Budget Resolutions and Economic Situation
Debate between Chris Leslie and Andrew Bridgen(9 years, 4 months ago)
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Chris Leslie
I do not think that was a very polite reaction from Conservative Members. My hon. Friend worked very hard during her time in local government to try to support the low-paid by introducing a London living wage, and I think it commendable that local authorities and businesses in London, in particular, have tried to make headway with that. Of course, a real living wage now needs to be about £12 to compensate for the reduction in tax credits.
Productivity
Debate between Chris Leslie and Andrew Bridgen(9 years, 5 months ago)
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Chris Leslie
We can see that the problem is particularly stark when we make those international comparisons. Our productivity growth rate has plummeted to the second worst in the G7. The UK was ranked 29th out of 36 OECD countries for GDP growth between 2010 and 2014. My hon. Friend makes an important point.
Chris Leslie
The hon. Member for North West Leicestershire (Andrew Bridgen) was on his feet first, and I would not want to pick the right hon. Gentleman before him.
Andrew Bridgen
The shadow Chancellor talks about productivity and the need to invest in plant and machinery, and the need for cross-Chamber support, to improve our productivity. Does he therefore support the Conservative Government’s maintenance or increase of capital allowances for businesses, giving them a clear incentive to invest in their businesses?
The Economy
Debate between Chris Leslie and Andrew Bridgen(9 years, 5 months ago)
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Chris Leslie
Long-term investment, especially production process technology and business investment, is crucial, which is why the stop-start approach of recent years from the Treasury has seen us underperform in business investment into the productive economy. It is essential.
Andrew Bridgen (North West Leicestershire) (Con)
Governments should try to encourage increased productivity in the private sector, but it is down to business confidence and reinvestment decisions. Although business confidence is now the highest it has been since 1992, investment dropped off in the run-up to the general election, because business was scared that there would be a hard-left socialist Government.
Chris Leslie
I know that the hon. Gentleman wants to make his political points, but I think we have a duty to ensure that we examine far more forensically the drivers of economic productivity and the growth that will help us to repair the public finances more successfully. That is the agenda we have to follow.
These are serious times, and we needed a serious Queen’s Speech agenda to address Britain’s long-term economic challenges. We should not forget that progress in our economy is still fragile and the recovery is still too constrained. The economy remains fraught with pressures, which have been heaped on the shoulders of many working people. For example, the number of people who have to work a second job in order to get by has increased dramatically in recent years, and a record number of pensioners are returning to the labour market. Indeed, the number of over-65s in employment has increased by more than 8% over the past year alone. The Office for National Statistics says that our share of high-skilled jobs is falling. The Government’s vision for Britain is one of a low-wage, bargain-basement economy. That is not the vision of a party for working people.
Future Government Spending
Debate between Chris Leslie and Andrew Bridgen(9 years, 8 months ago)
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Chris Leslie
Government Members are trying to shout down my hon. Friend because they do not like to hear the truth. The truth is that many of our public services are affected by the support and the funding formula given to local government. She is right to highlight the impact—
Andrew Bridgen (North West Leicestershire) (Con)
Will the hon. Gentleman give way?
Chris Leslie
No.
My hon. Friend the Member for Warrington North (Helen Jones) is right to highlight the impact on our national health service of some of the devastating changes that have hit social care. She made her point well.
It is bad enough that the Chancellor and the Prime Minister fight so hard against the idea that an inclusive approach leads to a stronger economy and a better plan. [Interruption.] What is worse is that the Prime Minister, the Chancellor and Government Members fully intend to accelerate the failing plan for a further five years—[Interruption.]
Income Tax
Debate between Chris Leslie and Andrew Bridgen(10 years ago)
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Chris Leslie
We have consistently opposed this outrageous change to dish out a tax cut for the very privileged 1% in society. The hon. Gentleman should join us, and I hope he will, in voting for today’s motion, as it is about a key divide in British politics and in Scottish politics. It is very important that we expose the fact that by cutting the top rate of tax on earnings above £150,000 from 50p to 45p Ministers have wilfully accelerated the divide between the majority and the richest 1%.
Andrew Bridgen (North West Leicestershire) (Con)
Will the shadow Minister concede that the considerable increase in personal allowances under this Government has been of no benefit to those earning more than £150,000 because between £100,000-worth and £110,000-worth of earnings all the personal allowances are removed?
Chris Leslie
The hon. Gentleman has done more for the very wealthy earning over £150,000. At this time of pressure on our public spending and on his constituents and mine, what did he decide to do? A typical millionaire, he gave away a benefit worth £100,000. He voted for that cut in the 50p rate of tax, which the vast majority of people feel is an obscene example of the unfairness of this Government. It is particularly a stain on the reputation of the Conservatives, but I want to hear how the Liberal Democrats justify their votes for the cut in that 50p rate.
Andrew Bridgen
Thank you, Madam Deputy Speaker. If the shadow Minister wishes to intervene, I am more than happy to give way.
Chris Leslie
The hon. Gentleman said that the 50p rate was clearly ridiculous, but my hon. Friend the Member for Vale of Clwyd (Chris Ruane) quoted the previous Chancellor of the Exchequer, my right hon. Friend the Member for Edinburgh South West (Mr Darling), who said before the last election that he could not countenance reducing the 50p rate while so many people were bearing such a burden in our society. Does the hon. Gentleman really think that that burden has lifted?
Andrew Bridgen
The deficit of £150 billion that we inherited from the previous Labour Government has been reduced by a third, but there is much more work to be done. If the hon. Gentleman will bear with me and listen to my speech, during which he will have the chance to intervene, I think that I will answer many of his questions.
The ability to earn more than £150,000 does not give or guarantee happiness, health or friends, but it does give choices. People who earn more money have more choices. My definition of poverty is having no choices: people with no choices are in poverty. One of the choices people have is about where they are domiciled for tax. With taxes rising in France, there has been a flight of people to the UK, to such an extent that, as was pointed out at a meeting with the Mayor of London a few months ago, so many French people live in London that it is the fourth largest French city.
I have always been a great believer in this quote:
“Those who do not learn from history are doomed to repeat it.”
When the right hon. Member for Edinburgh South West (Mr Darling) brought in the 50p tax rate before the last election, I naturally assumed that he did not take on board George Santayana’s sentiments, as history has told us time and again that
“for a nation to try to tax itself into prosperity, is like a man standing in a bucket and trying to lift himself up by the handle.”
Yet the Labour party persist in this notion that having one of the highest top rates of tax in the world will increase revenues and make the country more competitive. My hon. Friend the Member for Wolverhampton South West (Paul Uppal) was quite right to quote Abraham Lincoln, who said:
“You can’t make the poor richer by making the rich poorer.”
He described economic inequality as benign, rather than malevolent. Understanding the difference leads to understanding why allowing the greatest number of opportunities works better for increasing everyone’s wealth than trying to equalise outcomes. That was true then, and it remains true now.
The Labour party’s economic blindness seems to extend to failing to take note of what is happening over the channel in France. It is in its third year of being led by the Leader of the Opposition’s comrade Francois Hollande. After the Socialist Government increased a range of taxes, including the top rate of tax, revenues have proven to be half of what was expected. France has virtually no economic growth, and it has a black hole of billions of euros in its public accounts, to the point that it now wants the UK to pay €2 billion to help to bail it out. An uncompetitive top rate of tax decreases the incentive to work, reduces the amount of money for investment and, as has been seen in France, ultimately reduces the size of the economy.
What the Opposition do not seem to grasp as they play 1970s politics is that we live in a different world from that of the 1970s, when the UK had draconian top rates of tax. The principal difference is that high earners now have the option to live elsewhere, without any inconvenience, because of the internet and much improved air travel. We do not want to go back to the brain drain, and to being the sick man of Europe.
Plenty of people have offered advice on this issue to the Labour party. Let us take the comments of Mark Giddens, a partner at UHY Hacker Young, who stated:
“We would lose some of the edge that we currently have over other Western European countries in attracting successful entrepreneurs and investors. We will also find it harder to compete against other major English speaking economies such as the USA”.
The evidence seems clear. Under the French model we see high tax rates, anaemic growth, high unemployment and lower Government revenues; under our current model the long-term economic plan is working, we have the fastest economic growth in the developed world, and an economy that has created more jobs than the rest of the EU combined, leading to more tax revenue.
We can see in the HMRC analysis that was mentioned by the Minister and published in 2012, that the 50p rate was raising nothing like the £3 billion that Labour estimated at the time and continues to hold dear. Indeed, the direct cost of the reduction in the rate of income tax at that time was estimated at only £100 million. When other lost tax revenues are taken into account, it is evident that there was no direct cost to the Treasury in cutting the top rate of tax from 50p to 45p, not to mention the wider economic impact of that higher rate of tax, as we have seen in the French economy.
When Nigel Lawson cut the top rate of tax from 60p to 40p in 1988, the tax take rose and top earners paid a larger share of it. When the Treasury decided to set the rate of capital gains tax at 28%—up from 18% under the previous Labour Government—it stated that its studies had concluded that that rate maximised the tax take. If the optimum rate of unearned income is 28%, I suggest it is unlikely that the optimum rate of income tax should be nearly double that level. Figures show that less than 1% of the population earn more than £150,000 a year, yet those people contribute approximately 30% of the total income tax take. That is a total of £49 billion from the 45p rate, compared with only £40 billion raised the year before when the rate was 50p— evidence that when we cut the rate of tax, revenues rise.
What is Labour’s case for tax rates that will lead to decreased revenues? When the measure was first suggested it was nothing more than a pre-election attempt to convince its core vote that it was still the party of squeezing the rich, and remains so today. At the same time, Labour was obviously laying a bear trap for the incoming coalition Government. It was a Trojan horse of a policy; a Trojan horse of a tax. Members will have noticed that I have referred to France rather a lot in my speech. That is because for the future of the UK should Labour win the next election, we have only to look across the channel and see what has happened. As the Leader of the Opposition said previously, “What Hollande is doing in France I want to do in Britain.”
Financial Services (Banking Reform) Bill
Debate between Chris Leslie and Andrew Bridgen(11 years, 8 months ago)
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Chris Leslie
I do not want any of our banks to be in a position of over-extending themselves, putting at risk either their customers or the taxpayer. It is very simple. We need to listen to the carefully thought through advice of the banking standards commission, the Vickers report and others, including the incoming Governor of the Bank of England, on these particular issues. The Government may call it the British dilemma, but it is astonishing that they always seem to be asking the European Union to come to their rescue at some point with some reform to deal with bail-in or whatever other problems happen to be around later on down the track. That is not adequate.
Let me deal with the issue of derivatives inside the ring fence, as I know that the parliamentary commission has been concerned about it. The Vickers report said that derivatives trading should not be allowed—full stop. The parliamentary commission recognised, however, that there were services on the margins where some simple derivative products might be permitted, but it added that
“allowing ring-fenced banks to sell derivatives other than as an agent creates additional prudential and conduct risks.”
I agree with the commission on that issue. We need clearer protections to prevent abuses within the ring-fenced retail banks where derivatives are sold. That was illustrated, of course, by the mis-selling of some interest rate hedging products to small and medium-sized enterprises. The danger is one of information asymmetry between customer and vendor and the fact that the trade became exceptionally lucrative for the banks. We have to move away from this era of the exploitation of the customer’s lack of knowledge, and the commission was clear about that in the three tests it set.
We have seen one of the drafts of the secondary orders, subsequent to the commission’s recommendations. It is therefore worth comparing that order with the tests that the commission has set. The commission said that there should be adequate safeguards against mis-selling, but as far as I can see, the draft order does not go into any detail about how the Prudential Regulation Authority or the Financial Conduct Authority will enforce anything new. The commission said that there should be a clear definition of simple derivatives, which will be allowed, versus complex derivatives, which will be disallowed, but the draft order seems to define simple derivatives quite widely—in other words, as instruments designed to tackle interest rate risk, exchange rate risk, default risk, liquidity risk or for dealing in assets included in the liquid assets buffer. It would be easier if the Minister set out what would not be allowed rather than what would be allowed in the ring fence.
The third test relates to limits on the proportion of a bank’s balance sheet. The commission thought that was necessary, but the draft order so far leaves out what that percentage should be. There is a space left for a figure before the percentage sign, so perhaps the Minister can give us a sense of what that proportion of the bank’s balance sheet should be. That was one of the commission’s tests, as I said, so we need to secure assurances from the Minister about the Government’s intentions. As Martin Taylor said in his evidence to the commission:
“I can’t see the point of having a fence round the chicken coop, electrifying it to keep the foxes out, and then inviting a family of tame foxes to live inside it.”
That sums up the problem quite neatly. I have already alluded to the bail-in powers. Again, it is disappointing that the Government are relying on future European directives as the means to achieve bail-in rather than building it into the Bill before us. I do not think that the frequent excuse of “We’re waiting for the European Union” will do any longer.
We need also to focus on some of the other issues that should be in the Bill today, particularly rebuilding consumer choice, financial inclusion and a diverse market. The Bill is silent on all those areas. There is nothing about challenger or new entrant banks; nothing to ensure a universal obligation on banks for basic bank account services. There is also pussyfooting around on switching of bank accounts, about which I know some Government Members are concerned. There is nothing on mutuality, despite the pledge in the coalition agreement to
“foster diversity in financial services, promote mutuals and create a more competitive banking industry”;
and nothing about a fiduciary duty of care for clients and customers. We will table amendments to ensure that high street lenders offer a basic bank account, which is particularly necessary because of the onset of universal credit. We want a report within six months addressing obstacles to new-entrant challenger banks and current account provision. We also want Parliament to have an opportunity, soon after Royal Assent, to examine the adequacy of customer switching arrangements, and we want the publication of bank data on “lending deserts”, the postcode areas where—as we are finding in our constituencies—some small and medium-sized enterprises and customers find it difficult to gain access to credit. Other tests need to be included in the Bill to fulfil the coalition’s mutuality pledge. We also want a duty to be imposed on directors of ring-fenced banks to operate prudently and to safeguard deposits, and we want them to have a fiduciary duty of care to customers throughout the financial services.
Andrew Bridgen (North West Leicestershire) (Con)
The hon. Gentleman has rightly described consumer choice as the main driver of any market. Does he believe that encouraging Lloyds Banking Group to buy HBOS, or intimidating it into doing so, increased or decreased consumer choice in this country?
Chris Leslie
The hon. Gentleman may not have noticed it, but there was a bit of a financial storm going on in the financial services sector at the time. He may think that his constituents who had deposits in Lloyds would have been better off had the bank not been saved in the way that it was, but I do not think that they would have enjoyed the experience of turning up at the cash machines and not being able to get their money out. I think that rescuing the banks was a necessary step at the time, but now we must learn from that crisis, which occurred not just in the United Kingdom but in the United States and throughout the developed world. If Government Members think that they can get away with rewriting history, and that the former Prime Minister uniquely got on a plane, caused the collapse of Lehman Brothers, and then went off to Greece and Spain, they must be living on a different planet.
Andrew Bridgen
Does the hon. Gentleman not remember that Lloyds Banking Group needed to be bailed out only because it was intimidated into taking over HBOS by the last Government?
Chris Leslie
I disagree. I think that there was a high-risk, high-return culture in the banking sector—we saw it in the United States, and we saw it here—which Government Members fuelled through their deregulatory philosophical approach.
Finance Bill
Debate between Chris Leslie and Andrew Bridgen(14 years, 4 months ago)
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Chris Leslie
Indeed. There are liquidity problems across the economy and they remain. There are rumours in the air about the return of quantitative easing and that we might be entering into double-dip recession territory. All these things prove that the so-called independent Office for Budget Responsibility’s downgrading of growth predictions as a result of the measures in the Budget suggests that the Government had a choice in their hands to steer the economy in a particular direction and that they have chosen not the pro-growth path that the Liberal Democrats and the Labour party advocated before the election but, because of the damascene conversion of the Secretary of State for Business, Innovation and Skills the day after the general election, the anti-growth path. They will take a whole chunk of money out of the economy by cutting public services so steeply and so massively in such a short space of time.
Andrew Bridgen (North West Leicestershire) (Con)
Does the hon. Gentleman not appreciate that there is no money for the private sector from the banks because of the legacy of the last Labour Government? The Government are borrowing £3 billion a week—there is no money left for the private sector.
Chris Leslie
I do not agree that the private sector is crowded out in that way. I do not think that there is quite the evidence to suggest that. However, I am not sure that the hon. Gentleman, had he been in government during the crisis that the credit crunch provoked, would have done anything massively different to underpin and insure some of the banks against their losses at that time, purchasing shares in various banking institutions in order to keep the banking system going. I understand the partisan nature of his point, but all parties would have had to create that safety net for the banks at that time. I do not want to dwell on these matters, because time is limited and it is important to make my speech as brief as I can.
I want to ask the Minister specific questions about the absence of the small profits rate cut from the Bill, a matter on which I tabled an amendment. It is important to know why on earth it is not included. Typically, large corporations with their multi-million pound profits are at the front of the queue as far as this Government are concerned, but the real engine of growth in this economy is small firms. When I asked the Federation of Small Businesses about this, Stephen Alambritis, the head of public affairs, said that he was surprised at the signal sent to small businesses by the way in which the Bill is framed. He told me:
“It is important that small business is recognised in discussions about the Finance Bill. There should be a reduction in the tax rate for small business as there is for larger companies. There seems to be some discrimination from the coalition government, in that they are favouring large companies at the expense of small business”.
The Minister might say, “Of course they will get their cut,” but can we really trust the Government to deliver that if they are not putting such a measure in the Bill, particularly if they are not putting in the future years of the main rate cut, too?
A number of questions on this clause are exceptionally important. I obviously do not want to talk for too long, so I shall let the Minister respond.
Budget Resolutions and Economic Situation
Debate between Chris Leslie and Andrew Bridgen(14 years, 5 months ago)
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Chris Leslie
The hon. Lady will have to forgive me, but sometimes I get the impression that sign language is the only one she might understand. Cutting back budgets is exactly what she has been doing and she will be voting for it with relish.
Andrew Bridgen (North West Leicestershire) (Con)
I assure the hon. Gentleman that Conservative Members would have liked to enjoy Labour’s economic inheritance in 1997.
Chris Leslie
It is important that we start to look at the measures in the Budget. They did not deal with the waste and inefficiency the Government promised to find. The Government said that waste and inefficiency would form the totality of their public spending reductions. They said they would not hit front-line services. The fallacy of those claims is beginning to show.
Chris Leslie
If the hon. Gentleman feels that every single item of expenditure that has VAT imposed upon it is not a necessity, I must disagree. It is not simply a tax on luxury items, nor is it akin to duties. The VAT yield is astronomical: £12 billion annually, some of which comes from his constituents. We will see what their reaction is to the increase, and I urge them to write to the hon. Gentleman, because they need to convince him on that issue.
A couple of items in the Budget statement were definitely very confusing. Now that the Under-Secretary of State for Communities and Local Government is present, I must say that I am still at a loss to understand quite how the Government’s council tax freeze will work. It sounds superficially plausible to say that the Government will give an amount equivalent to 2.5%—I think that that was the figure when it was last in the Conservative manifesto—to councils that keep their council tax increase below that level in order to reach a zero increase. That guarantee has been reduced from two years to one year, but with one hand they give a little and then, with the other, yank away a great chunk of the grant that local authorities receive.
Local authorities throughout the country will have to pull those two elements together, but how on earth that supposed council tax guarantee is going to work will be a mystery to them. They will delay their budget setting and budget planning until the spending review is clear, because until they know the departmental expenditure limit for the Department for Communities and Local Government, and until they know their grant settlement arrangements, they will be none the wiser about the Government’s plans either on council tax or on how they should set their budgets. I urge hon. Members to speak to their local authority leaders and elected members about that point, because whether or not we agree with the strategy, if we are to believe in local democracy, the technicalities—the operational details of those matters—count a great deal.
Andrew Bridgen
The hon. Gentleman talks about the coalition Government’s cuts, but he has forgotten about the biggest cut of all. We are going to cut the deficit, which is a millstone around the necks of current and future taxpayers. That will secure the future of our economy.
Chris Leslie
And everyone will live happily ever after—in the rainbow land that the hon. Gentleman inhabits. If he feels that the deficit reduction is the only issue that he needs to worry about, then he is looking at only a very narrow band of the issues that face our economy. Of course we need to have a pro-growth strategy in order gradually, over a longer period, to deal with our debt and deficit strategy, but not at the expense of the poorest in society and of economic growth or employment. The hon. Gentleman may well feel that unemployment is a price worth paying, which was the famous mantra of the Conservatives, but Labour Members do not.
On a technical issue, will Ministers come back at some point to talk about the limit on savings as regards ISAs? There is a suggestion that they are going to be index-linked, but now that we are moving from RPI to CPI in terms of indexation, the Red Book is not clear whether the link will be made on that lower level.
On the weekend before the general election, the Prime Minister appeared on “The Andrew Marr Show”, where he apparently promised to avoid cuts to front-line services, saying:
“But what I can tell you is any cabinet minister if I win the election, if we win the election, who comes to me and says, “Here are my plans” and they involve frontline reductions, they’ll be sent straight back to their department to go away and think again.”
That is what the Prime Minister said only a matter of weeks ago. Unfortunately, Ministers have not been thinking again, but have simply taken the axe to vital services.
In Nottingham, we know that the services people rely on most will be severely hit, and that is only from the £6 billion of changes that have been announced so far. The tidal wave—the tsunami—of spending cuts that is coming in the autumn will be shocking indeed. In Nottingham, we know that £2.7 million is being taken out of education expenditure, with savings from one-to-one tuition, school transport, and provision for special educational needs. We know that £1.2 million is being taken from the working neighbourhoods fund, which includes back-to-work programmes, literacy and numeracy support, and welfare rights advice. That is the front line in Nottingham—cutting by the Conservatives. We know that they have even scrapped the right to see a GP within 48 hours: again, changes to arrangements for which they have no substitute, affecting the front line in Nottingham. They have chopped £350,000 off the road safety budget in Nottingham, as well as the £2 million taken from the transport capital plans. In my constituency, the Conservatives have frozen—I hope that they will reverse this decision and allow the project to go ahead—£5.9 million of housing renewal money for Stonebridge Park, where more than 250 old homes were to be cleared and the same number of family-sized one and two-bedroom units constructed to help to take some pressure off the 15,000 people on housing waiting lists. Again, I fear that that is the front line in Nottingham.
This unholy alliance between the Liberals and the Conservatives—I suppose that one could characterise it as an axis of the axe—will be absolutely to the detriment of my constituents. It makes me concerned about the potential merging of the Liberals and the Conservatives around a right-wing, ideological pole that has shown a clear divide between the parties in this country. I hope that hon. Members on the Government Benches will listen to their consciences, look at the detail in these proposals, recall their election promises—particularly those of the Liberal Democrats on VAT—and vote against this dreadful Budget.