Finance Bill

Debate between Chuka Umunna and Gavin Williamson

Tuesday 20th July 2010 Commons Chamber

[Mr Umunna]

I wish to make a bit of progress, but I might give way in a bit.

I wish to acknowledge that the Conservative side of the happy couple that is our coalition is at least consistent in its approach. The Conservatives fail to acknowledge the gravity of the financial crisis and its effect on our economy now and they failed to acknowledge the gravity of the crisis back in the autumn of 2008 when the Labour Government and others around the world took decisive action to save the financial services sector from itself and to protect the deposits of our constituents. The current Prime Minister and his Chancellor were then advocating the complete opposite—a do-nothing approach.

Let us be clear. Whatever those on the Government Benches say, no serious economist currently claims that the deficit can be disassociated from the global credit crunch I have just described. The credit crunch led the last Government to spend billions to prop up the financial services sector and to support our economy in the face of a global economic downturn that caused tax receipts to plummet and benefit payments to increase.

[Gavin Williamson (South Staffordshire) (Con)]

Will the hon. Gentleman give way?

[Mr Umunna]

No I will not; I will make some progress first, and I will give way in a bit.

What we are witnessing now is a gross and distorted rewriting of history and repainting of the picture to justify the imposition of a Finance Bill and Budget that are less about economics and all about politics.

On 23 June, in an insightful piece in the Conservative house journal, The Spectator, its political editor described the Chancellor’s Budget thus:

“The mission, as Mr Osborne sees it, is to shrink the public sector and grow the private sector—the classic goal of the modern British centre-right.”

That is what the measures in the Bill and the emergency Budget are all about.

Let us address the Chief Secretary to the Treasury’s claims that the Bill is fair. He said:

“This is a Budget that protects the most vulnerable, especially children in poverty and pensioners, while ensuring that those with the broadest shoulders take the greatest share of the burden.”—[Official Report, 6 July 2010; Vol. 513, c. 203.]

Just a few weeks ago, a Liberal Democrat leaflet was pushed through thousands of letterboxes in my constituency under the headline, “Clegg delivers on promises”, proclaiming that the Government are reducing the deficit in as fair a way as possible. It made a series of claims in relation to the Bill and the emergency Budget. First, it claimed that there will be “more money for schools”. We have seen now how accurate that claim was: consider the Building Schools for the Future debacle that we have witnessed over the past few weeks.

Secondly, the leaflet claimed that

“tax credits for needy households”

will be

“saved”,

yet the emergency Budget, in fact, freezes child benefit, thus producing a real-terms cut for more than 14,000 in my constituency who receive the payment. Thirdly, it claimed that the emergency Budget included

“a tax cut for low and middle income families by raising tax allowances”.

That neglects to mention that the increased allowances are completely outweighed by the panoply of regressive measures in the Budget—most notably, the unfair VAT rise that will be introduced under clause 3.

During the general election campaign, my Liberal Democrat counterpart and I spoke at an international Save the Children event in my constituency and we both talked of the need to reduce child poverty. Save the Children is running an excellent campaign in opposition to the VAT hike—a hike that the Liberal Democrats now sanction. I note that there is but one Liberal Democrat Member, I think, in the Chamber at present.

[Mr Umunna]

Okay; three.

The charity said:

“A 20% VAT rate means that the poorest parents will see their VAT bill rise to at least £1,600 a year—affecting already overstretched budgets—and driving some into the arms of loan sharks”,

as my hon. Friend the Member for Wakefield (Mary Creagh) has just mentioned.

The fourth and final claim in the Liberal Democrat leaflet is that they stopped

“Tory plans for a huge Inheritance Tax give-away for the wealthy.”

Even if we accept that claim—I do not—the omission of that giveaway from the Bill pales in comparison with the appallingly regressive overall impact of the Budget, which the Institute for Fiscal Studies and others have looked into. It has calculated that the total effect of the tax rises and spending cuts will cost the average family in the top income decile £1,135 a year. It will cost the average family in the bottom income decile £1,344—£209 more in real terms. The poorest will be 20.5% worse off, and the richest will be 1.6% worse off. So when it comes to social justice, the Government have absolutely nothing to boast about.

The suggestion made in the leaflet that those who are on low incomes should rejoice at the fairness of a Budget that places a larger real-terms burden on the poorest than the richest is an utter disgrace. What is even more disgraceful is the fact that the measures in the Bill and the emergency Budget were a choice. Whatever rewriting of history the coalition indulges in, it cannot distract us from a simple fact: the coalition Government have actively chosen to do this to my community.

[Gavin Williamson]

Does the hon. Gentleman not feel that the last Labour Government had any responsibility for the economic situation that we find ourselves in and that the uncontrolled borrowing had an impact and led to the decisions that are encompassed by the Bill?

[Mr Umunna]

I will turn to those exact points in the rest of my speech if the hon. Gentleman will wait.

Let me address the claim that the Bill will, as the Chief Secretary said, help

“businesses that we rely on to rebuild our broken economy”.—[Official Report, 28 June 2010; Vol. 512, c. 674.]

The signs are that those businesses, along with leading economic experts, do not share his optimism. A recent survey of the service sector by the Chartered Institute of Purchasing and Supply showed that confidence in the sector has been dented by the austerity measures announced in the Budget, of which, of course, the Bill is a part. The survey registered a fall in confidence between May and June this year that was the most significant drop since records began 14 years ago. Since the First Reading of the Bill, the International Monetary Fund has updated its 2011 growth forecasts, downgrading that of the UK by 0.4% on its April figures—the largest drop in the forecast of any major economy over that period. The BDO business optimism index, which measures business confidence, saw its sharpest fall since 1995 between May and June this year, and who can blame those involved?