%. It had hovered at or around that level for most of the early part of the year, yet during the general election campaign the Greek bond yield began lurching upwards, reaching a peak of more than 12% the day after our general election.
The right hon. Gentleman mocked my Greek defence and said that the circumstances were so different that we could not possibly be affected. I merely remind him that our Budget deficit is the second highest in the EU and currently higher than that of Greece. It is true of course that Greece has substantially higher public debt to national income ratios than we do, but that is not as consoling a thought as the right hon. Gentleman appears to think. Contagion does not work like that. It is, by definition, irrational and sees similarities even where a cooler mind sees differences.
Barry Gardiner (Brent North) (Lab)
Did the right hon. Gentleman have the opportunity to watch and listen to the eminent Japanese economist on “Newsnight” last night, who explained, on precisely this point, that were Britain to be paralleled with Greece, the bond rates in Britain would not be showing a four point spread at the moment and would not be being bought so avidly by British companies and consumers?
Chris Huhne
The hon. Gentleman makes a point about the circumstances, but markets travel on expectations. The expectations of what was going on in this country were very clear during the general election campaign: the hon. Gentleman and his friends were about to lose the election. It is precisely the case with the contagion in southern Europe that it spread quickly from Greece to Spain and to Italy. Italy, of course, has a very high public debt to GDP ratio and is clearly in a different category from ourselves. But that is not the case for Spain—one of the most substantial economies in Europe—where the central Government to GDP ratio is actually much smaller than ours. The debt to GDP ratio in Spain was 33% as against 60% in the UK at the beginning of this process. That is the problem that the right hon. Member for Doncaster North and his friends have to answer. It was absolutely clear from the rise in bond yields across southern Europe that we were in the firing line and it would have been completely irresponsible for us not to remove ourselves from it.
Chris Huhne
I certainly do not believe that we can rely on achieving the sort of comprehensive approach that I am talking about merely through introducing pay-as-you-save measures. The reality is that there will have to be cross-subsidy, as there already is, but particularly to the fuel poor and to those in homes that are hard to heat and which need solid-wall insulation and so forth. I am afraid that the hon. Gentleman will have to wait for the final proposals in the Bill, but I very much agree that we need a comprehensive set of proposals to deal with the whole of the residential housing sector. Those proposals must cover homes owned by owner-occupiers but also the private rental sector, where many of the worst offenders when it comes to energy inefficiency are to be found. I hope that that is what he will see.
Barry Gardiner
I am grateful once again to the right hon. Gentleman. I welcome the measures that he is outlining and we will want to study them carefully, but I am troubled by his suggestion that one element of the coalition agreement was a decision that green taxes should rise as a proportion of the revenues into the Exchequer. I have heard him make the argument, from this side of the House, that green taxes should be used to change behaviour but not as long-term revenue streams on which the Exchequer can depend. I agree with that, but will he explain why that element of the coalition agreement is now seen to fund resource into the future?
Chris Huhne
The hon. Gentleman knows, as I do, that the two points that he makes are not as mutually contradictory as he suggests. There is a long history in this country of applying so-called “sin taxes” to alcohol and tobacco, and they have had the very desirable effect of helping to get people off smoking and of cutting their drinking. The success of those taxes is not perhaps as great as many hon. Members on both sides of the House would like, yet I am assured by the latest Red Book documents that the Treasury continues to raise a very substantial amount of money from both tobacco and drink excises.
The reality is that, while green taxes will change behaviour, the responsiveness of behaviour is such that revenue will continue to be raised for a very substantial period. I have to say that, in the present circumstances, that point is likely to commend itself to the Treasury, which always used to follow the motto of Colbert, the finance minister of Louis XIV, who said that the art of taxation lay in plucking the maximum number of feathers from the goose with the minimum amount of hissing. In that context, green taxes certainly are a very justifiable way to pluck the maximum number of feathers.
I shall give way once more, to the hon. Member for Edinburgh North and Leith (Mark Lazarowicz), and then I shall wind up and let the debate make progress.
Budget Resolutions and Economic Situation
Barry Gardiner Excerpts(15 years, 9 months ago)
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Barry Gardiner (Brent North) (Lab)
Today, let us spare a thought for the Liberal Democrats. In April, the great cause célèbre—the only amendment they fought for in Labour’s Budget—was deferring the rise in the rate of duty on cider until June. Today, they achieved that ambition; duty was reduced from 10% to just 2%. In April, Liberal Democrat spokespeople loudly claimed to have stopped the wicked Labour Government from raising a few million pounds from west country cider farmers. Today, they sit, quisling apologists, for a Budget containing the most savage cuts and devastating tax increases in a generation.
On 8 April, the Deputy Prime Minister accused the Conservatives of wanting to raise VAT to plug a black hole in their financial plans. He boasted:
“We will not have to raise VAT to deliver to our promises. The Conservatives will. Let me repeat that: our plans do not require a rise in VAT”.
No wonder that, when the Prime Minister was asked during the election campaign for his favourite political joke, he replied in just two words: “Nick Clegg.” The Liberal Democrats have now delivered the tax bombshell for their Conservative masters, precisely targeted at the poor, who spend a far greater proportion of their income on VAT-able items.
Stephen Williams (Bristol West) (LD)
Would the hon. Gentleman like to look at the tables on pages 67 and 68 of the Red Book, which disprove the point that he has just made?
Barry Gardiner
I should be very happy to look at the pages of the Red Book in due course, but if the hon. Gentleman wants to challenge the fact, which I have just stated, that the poor spend a greater proportion of their incomes on VATable items, I am sure that he will find not only that he is wrong, but that he is out of sync with other Liberal Democrats—his leader, in fact, and his deputy leader—who have said exactly the same as I have. No wonder that the Liberal leader had to write to his MPs today to insist that he had not sold out on his party’s promise to protect those who are on average incomes.
I simply refer those hon. Members to “Liberal Democrat Voice”, published on 8 April, in which the Liberal leader said:
“So if you’re on an ordinary income, you have a choice. If you want your taxes to rise: vote Labour or Conservative. If you want your taxes to fall: choose the Liberal Democrats.”
The smugness is breathtaking, but nowhere near as breathtaking as the G-forces exerted by the speed of the U-turn that he has performed. His talk of progressive cuts certainly did not go down well in Sheffield, Hallam, where the axing of the Labour Government’s £80 million loan to Sheffield Forgemasters has denied his constituency of the manufacturing future and new jobs that local people so badly wanted and that he once said that he believed in.
As the Social Liberal Forum reminded the Deputy Prime Minister in an open letter last week:
“The Liberal Democrats did not sign up to the Conservative formula of cutting £4 for every £1 raised in additional revenue and it would be impossible to pursue such a policy without adversely hurting the most vulnerable in society. With this in mind, it seems incomprehensible that we could be contemplating a rise in VAT at this stage. As the Liberal Democrats pointed out before the election, a VAT rise to 20% would cost every person in the country an average of £389, disproportionately hurting the least well-off who would be least able to afford it.”
That is Liberal Democrats talking. Frankly, we expect the Conservative party to attack the poorest in society. It was rather refreshing to be told a week last Thursday, by the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), that
“Those in greatest need ultimately bear the burden of paying off the debt”.—[Official Report, 10 June 2010; Vol. 511, c. 450.]
At least he got it right.
Paul Blomfield (Sheffield Central) (Lab)
It is unfortunate that the Deputy Prime Minister is not listening to the comments about Sheffield Forgemasters, and I assume that he was not listening to the Prime Minister’s remarks yesterday, when he made disparaging comments about the shareholders of Sheffield Forgemasters and the financial engineering associated with the deal, which has been through the most robust critique by the Treasury. Does my hon. Friend agree that, when the Deputy Prime Minister returns to Sheffield, it would be appropriate for him to apologise on behalf of the Prime Minister for those comments?
Barry Gardiner
I entirely endorse my hon. Friend’s remarks. The only thing that I find more smug than the comments that have been made was the fact that, during the entirety of oral questions to the Deputy Prime Minister, he refused to answer any of the questions that he would have found difficult to answer. One wonders why they are called oral questions to the Deputy Prime Minister if he is not going to bother to answer them.
Mary Creagh (Wakefield) (Lab)
How does my hon. Friend feel that the Budget will impact on the poorest of his constituents in Brent? The impact will be felt by the poorest people across the country, but does he agree that, with this Budget, we have finally seen the Liberal Democrats for what they are: the real wolves in sheep’s clothing?
Barry Gardiner
My hon. Friend is absolutely right. It is very clear that the Liberal Democrats vary not just what they say from doorstep to doorstep, but what they say before the election from what they do after the election, and many of us have bitter experience of that.
Today, it was interesting to hear the Chancellor say that council taxes will be frozen. I thought to myself, “Yes, I’ve heard that mantra before.” My hon. Friend prompts me. That is exactly what the Liberal Democrats promised in the run-up to the 2006 local elections in Brent. Strangely, after that local election, they went into a coalition with the Conservatives, who had promised not just a freeze on council tax but a reduction in council tax. When they got into power, what did they do? They raised council tax for three years in a row.
Moreover, before the election, the Minister of State, Department for Education, the hon. Member for Brent Central (Sarah Teather), was photographed with the elderly—I have a copy of it here—and appeared on a leaflet that said, “Free Personal Care for the elderly say Lib Dems”, but when they got into office on Brent council, they raised the personal care charges from £5 an hour to £16.50 an hour.
When the Chancellor talked today about how the Government would freeze council tax, I thought, “Yes, I know how they will manage to do that.” All the charges that councils make people, such as elderly residents in Brent, pay will be bumped up. The increase will be imposed not on council tax, but on those who have the very least ability to pay—the most vulnerable people in our community.
Last week, I was invited to the Brent Teachers Association meeting to debate the future of education in the borough with the Minister of State, Department for Education, the hon. Member for Brent Central. As she had promised in her election literature an extra £2.5 billion towards education and smaller class sizes, but subsequently approved a £1.88 million cut to the borough’s education area-based grant, I was looking forward to that debate. However, I understand that, half an hour before the start of it, her office phoned to indicate that she was indisposed and could not attend. If I had been in her position, I would have been indisposed and unable to attend, too. To cut one’s education department in the borough, having promised such a vast increase in the education spending, is typical of how the Liberal Democrats have proceeded around the country, and we now see that what they do in national government is absolutely no different. The disillusion of those who believed the Liberal Democrat promises before the election can be only further deepened by the Budget statement that they have heard today.
Barry Gardiner
No, I am moving on from the Liberal Democrats. [Interruption.] We have got to go for the Tories now. Go on, I will give way to the hon. Lady.
Jo Swinson
I thank the hon. Gentleman for rethinking and giving way. I am listening to what he is saying with great care, but I wonder whether he is going to tell us—I am yet to hear about this from any Labour politician—where he would like any of the £44 billion of cuts that the Labour Government decided were required to fall.
Barry Gardiner
The hon. Lady has been a Member for a number of years. She will remember the answer that she and her colleagues gave when they sat on the Opposition Benches and Labour Members asked them exactly that sort of question: “You’re in government. It is you who provide the answers and we who ask the questions.”
People were told, “Vote blue, go green.” Vote blue, go green? Go green with frustration? Go green with fury? Where was that—did I miss it? Was there anything in the Budget about going green? I heard a mention of an investigation into whether there should be a per-passenger or per-plane duty, but that hardly constitutes vote blue, go green. There are many things that a really progressive Government could be doing to improve the way in which the environment is treated in this country.
Stewart Hosie (Dundee East) (SNP)
The hon. Gentleman is absolutely right that there are a great many such things—fairness in transmission charges to the grid, for example, and access to the fossil fuel levy—so perhaps he will explain why, over 13 years, his party did not do them either.
Barry Gardiner
I am happy to give an answer to the hon. Gentleman. We introduced the first legislation on climate change anywhere in the world. We put in place carbon budgets and feed-in tariffs. We ensured that we set a reduction target for 2050 of not just 50% but at least 80%, with interim budgets that can be examined every year, so that Parliament can hold the Government to account. The Labour Government achieved substantial things on the environment, but I agree with the hon. Gentleman that we did not do enough. I often spoke from the Government Benches to ask my own Ministers to go further. In addition, the system of renewables obligation certificates is a good deal more generous in Scotland than in England. However, does the Budget address the environment? Not one whit; we heard only a mention of an investigation into duty for planes rather than passengers.
Heather Wheeler (South Derbyshire) (Con)
If the hon. Gentleman reads page 57 of the Red Book, he will see that it states:
“Legislation will be in the Finance Bill introduced in the autumn for an enhanced capital allowance for zero-carbon goods vehicles.”
If that is not a green element, I do not know what is.
Barry Gardiner
The hon. Lady is new to the House and might not have had the opportunity to read earlier Red Books. The previous Government were also doing quite a bit on zero-carbon vehicles.
The Budget is a dreadful missed opportunity. It should have ensured that we can resolve the problems with our public finances and pull the country through the recession. It should have achieved that in a staged and phased way. The Government tried to paint a dichotomy between those who appreciated that this had to be done—that this was the inevitable Budget—and, as they put it, those on the other side who said, “No, no. Hold back.” However, it was never like that. Labour Members said that this must be done, but more progressively and slowly. We said that we must not jeopardise the recovery now by taking a macho posture that goes too far, that chokes off recovery and that will ultimately be self-defeating.
Barry Gardiner
I am about to conclude my remarks.
If the Opposition’s policies had been followed, we could have pulled the country through the recession and reduced the structural deficit to half its present level, as has been shown by today’s predictions and forecasts. However, the Government have decided to go for machismo over prudence—they will pay the price for it.
Financial Services Regulation
Barry Gardiner Excerpts(15 years, 9 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Osborne
My hon. Friend makes a very good observation. Let me make a broader observation, if I may. She has enormous experience of the financial services. There are Members on the Opposition Benches with real experience as well, including the hon. Member for Leeds West (Rachel Reeves), who used to work in the Bank of England. I would like that experience to be brought to bear in the process over the next year. We have decided not to resolve the issues in the Treasury, in the Department for Business, Innovation and Skills and in No. 10 Downing street, as we could have done. We have decided to have an open commission to which all Members can contribute and with which they can all engage. I think that is a better way to make policy.
Barry Gardiner (Brent North) (Lab)
Has the Chancellor taken the opportunity to review the Official Report of the Committee stages of the Financial Services and Markets Act 2000 when the FSA was being set up? If so, does he recall that the constant cry from the Conservative Benches in those days was for lighter-touch regulation? Will he take the opportunity to say unequivocally to the City that, as far as his party is concerned, the era of lighter-touch regulation is over?
Mr Osborne
My right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) was clear about the risks of creating the tripartite system when he was the shadow Chancellor who opposed that legislation. When it comes to light-touch regulation, let me quote what the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath, said in 2006:
“I will be honest with you, many who advised me, including not a few newspapers, favoured a regulatory crackdown. I believe that we were right not to go down that road”.
I am afraid that the regulatory approach taken by the Labour Government when they were in office completely failed, and we will learn the lessons of their mistakes.