Finance (No. 2) Bill

Catherine McKinnell Excerpts

Monday 15th April 2013 Commons Chamber

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

We have had a surprisingly good debate despite what was, frankly, a disappointing and lacklustre Budget. I use the word “surprisingly”, because the lacklustre nature of the Budget was no more evident than in the opening speech made by the Exchequer Secretary to the Treasury.

Hon. Members on both sides of the House have powerfully put the case for securing growth in our economy, and I especially want to commend several of the contributions made by Labour Members. My hon. Friend the Member for Islwyn (Chris Evans) made a powerful speech about aspiration that included a poignant reminder of the words of Harold Wilson that it does not matter what the rate of employment is because to a person who is unemployed, that rate is 100%.

My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) made a characteristically forceful and insightful speech about the impact of the Chancellor’s failing plan on economic development in the north-east, which is a region close to my heart. He reflected on the double-dip, double-debt and double-downgraded Chancellor.

My right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) reflected on the banks simply not paying their fair share, while my hon. Friend the Member for Luton North (Kelvin Hopkins) gave a colourful insight into the Bill’s historical context. My hon. Friend the Member for Bolton West (Julie Hilling) reflected on her memory of Budget day and a Chancellor who simply looked lost as to what to do about his flatling economy and failing plan.

My hon. Friend the Member for Corby (Andy Sawford) made a passionate speech about the real impact of the Chancellor’s failure. The amounts involved under the bedroom tax might be worth just half a bottle of claret to the Chancellor, but to the people affected, they make the difference between heating and eating.

My hon. Friend the Member for Glasgow North East (Mr Bain), like other hon. Members, talked insightfully about the Chancellor’s campaign against the poor and the divisive nature of his economic policies. My hon. Friend the Member for Edinburgh East (Sheila Gilmore), with her insightful wit, put Government Members to shame for their failure even to show up today to defend their Chancellor’s Budget. We have just heard my hon. Friend the Member for Swansea West (Geraint Davies) reflecting on the divisive nature of the Chancellor’s failing plan.

We heard good speeches from the few Government Members who bothered to attend the debate—[Hon. Members: “Three.”] I am reminded that we heard three speeches from Government Members, and I was surprised by how few of them turned out to support their Chancellor’s Bill. The Exchequer Secretary claimed in his lacklustre speech that the Bill will inject energy into our economy, but it has not injected any energy into Government Back Benchers, so it is even less likely to inject any energy into our bumbling economy that is staggering under the weight of the Chancellor’s complacency.

The emptiness of the Government Benches has been stark. For most of the time, we have seen only the Minister, his Parliamentary Private Secretary and a token Liberal Democrat. Are Government Members too ashamed to defend their downgraded Chancellor? Even the Chief Secretary to the Treasury has not shown up today.

It is a shame that the hon. Member for Cities of London and Westminster (Mark Field) is not in the Chamber because he made a compelling speech in which even he lamented, to use his words, the Chancellor’s “sleight of hand” in manoeuvring to bring his borrowing down to just under £121 billion. That represents a rate of deficit reduction of not 1%, nor even 0.1%; at that rate, it would take 1,000 years to reduce the deficit. He acknowledged that debt will not fall in this Parliament, so the Chancellor should at least focus on the long term, instead of quick-fix gimmicks. That was sound advice.

The hon. Member for Redcar (Ian Swales) defended the Government’s failing plan, and suggested that a VAT cut would simply benefit the well-off. Has he even noticed the Chancellor’s tax giveaway to millionaires? The hon. Member for Macclesfield (David Rutley) proudly declared that the Chancellor’s plan was a continuation of Thatcher’s legacy, and told people to cheer up and stop moaning. He should try telling that to the 2.5 million people who are unemployed.

Deep down—perhaps it is evident from their poor attendance—even Government Members know that the Chancellor’s Budget failed to deliver what is needed to get us out of this economic mess. Let us consider the situation facing the Chancellor as he composed his Budget last month. What were the key economic indicators to which any genuinely in-touch Chancellor would want urgently to respond? Before we consider the current economic situation and this year’s Budget, let me take the House back briefly to the Chancellor’s first Budget—the June 2010 so-called emergency Budget—which, according to him, was necessary to deal decisively with the country’s record debts and produce a credible plan to deal with the record deficit. Right hon. and hon. Members may recall that the Chancellor used that emergency Budget speech to predict that the UK economy would grow by 1.2% in 2010, 2.8% in 2012, and 2.9% in 2013. He was dreaming. As a result of his failure, we have had a double-dip recession and the economy is stagnating, with just 0.8% growth since the 2010 spending review, compared with 5.3% forecast at the time. He consistently blames factors beyond his control, but only three G20 countries have grown more slowly than the UK in the same period.

The independent OBR has halved its predictions for 2013, anticipating growth of just 0.6% this year, compared with the 1.2% forecast in December, a mere four months ago. The most recently published figures suggest that industrial production in February was down 2.2% on the year before, while the UK’s trade deficit has widened to £9.4 billion following a worrying 4.7% fall in exports to non-EU countries. Indeed, over the past two and a half years, lack of confidence created by the Chancellor’s failing plan has seen business investment fall by £3 billion, compared with the OBR’s forecast of a £24 billion rise. Of the G20 nations, only Italy and Saudi Arabia have experienced a sharper fall in investment in that period. As a consequence of the Chancellor’s economic failure, Government borrowing has risen, not fallen, with the coalition set to borrow £245 billion more than the forecast in autumn 2010. [Interruption.] I am astounded that Ministers shout that we would be borrowing more; they are borrowing more.

The Chancellor’s promise to balance the books by 2015 will not be met, and the national debt will not fall until 2017-18 at the earliest, which has resulted in the downgrading of Britain’s triple A credit rating by Moody’s. More recently, Fitch has put the UK on negative watch—the very cover that the Chancellor used for his accelerated spending cuts in 2010. What does that economic failure mean for ordinary people up and down the country? Who is paying the price for the downgraded Chancellor’s economic plan, which lies in tatters? The most recent figures, published on Budget day, show that unemployment has risen again, and the trends behind the employment figures are increasingly worrying. Long-term unemployment remains far too high, and the risks have become dangerously entrenched while youth and female unemployment is up again.

Ministers regularly claim—and Government Members have done so again this afternoon—that the coalition has helped to create more than 1 million private sector jobs, but about 200,000 of those were created as a result of the reclassification of further education and sixth-form colleges in the private sector. Half the jobs that have been created since 2010 are part time, and almost 1.4 million people who want full-time work can only find part-time work. People who are in work have found that their wages have simply not kept pace with inflation. There is also the deeply worrying phenomenon of falling productivity, with more people apparently producing less. Is it any wonder that we have seen a disturbing rise in so-called zero-hours contracts, with recent media reports suggesting that almost a quarter of larger employers are recruiting staff in that way?

This is the reality for many people in this country—not for the Chancellor’s millionaire pals, but for the millions of ordinary people in this country who are facing the reality of unemployment and, for those in work, squeezed living standards, under-employment and increasing insecurity. The truly startling but unsurprising reality, confirmed by the OBR, is that people will be worse off in 2015 than they were when this Government came to power.

What was the Chancellor’s response to this dire situation on 20 March? A package of measures genuinely and urgently to kick-start our flatlining economy, boost confidence, stimulate investment and create jobs? No. A recognition that his plan has completely and demonstrably failed? Again, wrong. What this country urgently needed was a Budget with the X factor. Instead, we have a one-direction Chancellor who clearly believes that it is impossible to admit that he got it wrong and to change course. We got a more of the same Budget from a more of the same Chancellor, who would rather continue down the same path no matter what long-term damage it does to our economy and to local communities than come clean with the British public.

Of course, there were some welcome measures. The Opposition have consistently called for a tax break for small firms taking on new workers and the Chancellor is now set to introduce a scheme. Let us hope that it has a better success rate than his previous policy which, at the last count, has created 70,000 jobs, which is to be welcomed, but which is just a little shy of the original prediction of 800,000. On tax avoidance, the Government are consulting on how to clamp down on abusive payroll services based in tax havens, as well as confirming their intention to strengthen the tax disclosure provisions introduced back in 2004 by the Labour Government. Again, those are both areas where the Opposition have been calling for urgent action for some time.

Despite all the tough talk on tax avoidance, we continue to get a series of mixed messages from the coalition and a lack of real action. We repeatedly hear the Chancellor and the Prime Minister claiming to be leading on international tax avoidance action at the G8, yet days ahead of the meeting the Exchequer Secretary boasted that the UK has moved ahead of Ireland, the Netherlands and Switzerland in “tax competitiveness”. I wholeheartedly agree with the sentiments expressed by the hon. Member for The Cotswolds (Geoffrey Clifton-Brown), who is not in his place at present. He rightly pointed out that the UK needs to be careful of promising competitive tax rates if companies get away with not even paying them. He also rightly pointed out that we need to analyse what impact tax avoidance has on developing countries. We will introduce amendments to that effect.

Perhaps the most mixed message of all is the coalition’s incredible decision, announced in last year’s omnishambles of a Budget and confirmed in this year’s Budget document, to give some of the wealthiest people in this country an average £100,000 tax cut this month. A Chancellor who claims that he finds tax avoidance “morally repugnant” is determined to carry on with his game of “Who wants to bung a millionaire?”, reducing the 50p rate of income tax because the “behavioural response” was “larger than expected”. No doubt he will have phoned a few friends last weekend to remind them of his good news. This means, in effect, that top earners have been so nifty at shifting their income to minimise their tax liability that this Government, who talk tough on tax avoidance, are rewarding them by cutting the rate. Liberal Democrat colleagues will be telling themselves that this indefensible decision does not matter and that everything is okay because of the much-trumpeted increase to the personal allowance. But they have not quite owned up to the fact that families on average will be £891 worse off in this tax year, and cuts to tax credits and benefits have been introduced since 2010.

Indeed, the small rise in the personal allowance is hugely outweighed by the cuts to tax credits and child benefit, the bedroom tax, the granny tax and the increase in VAT, which the Liberal Democrats campaigned against so vociferously before it was announced in June 2010. The straight fact is that the dire economic situation in which we find ourselves is of the Chancellor’s making and that of the coalition Government, but the brunt is being borne by millions of ordinary people and local businesses—

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Question again proposed, That the Bill be now read a Second time.

[Catherine McKinnell]

The dire economic situation demanded an urgent response from the Chancellor. Indeed, the director general of the British Chambers of Commerce, John Longworth, said:

“We are at an unprecedented moment in our economic history, and the government should be doing everything in its power to get the economy moving. Many of the Chancellor’s measures are positive but may come too late, particularly for smaller and medium-sized companies. We need urgency, scale and delivery today.”

We agree, but what we got from the Chancellor and what we have before us this evening is a bit of tinkering around the edges and more of the same. It is just not good enough and Britain deserves better. That is why the Opposition will vote against this inadequate Budget from an inadequate Chancellor who is increasingly out of touch and totally out of his depth.