Finance (No. 3) Bill

Chris Stephens Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

[Mel Stride]

This debate is not the place to make pronouncements about the Taylor review. The Government are considering the Taylor review and the way in which people are working. There are a number of aspects in the Budget that relate to the taxation elements of the way that people work, but we will come back in the fullness of time with a full response to the Taylor review.

[Chris Stephens (Glasgow South West) (SNP)]

Just on wages, there was a lack of clarity in the Budget in relation to the public sector pay cap. Can the Minister confirm that every Department is budgeting for 1.5% this year?

[Mel Stride]

As the hon. Gentleman will know, we have made, within this year, more finance available to various Departments, and the Chancellor was very clear about that in the Budget. He was equally clear that there will be a number of decisions to be made in the spending review next year relating to all the Departments across Government.

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[Chris Philp (Croydon South) (Con)]

It is a great pleasure to speak in this debate. The Financial Secretary to the Treasury got it right in his introduction—I can see he agrees with that—when he set the financial scene and reminded us of the history of the past eight or so years. When this Government came into office in 2010, we faced an economic crisis of almost unprecedented scale. At around 10% of GDP, the deficit was running out of control and unemployment was at a record high. Over the past eight years, the coalition and then the Conservative Government have worked hard and tirelessly to get our public finances back under control. It has not been an easy task. Had we listened to Labour Members, who frequently challenge our agenda, the deficit would still be extremely high and the debt would be a great deal higher than it is now—[Interruption.] The shadow Minister says from a sedentary position, “You’re joking”, but I have lost count of the number of measures of fiscal responsibility that the Opposition have voted against over the past eight years. Had Labour’s programme been adopted, the deficit and the debt would both be far higher than they are today.

Next year, borrowing is going to be down to about 1.4% of GDP, and it will be down to 0.8% by 2023. Critically, the debt as a proportion of GDP has been falling since 2016. The consequence of not getting our deficit and debt under control is that we pay far more in interest payments. Even today, we are paying around £45 billion a year in interest payments, but if the debt were any higher, as it would have been under Labour’s programme, those debt payments would be higher and the interest rates on that Government debt would be a great deal higher as well. That would mean having much less money to fund vital public services.

Hand in hand with the deficit reduction programme goes the Government’s track record on jobs. The unemployment rate has decreased from around 8% in 2010 to around 4% today, and it is now at a 43-year record low. It has never been lower in my lifetime. To those who say that the jobs that are being created are not high-quality jobs, I would say that 80% of them are full time, and I would remind those who say that they are all zero-hours jobs that only 3% of the jobs in the UK economy involve zero-hours contracts.

This track record of financial responsibility over the past eight years has now enabled a certain amount of fiscal loosening, providing extra money to be spent on public services. Both Opposition Front-Bench spokesmen said that austerity was continuing, but let us look at the Red Book. The cumulative effect of all the Budget measures being announced will result, in 2023 alone—the final year of the forecast period—in a £27 billion fiscal loosening relative to the measures that were in place before. There is no way that anyone can describe a £27 billion a year fiscal loosening as a continuation of austerity. In any case, it is not austerity. Austerity implies that it was a choice. It was not a choice; it was a necessity—

[Chris Stephens]

It was a choice.

[Chris Philp]

The hon. Gentleman says that it was a choice, but it was not. We simply cannot go on spending way more every year than we raise in tax revenue, because we would eventually lose the confidence of the bond market, as this country did in 1976. At best, we would end up saddling the next generation with a gigantic bill that they would have to pay off. There is nothing noble, ethical or moral about spending more than we can afford and sending the bill to the next generation.

If we look at the fiscal loosening in the Budget, we can see that the NHS is the principal beneficiary, to the tune of £20 billion a year by the end of the forecast period. More immediately, the Ministry of Defence gets an extra £1 billion and the universal credit system gets an extra £1.7 billion. The shadow Chief Secretary to the Treasury specifically mentioned universal credit in his characteristically lively speech earlier. I remind him that the universal credit system massively strengthens work incentives. Before, we had a system in which effective marginal tax rates were often running at 90% and in which there were cliff edges at 16 and 32 hours, after which people would actually get less money for working more hours.

The Resolution Foundation has carried out research on this. I understand that its chief executive is the former economic adviser to the right hon. Member for Doncaster North (Edward Miliband), and even he says that the total fiscal cost of the universal credit system, with these changes, will be higher than the cost of the old benefits system that it is replacing. So it is going to cost more public money than was being spent before. Universal credit’s track record of getting people off benefits and into work is better than the track record of the benefits system it is replacing. I think that universal credit has been properly funded. It might need a bit of fine tuning in some areas to do with the way in which some of the dates work, and I have spoken to Ministers about some technical changes that could be made. As a whole, however, I believe that the system is fully funded and that it will work.

[Chris Stephens]

The hon. Gentleman believes that universal credit is fully funded, but has he seen the evidence from DWP staff who are saying that they are spending so much time answering telephone calls that they cannot go through and answer the online journals from claimants? Does he not think that there is a problem there?

[Chris Philp]

When we introduce any new system that involves 5 million recipients, there will inevitably be some level of operational teething problems. These teething problems are on nothing like the scale of those we saw in the early 2000s when Gordon Brown rolled out tax credits and there was unmitigated chaos for some years.

I have had direct experience of universal credit in my own constituency. Croydon South is the joint highest constituency in the country—with Great Yarmouth, I think—for universal credit roll-out, with 43% of claimants now on universal credit. I estimate that around 4,000 Croydon South constituents are now in receipt of universal credit, and in the past six months I have had 21 complaints or problems raised by constituents. That is obviously 21 too many, but viewed in the context of about 4,000 recipients, it would appear that the teething problems are limited in their extent.

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[Colin Clark]

I thank the hon. Lady for the intervention. I think she will be well aware that many people in the public sector, including those in hospital management, and those who may go on from being nurses to being in hospital management, are paid substantially more than £50,000.

The OBR is concerned about this next issue. My hon. Friend the Member for Dumfries and Galloway (Mr Jack) asked the Financial Secretary about tax divergence, which is very much the crunch, as it has the potential to affect my constituency. The Financial Secretary mentioned that 1% of the population are paying 28% of tax—in Scotland, that constitutes 19,500 taxpayers. The OBR recently reported to the Treasury Committee that the number of higher taxpayers is lower in Scotland than it estimated, and this has actually cost Scotland between £550 million and £700 million in respect of the original estimate. The OBR said:

“It implies that a much lower share of UK-wide income tax is coming from Scottish taxpayers.”

That means the Scottish economy is more vulnerable to losing higher rate taxpayers, which is a serious consideration, because it affects the growth of the Scottish economy. As Scotland is part of the United Kingdom, it should concern us all. The Scottish economy is clearly vulnerable to the loss of these higher rate taxpayers, and it would look as though they are already beginning to move; they are already beginning to react to the divergence.

The OBR gave evidence on how people, for tax purposes, could change their behaviour. It talked about

“a relatively high income individual with a property in Scotland and one elsewhere in the UK, writing to HMRC to say, ‘I live more than half the year”

somewhere else. That would mean that their tax would be paid elsewhere in the UK. Here is the absolute proof that cutting tax rates increases the tax take. As was said by my right hon. Friend the Member for Wokingham (John Redwood), who is no longer in his place, if there is tax divergence, people will vote with their feet. They are already doing that, as we are seeing the tax take falling in Scotland. [Interruption.] Would the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) like to intervene? No, he would not. Labour should look closely at Scotland and it should be a lesson on why not to raise taxes.

[Chris Stephens]

The hon. Gentleman needs to be careful with this argument, which I have heard expressed before. Is he seriously encouraging people to engage in tax avoidance?

[Colin Clark]

It is interesting that the hon. Gentleman talks about “tax avoidance” because there is no tax avoidance in this. If we are losing people who would be paying higher tax rates in Scotland because they are choosing not to move to Scotland or they are registering their addresses in England because they spend a lot of their time in England, that is a loss to Scotland, because Scotland is getting greater tax independence. It is interesting that Scottish National party Members will talk about tax avoidance, because this is the demonisation of people who are paying a higher rate of tax. They are not the enemy; they are the friends of the Scottish economy.

[Chris Stephens]

Is the hon. Gentleman seriously suggesting that people in Scotland should register themselves in England in order to pay less tax? With all due respect to him, I would have to say that many of us would view that as tax avoidance. [Interruption.]

[Colin Clark]

As my colleagues are saying from a sedentary position, these people are being driven away. The actions of the Scottish Government are leading to divergence in tax rates between Scotland and England, and that is damaging the Scottish economy.

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[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to follow the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie). He has proved for me the point I came to when I was listening to the Financial Secretary and putting together my remarks for this debate. Politics is a mixture of rhetoric and reality. It was two years ago at that very Dispatch Box that the former Chancellor, George Osborne, announced that austerity was over, and now the current Chancellor tells us that austerity is coming to an end.

The rhetoric we have heard during the past two weeks has led me to conclude that many Conservative Members are modern-day Warleggans. They remind me of the scene when Captain Poldark—he is no doubt viewed by Conservative Members as some sort of Marxist-Leninist—asked the landowners to cut the price of grain, and George Warleggan said, “Well, if I cut the price of grain, then my profits will decrease, and if my profits decrease, then I won’t have enough money to give provision for the poor.” There it is: modern day Conservativism found in a period drama.

The reality is that, by any measure, this Budget and this Finance Bill benefit the rich on the backs of the very poor. The Resolution Foundation has told us in its research that those in the bottom 30% of the income distribution will on average gain less from the work allowance and income tax changes than they will lose through the benefits freeze. Indeed, a low-income family with children will lose £210 next year as a result of the benefits freeze.

Let us discuss universal credit and the broken social security system in this country. The money announced for universal credit changes is mainly to do with managed migration. Two weeks ago, the Social Security Committee in the Scottish Parliament heard evidence from the Crookston Community Group in my constituency. An eight-year-old boy in my constituency was stopped by a teacher and asked why he was taking so many tomato ketchup sachets. His answer was so he could take them home and put them in boiling water to make soup for him and his family. That makes me want to weep, but it is not a special case. Suzanne McGlone of the Crookston Community Group said:

“While this incident would shock most people, it is actually the lower end of the scale.”

That is the reality of the current social security system.

On top of the cuts, the litany of evidence about the pressures faced by beleaguered staff in the Department for Work and Pensions is coming to fruition. I tabled a parliamentary question, and I got the answer during this debate. I asked a simple question: how many workers in the Department for Work and Pensions are currently dealing with the national tier telephony service? I was advised that 400 staff are now dealing with phone calls. To put that into perspective, according to parliamentary answers, 4,504 DWP staff are chasing social security fraud. That is an unbelievable comparison. DWP staff are telling us that they are having to deal with so many telephone calls from claimants that they are unable to process online journals. What does that mean? It means payment delays, rising food bank use and more people getting into poverty.

[Stephen Kerr]

I recognise the passion with which the hon. Gentleman approaches this subject, but perhaps he can enlighten the House as to why, after it was agreed that social security powers would be devolved to the Scottish Parliament and the Scottish Government in Edinburgh, it is taking so long for the SNP Scottish Government to get to grips with the issues of social security.

[Chris Stephens]

I have just given some examples of how broken the UK social security system is. If the hon. Gentleman seriously believes that any devolved Government could address the mess of the social security system in the UK within weeks, he is kidding himself on.

[Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The hon. Member for Stirling (Stephen Kerr) is clearly unaware that there are 4,000 people, not 400, chasing rather than helping. I heard Gaelic mentioned today, and he should know that the word “Tory” comes from the Irish Gaelic “Air an Toir”—pursuers. That is what they are doing in the DWP—pursuing people mercilessly, rather than helping them, as my hon. Friend pointed out.

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[Chris Stephens]

My hon. Friend is quite right. Conservative Members try to divide people on the basis that Conservatives are for aspiration and the rest of us are not. According to the Conservative party, there are the undeserving and the deserving poor. No one deserves to be poor in this country, and that should always be the case.

[Danielle Rowley]

I held a debate recently in Westminster Hall about split payments, and I asked the Minister answering the debate what support was going to the Scottish Government and what money there was to help create a different system in Scotland. I have yet to receive an answer. I also asked the Treasury how it defines austerity, and it could not give me an answer. What does the hon. Gentleman think about that?

[Chris Stephens]

I thank the hon. Lady for that, because the point is well made. I was at the Westminster Hall debate she secured, and she gave an excellent speech on why we need split payments in universal credit. The reality is that the Scottish Government want to do split payments, but the Department for Work and Pensions is trying its best not to. That is despite the Work and Pensions Committee, of which I am a member, telling it that it should engage positively with the Scottish Government. The Department should perhaps use what is happening in Scotland as a pilot, which it could then roll out across the UK. Where individuals are subjected to domestic abuse and go through the universal credit system without split payments, the hon. Lady and I have a very real fear that that domestic abuse will become worse.

[Stephen Kerr]

Will the hon. Gentleman give way?

[Chris Stephens]

Not at the moment.

We have heard warm words about rising wages from those on the Government Benches, but there has been no mention whatever of the fact that 4 million people are in insecure work. There has been complete silence about the Taylor review and what measures the Government will introduce as a result. The reality is that low pay and poorer living standards are on the rise.

As I said, there are 400 people dealing with telephone calls in the Department for Work and Pensions, but 4,504 chasing DWP social security fraud. There are also 400 people employed across the UK by the national minimum wage compliance unit. How are we going to chase these rogue employers if there are only 400 staff chasing up compliance with the minimum wage?

That brings us nicely to the issue of public sector pay and whether there is a public sector pay cap. Earlier, I made an intervention on the Minister. I did not really get an answer, and I do not think that anyone who has raised this issue in the last few weeks has got an answer. The reality is that the public sector pay cap is still in place across UK Government Departments. Why is it still in place? Under freedom of information, we now know that the departmental permanent secretaries got together in February this year and agreed the joint position across all UK Government Departments that there would be a pay rise of 1% to 1.5% for public sector workers. I find that extraordinary, because there are 200 separate pay negotiations across UK Government Departments, so how about a bit of efficiency and small Government from those on the Conservative Benches? Let us reduce the number of pay negotiations from 200. If the departmental permanent secretaries can agree one negotiation, there can surely be one negotiation with the trade unions.

Those on the Scottish Conservative Benches have made a number of, shall we say, interesting observations today. I was interested in the elaborate tax avoidance scheme suggested by the hon. Member for Gordon (Colin Clark): if someone is a higher rate taxpayer in Scotland, they should consider registering themselves somewhere else in the United Kingdom. That is tax avoidance by any description.

[Stephen Kerr]

On a point of order, Madam Deputy Speaker. The hon. Gentleman is making comment on the speech given by my hon. Friend the Member for Gordon (Colin Clark), who is being reported as having said something he did not say. The hon. Gentleman should not be permitted to say that. How can that be corrected?

[Madam Deputy Speaker (Dame Eleanor Laing)]

I appreciate the hon. Gentleman’s point, but it is a point of debate, not a point of order for the Chair. It is, I am very glad to tell the House, not my responsibility to adjudicate between Members who sit on the Government Benches and Members who sit on the Opposition Benches on particular points of fact. The hon. Member for Glasgow South West (Chris Stephens) is in order in the eloquent speech he is making.

[Chris Stephens]

Thank you very much, Madam Deputy Speaker. Hon. Members can read Hansard tomorrow and come to their own conclusions.

Scottish Conservatives were complaining earlier about office closures. I find that fascinating from a political party that has put a meat cleaver to the jobcentre network and a meat cleaver to HMRC offices across the UK. You really could not make it up.

[Angus Brendan MacNeil]

My hon. Friend makes an absolutely fascinating point about the Conservatives calling for the richest to relocate to avoid tax. Continuing that logic, they should say that those earning less than £33,000 in England should register in Scotland. We know that the many get the deal in Scotland, but they speak for the few, as ever.

[Chris Stephens]

My hon. Friend makes a fascinating observation, but I think he will be disappointed by the response from the Scottish Conservatives. It will not be on their crib sheet, so I am sure they will not agree.

[Stephen Kerr]

To be clear, my hon. Friend the Member for Gordon (Colin Clark) did not ever, at any time, suggest that Scottish taxpayers should relocate. He was simply pointing out the consequences that might flow from the growing tax gap between Scotland and the rest of the United Kingdom.

[Chris Stephens]

I am not sure whether that was an intervention or a point of order, Madam Deputy Speaker. Suffice to say, once again, that I will allow hon. Members to read Hansard tomorrow morning and reach their own conclusions.

In this centenary year of the women’s vote, what is missing from the Bill and the Budget most of all is anything for women born in the 1950s. That is a disgraceful omission. I am delighted that the Work and Pensions Committee has agreed to my suggestion to hold an inquiry so that we can get to the bottom of helping women born in the 1950s to get justice, to get their pensions and to get compensation.

We were told that austerity is over. It is not. We were then told it is coming to an end. It is not. For the poorest and most vulnerable in our society who have had to pay the price of austerity, austerity must end. That is why I will not be supporting a Second Reading for the Finance Bill.