Finance Bill

Charlie Elphicke Excerpts

Tuesday 6th July 2010 Commons Chamber

[Ian Lucas (Wrexham) (Lab)]

rose—

[Charlie Elphicke (Dover) (Con)]

Will the Chief Secretary give way?

[Danny Alexander]

I am going to make progress for a few moments, or the former Chief Secretary will never get a chance to have his say.

Clause 4 takes further action to tackle the deficit by increasing the standard rate of insurance premium tax from 5% to 6%. The higher rate of insurance premium tax will increase from 17.5% to 20% from 4 January 2011, to bring it into line with the new VAT rate. The increases are both fair and sustainable.

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[Mr Byrne]

My hon. Friend is right. One reason the British supply chain is now so worried about the Government’s intentions is that it has seen these knee-jerk reactions, such as yesterday’s decision, of which the Chief Secretary was so proud he did not dare come to the House to say a word about it.

I want to make a point that follows on from what my hon. Friends have said. Rather than balancing spending over the economic cycle, we now have, in the Budget, a plan to eliminate in just five years the structural deficit. However, the Finance Bill ignores the question of what happens if growth is weaker than expected. It is worth for a moment the House exploring the economic consequences of this Chancellor’s proposals. If growth fails, the structural deficit as a percentage of our economy goes up, yet the timetable for its elimination remains unchanged, so the Chancellor’s only course of action is to cut deeper and deeper. If growth falters or the economy shrinks, the Chancellor cannot stimulate the economy, but can only respond with cuts. It is not a plan to manage the economic cycle; it is a plan for an economic death spiral. Like some kind of self-flagellating penitent who believes borrowing is so morally wrong, he responds to any new urges with another bout of whipping. He might feel it gets him to heaven a little faster, but I am afraid it is no way to run an economy.

[Charlie Elphicke]

I enjoy the right hon. Gentleman’s thirst for talking down the economy, but how many independent economic forecasters are predicting the double-dip recession that the Labour party seems to constantly hope and pray for?

[Mr Byrne]

I note that the hon. Gentleman was so eager to participate in this debate that he missed the beginning of it. The words I used were not my words, but the words from a wide section of the British business community. [Hon. Members: “Who?”] Well, Goldman Sachs, the Chartered Institute of Purchasing and Supply, and the judgment of the stock market. This is not a perspective held by a narrow corner of the business community. The judgment on this Budget is widely shared across this country.

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[Mr Byrne]

Quite right. Sir John Major told us:

“If it isn’t hurting, it isn’t working”.

This Bill, and this Budget, will hurt all right—hurt the recovery; hurt families; hurt pensioners; and it will not work, as it will put people out of work.

[Charlie Elphicke]

Perhaps I am just confused, but I am looking at the OBR table C.2 and it seems that ILO unemployment and the claimant count will be falling over the course of this Parliament. Will the right hon. Gentleman confirm if I have misread the table?

[Mr Byrne]

In preparation for this debate, the hon. Gentleman will have compared those employment forecasts with those in the March Budget and will have noticed, like the rest of the world, that they are now 100,000 lower.

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[Mr Meacher]

I regret that the Labour Government did not succeed in narrowing the gap between rich and poor. However, they did something quite remarkable in reducing the number of children in poverty by 600,000. No, it was not enough, and we fell below our target. I can tell the hon. Lady why the gap widened, however. To cite a phrase that was used early on in the Labour Government, new Labour took the attitude that it was fairly unconcerned about people becoming filthy rich. That was a serious mistake, and the increase in the wealth of the tiny top segment of the population has been enormous. That is the reason that the gap increased.

[Charlie Elphicke]

I am interested to hear the right hon. Gentleman raise the issue of child poverty. Can he explain why in the last Parliament it went up by 300,000 on every single measure?

[Mr Meacher]

Indeed. The hon. Gentleman is wrong on the figure; the last figure available for when Labour were still in government suggested an increase of about 100,000. That, of course, was the result of a recession caused by the bankers. The Labour party protected the poor and the unemployed to a significant degree, as those groups are about to find out from the very different treatment meted out to them by this Government.

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[Mr Lammy]

My hon. Friend is absolutely right. In the midst of a growth in unemployment, which has been predicted by the OBR, there is a VAT rise that will affect the poorest families.

In debating the Budget, we have to defend the hope and prospect that there is a different economic way. That is articulated not just by the usual suspects—economists such as David Blanchflower have been mentioned in the debate—but Martin Wolf in the Financial Times, Samuel Brittan and George Joseph Stigler. A number of economists are saying that this is the time for fiscal stimulus, for an FDR-type new deal, for an LBJ-type offer. This is the time for that big society that they dreamed about.

When this country lay in rubble after the second world war, we did not shrink back. The Attlee Government invested. We built the NHS, we built housing, we built schools. That is the example that we should be following. Instead we get this false smoke-and-mirrors game.

[Charlie Elphicke]

rose—

[Mr Lammy]

I will not give way at this moment.

Politically one has to applaud, in some senses, the Government for the way in which they have changed the debate that was about fiscal stimulus, support, opportunity and hope, despite these difficult times. The country had a focus on the banking sector in this country, in particular, but that has been turned into solely a debate about deficits; that is the only discussion taking place. I say, as a Labour Member who is proud of my party’s tradition, that the discussion had not solely been about the recovery; it had also been about what had led us to this position. That was a discussion about materialism, consumerism and excess, but all we hear now is this emphasis on cuts, cuts, cuts and deficits. The Government are wrong, as was made clear in the G20 meeting and the letter that President Obama wrote shortly before it. They have taken the wrong position for ideological reasons, which will have grave social consequences.

The Government have said that this Budget is unavoidable, but of course it is not, for the reasons that I have set out. It is not unavoidable, because the previous Budget, in March, made it clear that we intended to cut the deficit over the next Parliament in a measured way. This Budget is not progressive. How can one describe a Budget that means that unemployment will rise and growth will shrink as “progressive”? This is a total twisting of the word “progressive”. We have a dictionary on the table in front of the Economic Secretary, so I invite her to pick it up and look at what “progressive” means. It certainly does not mean what is in this Budget. This Budget is not fair to many people beyond this place.

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[Charlie Elphicke (Dover) (Con)]

I, too, congratulate the hon. Member for Scunthorpe (Nic Dakin) and my hon. Friends the Members for North East Cambridgeshire (Stephen Barclay), for Ipswich (Ben Gummer), and for Weaver Vale (Graham Evans) on their excellent speeches. I also congratulate the hon. Member for North Durham (Mr Jones), who has just departed, who spoke with such eloquence about the need for parliamentary reform. His passion brings a tear to the eye of the Leader of the House; of that I have no doubt whatever.

I am saddened by the need for clause 3, on VAT, to be included in the Bill. It is a great shame that it is necessary to take difficult action in relation to taxes because of the extreme black hole left in the public finances. We now find ourselves in a position where debt is 62% of GDP this year—higher than the 54% in 1976, when the International Monetary Fund was last called in. That is the level of seriousness of the debt that we have. The ratio of debt to GDP is predicted to go to 70% in the next three years, even with the tough action taken by the Government.

I for one am relieved, however, particularly because taxes could have been a lot higher. The black hole could have been filled in other ways. We have taken the difficult decisions on public spending, but we on the Government Benches know that if there had not been a change in government, we would have seen not only a rise in VAT but a possible £20 billion tax increase, with income tax perhaps going to 25p in the pound. That is the size of the black hole that we have been looking at.

I congratulate my right hon. and hon. Friends on the Treasury Bench on taking the firm action required, because I worry about the least well-off. I worry that the rich-poor divide has widened since 1996-97. I worry that since 2004-05 households in child poverty has risen by 300,000. I welcome the fact that it will be frozen for the next two years. I am concerned that the number of children in overcrowded homes has risen from 980,000 in 2006 to 1,080,000 in 2008, according to Communities and Local Government figures. I am concerned that the housing waiting list has risen from 1 million in 2001 to 1.8 million in 2009, according to CLG figures. I am also concerned that disposable income rose by only 1% a year between 2004-05 and 2008—and that was before the current difficulties hit home.

I, for one, welcome the difficult decisions taken on capital gains tax in clause 2. Personally, I think that that is the right thing to do. I have always taken a more Lawsonian approach. A difficult decision has been made, but it is essential that everyone pays their fair share of tax. I regret that we are not keeping a more ameliorated position for those who own business assets, but I think that those who own country estates, oil paintings or buy-to-let empires should pay a fair share of tax.

We know that that is the right approach to take, because the figures from the past few years show that the level of private rented sector property rose from 10% of housing stock in 2000 to 14% in 2008. Meanwhile, the total social housing stock fell from 4.25 million properties to just 4 million in 2009, according to CLG figures. The level of owner occupation fell from 71% in 2003 to 68% in 2008, according to CLG figures. I regard that with concern, because where people need assistance we should have affordable housing there for them. The number of new affordable houses built also fell under the previous Government. Where people have the requisite funds to buy their own home they should be encouraged and helped to do so. So I commend this Budget to the House.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

If the hon. Gentleman is so concerned about housing, how does he feel about his Government’s decision to cut the Homes and Communities Agency by £60 million? Some £4.5 million of that cut will have an impact on new homes that were supposed to be built in my constituency. How does he feel about the most recent announcements on housing allowance, which mean that people in my constituency are having to make up a shortfall of £50 a month?

[Charlie Elphicke]

I point out to the hon. Lady that the number of affordable houses built in 1995-96 was 74,530, whereas the average for the previous Government’s entire tenure was just 40,000 affordable homes built each year. Why was that? Last year’s figure was 20,000 below what was achieved under the outgoing Conservative Government. As I said, we built 74,000-odd a year, whereas last year the previous Government built 55,000, so I do not think that they have any record to stand on when it comes to affordable housing, except that of a roll of shame. Their record is an absolute disgrace.

What we need is for the UK to grow faster, because the best cure for deprivation is a job. Too many jobs were taken away by the previous Government’s galactic economic incompetence, and we need to have change, so I want to make the case for that. Will the UK grow faster with a larger public sector? Will the UK grow faster with even higher taxes, as were planned by the previous Government? Will the UK grow faster with ever more debt, or would that result only in ever-higher interest rates, a weaker currency, an increased country risk and our country’s credit rating at risk? I think that the right decisions have been taken, because the UK will grow faster with a lower jobs tax.

[Chris Leslie]

I wonder whether the hon. Gentleman recalls what the so-called “independent” Office for Budget Responsibility said about the downgrading of growth forecasts as a direct result of these Budget measures. What was the OBR’s finding? Did it say that growth would increase or decrease as a result of the measures in the Budget?

[Charlie Elphicke]

The hon. Gentleman will know that the OBR itself said that that was misleading. He will also know that the OBR ruled that the figures set out in the March Budget were a total work of fiction and a disgrace, and it downgraded them. The true downgrade was that of GDP growth by 0.5% to 1% by the OBR when it put right the fiction that had been produced previously, and the misleading about the economics of our nation. The hon. Gentleman does not have a leg to stand on.

This country will grow faster with a lower jobs tax, with lower borrowing and with a low rate of corporation tax, as set out in clause 1. The key point that I want to make is that the fall should be faster, because I want to see a corporation tax rate of just 19% in this nation by the end of this Parliament; that would give us a real revolution. I would like us to have a participation exemption, as exists in the Netherlands, Ireland and other places, to make our nation a European headquarters company of the European time zone. I think that capital gains tax is necessary, but business assets should be taxed lower. That was one of the few things that the former Prime Minister got absolutely right, and it is a great shame that we do not have a differential level, or a higher entrepreneur’s relief. Ideally, that would be extended, because we need to encourage more jobs and growth, and an expansion of the private sector.

I particularly welcome the new business national insurance relief, which is extraordinarily important. Obviously, as a representative of Dover, I would say that ideally it should be extended across the nation, especially in deprived areas of the south-east that have benefited from social structural European funds—not just Dover but other parts of east Kent and the south-east. We need to clear away the deprivation and the benefits culture that has grown up in recent years so that we can unlock the potential, the hope and the chances in each and every citizen of our nation. If we get them off benefits and back into work and break the cycle of poverty, we bring hope and unlock that potential. That to me is the most important thing—to give everyone in this country a real crack at opportunity in life. In this Budget and this Finance Bill, difficult and bold decisions have been taken, but they are the right decisions, and I support the Bill.

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[Charlie Elphicke]

May I ask the hon. Lady to which clause in the Bill she is referring?

[Ms Eagle]

Mr Deputy Speaker, it looks like someone is applying for your job. Every clause in the Bill hinges on the forecasts made by the Office for Budget Responsibility that appear in the Red Book. In fact, those forecasts run through every part of this Budget debate like the words in a stick of Blackpool rock. So the hon. Gentleman cannot, in all honesty, however late the hour, try to claim that the points I am making have nothing to do with the Bill before us.

Could it be that Sir Alan has decided to sling his hook because he was forced to become a kind of extension of the Conservative party spin machine last week, when he brought forward that highly contentious explanation—coincidentally just an hour ahead of Prime Minister’s Question Time—of the likely effects of the Budget on jobs? We can only speculate about whether that was the case, but I would be interested to hear whether the Exchequer Secretary is able to shed any light on this matter, in the interest of transparency, when he winds up the debate.