Finance (No. 2) Bill

Claire Perry Excerpts

Monday 11th October 2010 Commons Chamber

[Ms Eagle]

The hon. Lady must recognise that the budget deficits being suffered in all the more advanced economies result directly from the need to rescue the world financial system by underpinning it, the effect of automatic stabilisers and the loss of revenue caused by the recession that followed the credit crunch. I thank her for giving me the chance once more to put that on the record.

[Claire Perry (Devizes) (Con)]

Will the hon. Lady give way?

[Ms Eagle]

I will be happy to give way when I have finished dealing with the point made by the hon. Member for Solihull (Lorely Burt). I am pleased that she gave me the chance to put on the record again the plain fact that Budget deficits throughout the developed world were caused by the costs of the recession and the need to underpin our banking systems, rather than by profligacy in public spending. The problem was caused by a gigantic global market failure, not by the activities of Governments.

[Claire Perry]

It is a pleasure to welcome the hon. Lady to her new role, as she is one of the more economically literate and articulate of the shadow Front-Bench team. I am therefore surprised that she continues to bring out the hoary chestnut that somehow this deficit was entirely a result of the collapse in the banking system and was nothing to do with the previous Government’s spending more than they raised in taxes since 2001.

[Ms Eagle]

The hon. Lady has also to recall and acknowledge that a lot of the investment spending since 2001 went on infrastructure, which will stand our country in good stead as we look to how we can rebuild our prosperity and continue to earn our way in what will be an increasingly competitive world.

--- Later in debate ---

[Claire Perry (Devizes) (Con)]

I join in the congratulations to my hon. Friend the Member for Skipton and Ripon (Julian Smith) on his excellent maiden speech. I also congratulate the hon. Member for Nottingham East (Chris Leslie) on his elevation. He is a triumph of quality over quantity tonight. It is either that or he needs to change his Lynx body spray.

I am pleased to speak in support of the Bill, an agglomeration of 31 yawn-inducing technical tax measures to some, but to me another item crossed off the most important “to do list” of this Parliament, tackling the crippling millstone of public debt inherited from the last Labour Government. I would like to do three things: to address some specific clauses; to review the need for presenting the Bill in this slightly unusual form; and to provide some context for the measure.

There are 33 clauses to be put on the statute book. In—I think—all cases, those measures were inherited from the previous Labour Government; there are almost no changes from our side of the House. All are worthy of review, but three are particularly relevant. The first is on the level of support provided to carers. Almost every week in surgeries around my constituency I hear about carers and the particular burdens put on adult carers. We heard just this morning that 25% of women in their 50s—not so far off for some of us Members—will be carers while also facing the challenges of continuing to be supportive parents for their teenage children. It is imperative that the measures that we put in place to relieve carers of unnecessary tax are carried through handsomely.

I echo the comments made by my hon. Friend the Member for Portsmouth North (Penny Mordaunt) about the importance of the first-year allowances for zero-emission goods vehicles—100% of first-year allowances will be deductible from April, continuing until April 2015. That demonstrates our Government’s commitment to supporting incredibly valuable legislation that helps us in the overall attempt to “green up” the British economy.

The Bill’s measures, alluded to by my hon. Friend the Member for Mid Norfolk (George Freeman), on supporting enterprise and venture capital investment are critical to our plans to open Britain for business, although as part of that process we must continue to ensure that the banks actually lend. That matter is not for debate tonight, but we must return to it again and again as we proceed through the Parliament.

I turn to the odd split of Finance Bills, for which the Government have come under mild criticism. We had Finance Bill No. 1, which enacted a series of emergency Budget measures and now we have No. 2, which has been described as the mopping up of technical tax measures. May I review what was happening at the time of the election, and the need for emergency Budget measures? Our triple A credit rating was under threat, 10-year interest rates were spiking up at over 4% and starting to approach the interest rates of Italy, which has, I believe, had 62 Governments since the second world war. The credit default swap rating—I know that this all sounds like bankers’ speak but it materially impacts on the level at which we can borrow—which is the measure of potential British default on our debts, was getting up to 90 basis points, up there with Portugal and Spain, which could not even dream of a triple A credit rating. A fire was burning in the heart of the British economy and the Labour Government had no plans to put it out. We did. The emergency Budget on 22 June, introduced within the 50-day limit that we set ourselves, restored confidence both internationally and domestically in the British economy.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

Does my hon. Friend agree that, because of that emergency Budget, we are still able, although we are dealing with a massive deficit and borrowing £500 million a day, to borrow at half the rate of Ireland?

[Claire Perry]

As always, my hon. Friend makes an excellent point based on his substantial experience in the business world. During that process, we showed a clear commitment to doing the right thing for the British economy. We did not do things to maximise political headlines, of which the previous Government were guilty on an almost weekly basis.

What is the result of taking those bold actions? Let us talk numbers. The risk premium on the British economy has dropped by 30% since the election. Long-term interest rates—the 10-year interest rates—have dropped by more than 1%, meaning a 25% reduction in the cost of borrowing. These are not arcane measures thought up by a load of greedy bankers; they materially flow through to the borrowing costs of our constituents, both for mortgage and small business borrowers. The measures mean real growth for the British economy.

Why did we not consider tax measures in the first Finance Bill of this Parliament? The point made earlier on transparency and consultation is a valuable one. We said that we will be a Government who are far more transparent and that we will allow time for consultation.

[Kelvin Hopkins]

I am listening with interest to the hon. Lady. She said that the Government did not introduce tax measures, but what about the rise in VAT, which is a regressive tax? The introduction of a more progressive tax—for example, a tax on the rich or on big business—might have been more acceptable, but a regressive tax will deflate the economy by taking money out of the pockets of ordinary people, who spend most.

[Claire Perry]

I would debate regressive and progressive taxation and the question of income or expenditure with the hon. Gentleman, but I would like to make a little progress, if he will allow me, and focus specifically on the technical measures in the Bill.

The measures were published on 12 July, and I believe that we have had a number of responses to them, and we now feel that we have had adequate consultation to proceed. The House feels that we can cope with the split between two Finance Bills, but I would like Ministers to reassure us that we will revert to one Finance Bill as soon as possible, as the situation normalises. In that way, the whole finance package can be given proper scrutiny, and we will not have the kind of piecemeal debate that we are having today.

Finally, let me give some context to the measures. We have heard this before, but I make no apologies for saying it again: we have a record deficit. That is not the result of a financial shock that emerged like the creature from the swamp from America in 2007, but the result of a Government who spent more than they earned in taxes every year from 2002. I have listened with great interest to the representations made by Labour Members. They say, “We were investing. We weren’t ‘spending’; we were building schools and hospitals.” They were building schools and hospitals, but they were borrowing money to do so. In the process, they put the bill on future generations of taxpayers. They talk about being progressive, but that is not a progressive thing to do with the British economy.

The previous Government bequeathed us interest costs of £120 million a day. That is paid largely to foreign Governments, so that they can build their schools and hospitals off the tax pounds that we collect from our taxpayers. There is nothing progressive about that.

What do we get when we discuss the measures? Do we get the intelligent, grown-up debate that the hon. Member for Wallasey (Ms Eagle), the shadow Chief Secretary, asked for? We certainly do not get intelligent, grown-up debate on how to cut the deficit from the few Labour Members in the Chamber. With a very few honourable exceptions, we get opposition to everything. That was amply demonstrated during today’s statement by the Secretary of State for Work and Pensions. We now have the extraordinary situation of Labour Members, in opposing everything, wanting to tax the poorest families in this country to pay £1 billion in child credit to the richest 15% of families. I suggest that, by opposing everything, Labour Member get themselves into some extraordinary technical tangles.

Conservatives want to talk about deficit reduction, but Labour Members put up the ideological barricades, saying, “You’re bad Tory cutters. You’re bad Lib Dem ideologues.” Behind the sound and fury, one question remains unanswered: what would Labour Members cut? Where would their £44 billion-worth of spending cuts fall? If they oppose everything in our deficit-reduction plans—the plans are supported by the International Monetary Fund, the OECD, the CBI, the Bank of England, Tony Blair, Peter Mandelson and everyone but Labour’s Front-Bench team—they weaken their status as a viable Opposition.

I shall finish if I may by quoting Labour’s new shadow Chancellor, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson). No, this is not about his need for an economics primer; it relates to what he has said about the British people. He said:

“I think the reason why they took to the coalition is they thought, well, here’s someone rolling their sleeves up and getting down to the job.”

We are getting on with the job. The measures in this Bill are part of that, and I urge every hon. Member here tonight to vote for the Bill, as I shall be in the not-too- distant future.