Finance Bill

Charlie Elphicke Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mary Creagh]

I will not, because we have only one hour left, and eight Members wish to speak. The Front-Bench spokesmen took their time, and I intend to take my time.

The labour economist David Blanchflower, a former member of the Monetary Policy Committee, has said that the Government’s prediction on jobs is wildly over-optimistic, given that the Labour Government created only 1.6 million jobs between 2000 and 2008, when the economy was, by consensus, booming.

The VAT increase for which the House voted will raise £12.1 billion in 2011-12, but will reduce the amount of goods and services that people can buy. It will depress demand and delay the recovery. It will increase prices permanently by 1%, thereby permanently reducing the value of future earnings and—one of the hot topics in the Bill—future pensions. It will also disadvantage the poorest, who spend the biggest proportion of their income.

Let me say something about the social impact of the Bill. It was difficult to hear the details of that as the Minister raced through his speech. We have heard from the Prime Minister that children need warmth, not wealth, and they will certainly miss out on the wealth part as a result of this Bill. Poor families in Wakefield will lose up to £1,200 as a result of changes in working families tax credit. From April 2011 the Sure Start maternity grant will be available only for the first child in a family. That means a £500 cut for low-income pregnant mothers who already have a child.

[Charlie Elphicke (Dover) (Con)]

Will the hon. Lady give way?

[Mary Creagh]

No. I am going to take my time. As I have said, I am not going to take interventions.

Nappies, prams, babygros, bottles, dummies and high chairs will all be more expensive for families in our constituencies as a result of the VAT increase, but the grants to help the poorest women in our society to afford them will be cut. When I asked the Secretary of State for Work and Pensions how he expected families to cope, he said that he wanted them to recycle prams, but if someone has a child one year younger than another child, where is the second baby supposed to sleep? In the same cot? The parent of a second child will still need to buy a new car seat and a double buggy. It will be more difficult for low-income families to buy all those items. We are losing the baby element of child tax credit, and we are losing Labour’s proposed toddler tax credit, which would have meant another £208—

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[Charlie Elphicke]

I just point out to the hon. Lady that child poverty has risen by 300,000 since 2004, whereas under this Budget it will be frozen for two years. Does she not welcome that very positive fact?

[Mary Creagh]

Interestingly, when the Red Book refers to the effects on child poverty it talks about the next couple of years but does not mention 2013 and 2014. Thanks to the work being done by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the shadow Secretary of State for Work and Pensions, we are finding that this Budget’s impact on women—in particular on poor women, low-paid women and public sector worker women, and therefore on their children—is likely to hit disproportionately hard. I leave the hon. Gentleman with that thought.

What is absent from the Budget and the Finance Bill is any mention of the poor. The changes to the disability living allowance gateway are to save £1 billion by 2014, but we need clarity about which groups of disabled people are going to be affected. The housing benefit move to the 30th percentile of average housing will have an impact on families across the country. Stringent changes are being made to the housing benefit rules to say that anyone who has been on jobseeker’s allowance for more than a year will automatically lose 10% of their housing benefit.

If that is done to people, there are three possible outcomes. The first is that the people involved find jobs—and good luck to them. I am sure that that is the stated aim of the Government’s policy. The second possible outcome is that those people cannot find jobs because a further 1.3 million people are on the dole as the public sector and private sector job losses kick in, so they are forced to borrow the money. However, we are talking about people with a low income or no income, so they will, in effect, be forced into the arms of loan sharks and will fall into debt. The third possible outcome is that these people will spend £10 a week less feeding their children, so their children will be pushed back into poverty. The arguments being made about child poverty will not wash with Labour Members, because both the second and the third possible outcomes will tip those families back into poverty.

[Mary Creagh]

The beauty of the child trust fund is that both those things happened; this involved people who would never have thought of opening a trust fund. I count myself among them, because I had no idea what a trust fund was until I was “given it by the Government” when my son was born, but now that I understand what it is and I understand the secrets of how people save for their children in a tax-efficient way, it has enabled me to think carefully about how I plan for my children’s future. It enables families to do both those things.

Most families are using the child trust funds to put a little bit extra by. The parents who scrimp and save to put into the child trust fund will not let their children waste the money. The straw man that has been held up is that they will blow it all on their 18th birthday party, on buying fast cars and all the other things that 18-year-olds do—[Interruption.] That is certainly what has been stated by some Government Members as a reason for cutting the child trust fund; they have said, “You can’t give it to 18-year-olds because they won’t know what to do with it.” When their parents have paid into the fund they will make absolutely sure that that money, which for them is a life-changing sum, will be used wisely by their children.

[Charlie Elphicke]

rose—

[Mary Creagh]

I have taken one intervention from the hon. Gentleman, and I am aware that other hon. Members wish to speak.

The VAT rise in the Finance Bill will cost the NHS an extra £250 million each year, and it will be very bad for public health, too. Recent research by David Stuckler and his colleagues published in the British Medical Journal shows that social spending—housing benefit, disability living allowance and other such benefits—has more impact on tackling health inequalities than spending on the NHS. They studied 20 European countries over two decades, finding that mortality rates increased when social spending was cut. So the public health impact of cutting the housing, disability and incapacity benefit budgets will be felt by the poorest in our society in the reduction in their life expectancy.

In concluding, I wish to discuss what has happened in the past 10 weeks and the political impact that voting for this Budget will have on the Liberal Democrats. The past 10 weeks have been like a very dark episode of Doctor Who, with the Conservatives as the evil Cybermen. The Cybermen were originally a wholly organic species of humanoids that implanted more and more artificial parts into their bodies as a means of self-preservation. This led to the race becoming coldly logical and calculating, with every emotion all but deleted from their minds. They use human pawns and seek to further their number by conversion. The Liberal Democrats are the Conservatives’ hapless victims. The Cybermen have to assimilate their victims in order to drain their energy and live, but we all know that when the Cybermen have assimilated, they have only one further aim: they say to their victims, “You will be deleted.”

These are not progressive cuts. There is nothing progressive about slashing the extension of free school meals to the children of the working poor and thrusting 50,000 children back into poverty. There is nothing progressive about freezing the pay of dinner ladies, hospital cleaners and nursery workers. Why should low-paid women pay for the fiscal hysteria of markets and central banks, which presided over such colossal market failure? Why is corporation tax being cut by 1% a year for the banks when everyone in Wakefield is seeing their VAT increasing by 2.5%? Why is the annual exempt amount for capital gains tax rising each year with the retail prices index when housing benefit and occupational pensions in Wakefield will increase only by the consumer prices index?

Those are political choices. They are the wrong choices for my constituents and for those of other hon. Members. Economically, this is a deflationary Budget. It is wrong for Britain, wrong for families, wrong for pensioners and wrong for the poor. Politically, supporting this Budget will be the wrong thing for the Liberal Democrats. I urge all Liberal Democrat Members to think before they vote tonight, and before they throw away 120 years of Liberal tradition as the Tories’ new poodles. You are being assimilated. You will be deleted.

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[Charlie Elphicke (Dover) (Con)]

I shall keep my remarks brief and discuss clause 1 in relation to corporation tax.

There are many pockets of deprivation in Dover and Deal, and the rise in child poverty during the previous Parliament was a serious concern, as was the widening of the gap between the richest and the least well-off. The abolition of the 10p rate hurt and upset many of my constituents, so the rise in income tax personal allowance is extremely welcome, but what we need to do, as has been much discussed today, is to increase the nation’s trend growth rate.

On that point, I particularly welcome the reduction in corporation tax to what will be 24p by the end of this Parliament. That is incredibly important, because business, particularly international business, is very mobile and can set up anywhere. WPP, for example, has gone off to Dublin, and that should concern every Member, because the Exchequer is going to lose about £240 million in corporation tax receipts every year.

If we are to compete with centres in the European time zone, it is important also that we consider how to build in a participation exemption, as the Netherlands and Luxembourg have, and as Ireland and Switzerland have in effective forms. We need to draw international business into the UK, because that is a critical path towards expanding the amount of jobs and money that we have.

I make one brief plea. Reducing the corporation tax rate to 24p by the end of the Parliament is welcome, but, if we are to make a step change, reducing it to 19p would, in my respectful submission, be transformational. It would draw in international business and, ironically, raise corporation tax revenues. That is the international evidence, and that is the short and simple case that I put to the Treasury team—to consider going further, harder and deeper in future.