Finance Bill

Clive Efford Excerpts

Tuesday 28th June 2011 Commons Chamber

[Mr Jones]

I am not saying that at all. I am saying that the hon. Gentleman, his party and, certainly, the more blue-blooded elements of it very strongly argue that the state should not intervene in people’s lives, including, in some cases, motorists’ lives, but what we have in new clause 5 is the right of the Tory party arguing for direct state intervention in something very personal: somebody’s personal relationship.

Earlier, it was said that a tax system would encourage people to get married, but there is no evidence of that at all. In the late 1960s and ’70s, when the old married man’s tax allowance was in place, there was a record rise in divorces, but that was less to do with the tax system and more to do with the change in society and the law that clearly made it easier to get divorced or to choose not to marry at all. Again, the idea that £20 a week will encourage somebody not to divorce is quite ludicrous. All the studies find that we would need to offer a considerable amount of money to prevent people from divorcing.

My hon. Friend the Member for Bishop Auckland (Helen Goodman) raised the issue of international comparisons, somebody else mentioned Denmark and other countries and the hon. Member for Gainsborough mentioned the fact that we are one of the few countries not to recognise marriage in the tax system, but there is no evidence to suggest that taxation as an encouragement to get married does anything to hold the family unit together.

[Clive Efford (Eltham) (Lab)]

I have listened to my hon. Friend’s speech with a great deal of interest. On fiscal incentives for people to stay together, does he agree that the cost of running two separate households is a major financial consideration for people living apart? It far outweighs any fiscal benefit that the taxation system could deliver.

[Mr Jones]

I agree. The changes being made to housing benefit will not do anything to help families stay together. My hon. Friend is a London Member, so he will know that families will be forced to move out of central London because of the Government’s changes to housing benefit rules. That is one of the inconsistencies of this Government. On the one hand they say that a tax break of £150, or £20 a week, will help to keep the social unit together, and on the other they—the same Minister, I hasten to add—pursue policies on housing benefit and other benefit changes that will not help at all to keep families together but will lead to the root cause of most of these issues: the poverty that affects such individuals.

I turn to some of the problems with the Bill as framed, and to what we have before us. New clause 5 is not the measure in the Conservative party’s most recent election manifesto. This proposed change includes married couples but excludes civil partners, who would not be covered by the new clause. When there was an outcry and complaints about what had been proposed at the election, the Prime Minister included civil partners at the last minute.

People would have to opt in to this system and elect to transfer their part of an allowance. That would be very unfair to many people who do not understand tax codes. I have just got my annual tax return and I keep putting it to one side, as most people do, until the deadline arrives. Introducing a system whereby people have to elect to transfer a certain allowance may well help the more articulate middle-class people who can do that when they fill in the form, but I am not sure that some of the people on poor council housing estates in Glasgow whom the Secretary of State for Work and Pensions is trying to address will have the wherewithal or knowledge to do it even if they knew that the option was available.

The Government have told us that they wish to simplify the tax system, but the new clause would make it a lot more complicated. In trying to bolster marriage, it would help certain groups of people but not others. Whenever we do anything with the taxation system, we should try to make it as user-friendly as possible. If someone opted to move their allowance around, that would be quite complicated because people’s incomes change throughout the year, so they might have a certain allowance available in one year but not another. The system would incur not only the £3 billion-plus cost of having it open to everyone but the cost of trying to work out how the tax office would administer it. In that respect, the new clause is not well thought out.

The Government have got themselves into a bit of a logjam on this. The Prime Minister is clearly committed to this policy. His Back Benchers are now worried that it cannot be implemented because of the coalition agreement. Huge amounts of public money would be used, but would it have any effect on child poverty? No, it would not, and neither would it affect most families. Moreover, it would help people without any children, including pensioners.

--- Later in debate ---

[Mr Gauke]

As I sat down to give way to the hon. Member for Dudley North (Ian Austin), the shadow Chancellor said, “You don’t have to be married to benefit from the transferable nil-rate band.” He is absolutely right. As I said, it applies to married couples and those in a civil partnership. That is exactly what I said earlier. As the hon. Member for Dudley North pointed out, it is important that we support widows in the circumstances he mentioned. Does that mean, though, that we should never do anything for married couples? It does not necessarily follow.

I want to put this in the wider context of what we are doing to help strong and stable families. For example, the Department for Education has announced plans to spend £30 million on relationship support to deliver better support for couples in relationship distress. However, as hon. Members will be aware, the Government have made it clear that we intend to introduce proposals to recognise marriage and civil partnerships in the tax system. As the Prime Minister said recently, this will show that as a country we value commitment. I certainly agree, therefore, with the intentions behind the new clause.

Although the Government support the principle behind the new clause, now is not the appropriate time to bring forward such a measure. It would entail significant and immediate costs to the Exchequer, its scope is wider than the Conservative party manifesto pledge and the cost, we estimate, would be more than £4 billion. It would also necessitate substantial implementation costs.

[Clive Efford]

Will the Minister give way?

[Mr Gauke]

I will give way again, but I am keen to make progress.

[Clive Efford]

Will the Minister comment on what message this sends to teachers planning to strike on Thursday? On the day when the Secretary of State for Education was dragged to the House to explain what he was doing to avoid the strike, the priority of Back-Bench Conservative MPs is to propose a motion that would cost more than £4 billion a year, yet teachers are being told that the Government will not negotiate over increases in their pension fund contributions. What message does that send to those teachers?

[Mr Gauke]

We have heard a lot in this debate about single parents. One group that will be affected if teachers go on strike and schools close on Thursday will be single working parents, who will face substantial disruption in dealing with child care. I hope that Members in all parts of the House will strongly urge teachers to go to work on Thursday.

--- Later in debate ---

[Ian Swales]

I thank the hon. Gentleman for his intervention. I just read out a long list of items that are VAT-free; that was the point of what I was saying.

[Clive Efford]

Those items were VAT-free when the hon. Gentleman made his pledge at the general election. When he stood for election, he said that the poorest people in society were affected most by increases in VAT, and that it was therefore a regressive tax. He was right then, and that point is still right now. Why, then, is it correct and appropriate for the poorest people in our communities to pay for the deficit that was run up by the richest bankers in the country?

[Ian Swales]

The hon. Gentleman has strayed off the topic of the new clause, but on my party’s policy on VAT, obviously we are between a rock and a hard place, due to the economic state of the country. We had some very difficult choices to make, and a progressive expenditure tax is the right answer.

--- Later in debate ---

[John Hemming]

We should remember that VAT does not apply. I declare an interest, as a VAT-registered person. People who understand how VAT works will know that people who charge VAT can reclaim it on their inputs. We have to look at the details. On the hon. Gentleman’s further point, yes, there is an economic multiplier that has an effect. As demand is increased, there is a multiplier effect. At the same time, we have to look at the long-term effect on the deficit, the debt and the interest paid. As interest rates go up, wider damage is done to the whole of society.

It is true that in an ideal world we would not have higher rates of VAT. In an ideal world everything would be nice, and there would no problems and no difficult decisions to take. We have to get a balance. It is very pleasing to see that the official Opposition now accept that VAT should be 20% in the long term.

[Clive Efford]

There used to be a time when the hon. Gentleman was fond of quoting the Institute for Fiscal Studies, which called the VAT cut “an effective stimulus”. As for the construction industry, does he not recognise the figures showing a 19% increase in the number of business failures in the construction industry in the first three months of this year—since the increase was imposed?

[John Hemming]

There is no VAT on new build. The hon. Gentleman’s party believes that the VAT rate should be 20% in the long term; I thank him for agreeing with us about that.

The Government, essentially, have to bring the deficit under control to keep interest rates under control—and that is what we are doing.

--- Later in debate ---

[Nia Griffith]

That is precisely the point. There is a huge contrast between an economy that was growing and doing better than the forecasts had predicted, and a situation where there has been no growth since last October. As my hon. Friend pointed out, the Office for Budget Responsibility now predicts that the Government will have to borrow £46 billion more over the coming years than was forecast last autumn after the spending review. Worse, they are failing to get Britain back to work, which is probably pushing up the benefits bill this Parliament by more than £12 billion. That not only makes the deficit worse, but makes the lives of the people involved infinitely more miserable.

[Clive Efford]

My hon. Friend cannot have failed to notice that only one Back-Bench Conservative Member is present—

[Chris Ruane]

No, he is a Parliamentary Private Secretary.

[Clive Efford]

Yes, he is a PPS. By contrast, nearly a dozen Liberal Democrat Members have been present. That is nearly as many Liberal MPs as positions their party has taken on VAT. I have here positions set out by not only the hon. Member for Brecon and Radnorshire (Roger Williams), but the hon. Member for North Cornwall (Dan Rogerson), who called for a review, and a Liberal Democrat activist, who called for a cut in VAT on tourism in that part of the world. Just how many positions do the Liberal Democrats have on VAT?

[Nia Griffith]

The whole point is that our new clause calls for a proper assessment to be made to see what the actual effect of the current VAT rate is on the economy, given the lack of growth and the lack of a plan for growth. The important thing is to carry out that impact assessment and work out the best growth strategy, because nothing is coming from this Government in order to put things right.

What has been happening in the news recently? Everybody must be aware of the crisis we are facing on our high streets and in store after store. This is happening to TJ Hughes and its 57 stores, to Jane Norman’s 90 stores and 100-plus concessions, to Habitat, and to HomeForm, which covers Möben Kitchens and Dolphin Bathrooms. Some 5,300 jobs are in the balance, and now we hear about what is happening to Thorntons and Comet. Judith McKenna, chair of the CBI’s distributive trades panel, has commented:

“After a year of growth, high street sales volumes fizzled out in June….Shoppers are budgeting hard and cutting back on their discretionary spending, such as on clothes and big ticket household goods.”

She is the CBI’s chief financial officer.