Proposed Public Expenditure Cuts

Caroline Lucas Excerpts

Monday 13th September 2010 Commons Chamber

[Mr Osborne]

I think it does have something to do with the new Government setting out their plan, and it is easy to see why. We can compare what has happened to market interest rates for the United Kingdom with market interest rates for countries such as Spain, Portugal, Ireland and Greece. At the time of the general election, it was well understood that people in the world were concerned about the record UK budget deficit, the largest in the G20. As a result of the steps that we have taken in the Budget—which we now need to see through in the spending review—we have restored stability to the economy and helped to bring down market interest rates. That would not have happened if Labour had stayed in office.

[Caroline Lucas (Brighton, Pavilion) (Green)]

How does the Chancellor think that slashing jobs at tax offices up and down the country will help with the collection of the £120 billion that is lost every year through tax evasion and tax avoidance in this country? What other measures does he have in mind for collecting that money, which could be saved and used to prevent these enormous cuts, which are going to hit the poorest the hardest?

[Mr Osborne]

As I was saying in reply to my hon. Friend the Member for Colchester (Bob Russell), we are keen to ensure that the tax gap is reduced and that Her Majesty’s Revenue and Customs is an organisation that is able to collect that tax that is due to us all. Unfortunately, as has been well documented in recent days, we have inherited a whole string of problems, including 6 million people being given the wrong tax information under the previous Government. We are putting in place the measures that I believe will improve HMRC and enable it to focus on reducing that tax gap.

Capital Gains Tax (Rates)

Caroline Lucas Excerpts

Wednesday 23rd June 2010 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

Thank you for calling me to speak, Mr Deputy Speaker, and it is good to see you in your new position.

The Government’s mantra is that this Budget is both unavoidable and fair, yet more and more evidence demonstrates that exactly the opposite is true. In reality, this Budget is neither unavoidable nor fair: instead, it is a massively failed opportunity to shift the economy into the greener, fairer direction that we need.

Devastating public spending cuts of the kind announced yesterday are not unavoidable. They are not some kind of economic inevitability, but an ideological choice. The reality is that there has been no public debate about the choice between tackling the deficit through cuts or through progressive and radical tax reform. Quite simply, that case has not been put.

That is hugely significant, because the fact that these cuts will have an enormous impact on generations to come means there needs to be a national consensus that they are the right way forward. There is not that national consensus; there is a growing sense of anger and disbelief about the scale of the cuts proposed, as well as a growing sense that the Government have been economical with the truth.

Let us be clear: we are not in the same position as Greece. Our cumulative national debt is not large by international standards. The structure of our debt is very long term—about 14 years. Much of this year’s debt will be sold to British-domiciled individuals and companies, so the international sovereign debt crisis has much less impact on us. Those are the truths of the situation.

[Sajid Javid]

The hon. Lady said that our sovereign debt situation is not as bad as that of Greece. We do not just have to use Greece as an example; other countries have faced drastic situations and austerity measures. It is not reasonable to look at the size of the debt as a proportion of GDP; we also have to look at the amount of debt we have been issuing, borrowing £3 billion a week to help fund it. I am sure the hon. Lady is aware that last year the former Government printed about £200 billion in cash and borrowed about £225 billion on the gilts market. The only other country with a similar policy was probably Zimbabwe, so I am sure she is not advocating that we continue in that way.

[Caroline Lucas]

I thank the hon. Gentleman for his contribution, but if the then Government had not done that our situation would have been an awful lot worse. Many commentators are saying that this is a time to be investing, not taking money out of the economy. Our current situation would have been much worse if we had not had that stimulus at that time.

Despite what the Government say, we are not all in this together. Some people had more responsibility for the crisis than others and some benefited more from the boom that preceded it. It seems to me that those who enjoyed the largest benefits should pay the highest price. We need progressive tax reform. Increasing the tax take from those most able to pay it and helping lower earners by reintroducing the 10% tax band now would be a good start, both in raising revenue and in addressing inequality.

If we are looking for ways to find more revenue, let us bear in mind the huge extent of tax avoidance, tax evasion and unpaid tax in the UK. The figures are truly staggering. Her Majesty’s Revenue and Customs admits that tax evasion and avoidance together come to almost £40 billion a year, and in November 2009 it admitted that £28 billion of unpaid tax was owing. Shocking as those figures are, some experts out there suggest that the total target for necessary action to collect tax due and owing could be more than £100 billion a year. Why do we not see more efforts to go after that kind of money?

There are a range of options for changing the UK tax rules progressively so that more than £40 billion of additional taxes could be raised each year by the end of the life of this Parliament. With tax-collecting efficiency savings, that would deliver more than £60 billion of tax revenues for the UK, thus preventing any need for cuts to public services.

I say that not because I think we should introduce all those tax measures—certainly not straight away—but to prove that we have a choice. Spending cuts are not the only way to address the deficit. Fairer taxation has never even been put to the public as an option. That is a betrayal.

[Jacob Rees-Mogg]

Is the hon. Lady aware that if the tax rises she proposes were introduced, we would have the highest ratio of tax to GDP that this country has had in 40 years—7% higher than the record achieved under Margaret Thatcher’s Government?

[Caroline Lucas]

We also have a country that is at its most unequal at any time since the second world war. If someone asked me whether I would like either progressive tax reform or a much more equal society, I know which I would choose, because so much evidence suggests that unequal societies are not just incredibly damaging for those at the bottom of the heap, which is fairly clear; they are corrosive for everybody in society. Books such as “The Spirit Level” have demonstrated just how corrosive inequality is for everybody in terms of health outcomes and general well-being. I am happy to say here and now that I would much rather see an equal society. Of course, that is something the coalition Government told us the Budget was all about. It was supposed to be a fair Budget.

What choices were made? Let us be clear again that they were political choices; they were not inevitabilities. It was a political choice to make effective cuts to child benefit, the child tax credit and child tax funds that, together, cost £2.5 billion. Those cuts could have been avoided if, for example, the Chancellor had chosen not to cut corporation tax. It was also a political choice to increase VAT—a tax that hits the poorest hardest and that both Government parties said they were not in favour of increasing.

Raising the income tax threshold as some kind of compensation does nothing for the poorest households that do not pay income tax anyway, since in any given year about one in four families contains no income taxpayer at all. Uprating future benefits and tax credits only in line with consumer price inflation, rather than retail price inflation, will have a dramatic effect in increasing inequality in society. If we add to that the severe cuts in housing benefit, which will have a devastating impact on areas where significant numbers of people depend on it, such as my constituency of Brighton Pavilion, we can see that the menu we are being served up is very damaging indeed.

Let us remember that the vast majority of people who claim housing benefit are pensioners, people with disabilities or who care for relatives, or hard-working people on low incomes. As the director of Shelter has said,

“If this support is ripped out suddenly from under their feet it will push many households over the edge, triggering a spiral of debt, eviction and homelessness.”

If we add to that—if that were not enough—the impact of swingeing public spending cuts, we see a hugely bleak picture. Unemployment will grow, and anyone who leaves school or college in the next five years faces a grim future.

Of course, meanwhile, the rich have been largely let off. That is why we have seen the coverage we have seen in the Financial Times and everywhere else, with people saying that they are breathing a sigh of relief because the Budget did not hit them as hard as they thought it might. The rich will hardly notice the VAT increase. The bank levy is puny—less than half the £5 billion to £8 billion originally predicted—and is a fraction of City bonuses. That is not unavoidable; it is a political choice. The Government could have introduced a Robin Hood tax to raise billions—they did not. That was another political choice.

Unprotected departmental budgets will be savaged. Local government will need to slash services if it is to freeze council tax. Public servants, who did nothing to cause the slump, are being asked to bear an unfair share of the burden. Again, one thing we can say for sure is that we are definitely not all in this together. People on middle and low incomes have done much worse than expected, and the rich have been let off much of what they feared, but we will all suffer from an economy that now has a very real risk of going into a double-dip recession.

Many Opposition Members have talked about the importance of listening to commentators, such as Noble prize winner Joseph Stiglitz or David Blanchflower, about the real dangers of that double dip. David Blanchflower is one of the very few people who saw the recession coming. We should listen to his warnings now. The economy is still fragile. Today’s measures will certainly slow recovery and could well stop it in its tracks. Even Martin Wolf says in today’s Financial Times that we should be printing more money, rather than taking it out of the economy.

I should like to suggest that the real way out of the crisis, as well as fairer taxation, is through a major Government investment in the green infrastructure that this country so urgently needs if we are to emerge stronger from the recession than we were when we went into it. My party has called for the introduction of a green new deal—a massive and sustained investment in energy efficiency and renewable energy generation, which would create hundreds of thousands of new jobs, as well as cutting carbon emissions and making our economy more sustainable.

Let me give an example. Greens on a council in the north of the country brought an idea to the table that was accepted by the council and is being rolled out. Essentially, they leveraged some money from the energy companies and matched it with some council funding, and they are now rolling out free insulation for 40,000 homes in that area. That is not only cutting emissions, but saving average families about £150 a year on their fuel bills and creating 200 jobs. That sort of programme needs to be rolled out country-wide.

What about green measures in the Budget—or, better, where are the green measures in the Budget? Let us remember what the coalition manifesto promised. It said that it was promising

“a full programme of measures to fulfil our joint ambitions for a low carbon and eco-friendly economy”.

Those ambitions cannot have been very high.

The coalition’s first Budget offered little more than a passing reference to the green investment bank, just a few lines about future reforms to the price of carbon dioxide and a renewed promise on energy efficiency, so where exactly is this famous full programme of measures? I searched in vain, but instead I saw old style, big picture macro-economics, with a 4% cut in corporation tax over the Parliament and a regional growth fund for new businesses from next April that will provide

“a stable economic foundation for private sector growth”.

I am not against that, but what kind of growth are we talking about? Where is any commitment to sustainability in the vision for growth? What about the commitment to the green investment bank, which is urgently needed to drive £2 billion into clean energy by 2020? Apparently, we are going to have to wait, as there was no particular urgency on the green agenda in the Budget.

We were told instead that the Government will put forward

“detailed proposals on the creation of a Green Investment Bank”

after the spending review, but we have heard that before. We are told that the Government are considering a wide range of options, but there is no confirmation of legislation and no mention of capitalisation. With nothing in the Budget on the green deal for households, we must wait for this autumn’s energy security and green economy Bill. The low-carbon industrial strategy already appears to have lost urgency and direction.

The Chancellor talked a great deal yesterday about the crisis of national debt, but he barely mentioned the much bigger and more dangerous crisis of climate change. When the coalition Government were formed, Ministers said they would be the greenest Government ever. As I pointed out at the time, that, sadly, would not be very difficult, given Labour’s lamentable record, but it does not look as though serious steps are being taken to make this a green Government either.

The Budget is economically dangerous, socially divisive and completely lacking in any kind of vision for sustainability. Tragically, an opportunity has been missed to introduce something genuinely progressive, such as a Robin Hood tax on financial transactions, measures to increase employment and cut emissions through a green new deal, and measures to introduce fairer taxation—in other words, measures to take us closer to the fairer, greener Britain that the coalition says it wants to achieve, but from which, after the Budget, we are further than ever before.