Finance Bill

Clive Efford Excerpts

Tuesday 6th July 2010 Commons Chamber

[Danny Alexander]

I am grateful for that intervention. As the OBR set out both in its pre-Budget forecast and in the forecast published with the Budget, the comparison that the hon. Gentleman is seeking to make is based on interest rate assumptions that took into account market expectations under this Government’s measures, not market expectations of the measures that the previous Government were taking. He should read the OBR report if he does not agree, because that is an accurate account of what it says. It is clear that, had the previous Government carried on with their plans, interest rates would have been different. The risks that we are seeking to avoid through the Budget are those of higher interest rates, lower growth and fewer jobs, which I believe would be the consequence.

[Clive Efford (Eltham) (Lab)]

In light of that answer, what are we to make of Sir Alan Budd’s resignation today? The right hon. Gentleman puts much store by the OBR’s reports, but did they not contribute to Sir Alan relinquishing his post? He said that this was the greatest challenge of his professional career. He must have an extremely exciting career that he can give up that post so quickly.

[Danny Alexander]

I am grateful to the hon. Gentleman for giving me the opportunity to place on the record my thanks and those of this Government to Sir Alan Budd for his superb work in establishing, in a short period, an independent Office for Budget Responsibility with a strong reputation. It was always known that he intended to move on after a short period—a few months—in his post, and that is what he is doing. In a short time, he has established greater independence of the forecasts that go with the Budget than the previous Government managed in 13 years.

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[Danny Alexander]

I am grateful for the further intervention and it is interesting to hear the right hon. Gentleman cite Lord Lawson. I am not sure that the Labour party cited that example in its Budgets. There are various technical reasons, which have just been discussed, and which my hon. Friend the Exchequer Secretary will explain in his closing speech. The basic point is that our method is more business-friendly.

As a first step, clause 1 reduces the main rate of corporation tax from 28% to 27% from 1 April 2011. Consequently, the corporation tax of around 47,000 companies will fall. The Budget also supports Britain’s small businesses by cutting the small companies rate of corporation tax from April 2011, reversing the previous Government’s plans to increase the small companies rate. That will benefit some 850,000 companies. The Budget takes action to stop the previous Government’s job tax by increasing the threshold for employers’ national insurance contributions, thereby lifting 650,000 employees out of that tax. Of course, a separate Bill will deal with that.

Taken together, those measures offer a stable and consistent platform for a private sector recovery.

[Clive Efford]

rose—

[Helen Goodman (Bishop Auckland) (Lab)]

rose—

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[Lorely Burt]

Thank you, Mr Deputy Speaker. The hon. Member for North Durham (Mr Jones) has intervened on me twice, so perhaps he would like to join me on these Benches and make his contribution. I am sure that he will be making his speech later, and I will have the greatest pleasure in intervening on him then.

VAT is to increase to 20% with effect from 4 January 2011. This is another issue on which the Liberal Democrat bashing by the Labour party has been lengthy.

[Clive Efford]

rose—

[Lorely Burt]

Perhaps the hon. Gentleman would allow me to make a little progress first. [Interruption.] I am not giving way now, but I promise that I will do so. I might even say something that he likes; one never knows. Like my hon. Friend the Member for Bermondsey and Old Southwark, I do not think that anyone on either the Conservative Benches or the Liberal Democrat Benches is filled with any enthusiasm for increasing VAT. However, I am not going to rehearse all those arguments, because we know that Labour left the finances in a far worse state than we originally anticipated. The structural deficit is £12 billion greater than we were led to believe, so whichever way we look at it, the options are invidious. A VAT increase has therefore had to be the least worst option, as my hon. Friend has said. There are mitigating factors, because the VAT rise will not come into effect until 2011. Therefore there will be a short-term boost; consumers who want to spend money, particularly on large items, will be able to do so before that increase comes into effect.

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[Lorely Burt]

As I understand it, they are unaffected. I wish to say a word about pensions: is it not strange that in Labour’s 13 years in government the earnings link was not restored? This coalition Government have introduced that in their first weeks in government. We have the triple lock: we have 2.5% or earnings or prices—

[Clive Efford]

rose—

[Lorely Burt]

I am going to make a bit of progress. Before Labour Members leap to their feet to criticise, they should reflect on the fact that they had 13 years in power and they leave a shameful legacy. It required this coalition Government to come into office to introduce that, and we are doing so in such a short period.

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[Helen Jones]

My hon. Friend is right. The Treasury’s own forecast shows a huge loss of private as well as public sector jobs. Many private firms depend on public sector contracts to keep going. More to the point, enterprise does not flourish when so much money is taken out of the economy that it becomes devastated. If the Government cut benefits, freeze wages and cut public sector jobs, that does not lead to a vital entrepreneurial culture but to a culture of fear in which people do not take risks.

Let me take one example of the way in which the Government have failed to consider the knock-on effect of the Finance Bill. They propose to increase VAT. That will have a damaging effect on the retail sector, yet that sector provides many entry-level jobs and jobs for women who wish to combine work with looking after children. It provides jobs for the women whom the Government want to get back to work when their children go to school. If those jobs are not there, where will those women go? There is simply no joined-up thinking here.

[Clive Efford]

My hon. Friend has moved on from investment in the construction industry, but I wanted to point out that that industry accounts for 10% of our gross domestic product and public sector expenditure accounts for 40% of the activity in the construction industry. That shows up the regressive decisions made by the Government.

[Helen Jones]

I could not have put the point better than my hon. Friend has.

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[Helen Jones]

If the hon. Gentleman is so confident about that, perhaps he will get his right hon. Friend the Chancellor to publish the Treasury forecasts that he is currently failing to publish. The OBR figures are based on forecasts of growth that I do not believe we will achieve because, to be frank, those forecasts have never been achieved in 40 years.

[Clive Efford]

Does my hon. Friend find it as curious as I do that the figures leaked from the Treasury are produced by the same people who produced the figures for the OBR, and yet those figures conflict? Is she confused about that?

[Helen Jones]

I am extremely confused and rather surprised that, although the Chancellor said that he would make sure that nothing was hidden in the small print and that he would show us all the figures, he declines to publish the Treasury’s own forecasts.

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[Mr Redwood]

The point that I have been making for the Labour party’s benefit is that I think it is possible to get a reasonable private sector-led recovery from here, because the private sector was so gravely damaged and battered, and the figures were so awful, in ’08-’09. We are talking about rates of change from a very low base, so it is quite possible for things to get going.

[Clive Efford]

rose—

[Grahame M. Morris (Easington) (Lab)]

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[Mr Jones]

I am not sure that it is, because the Chief Secretary knows what he has signed up to. With his great experience as press officer for the Cairngorms national park, I am sure that he knows danger when he sees it. We need to expose the Liberal Democrats’ rank hypocrisy. They went into the election campaign arguing against most of the things to which they have now signed up. They have abandoned decades of commitment to some of the poorest in our society.

Those actions are predicated on a myth. The hon. Member for Dundee East (Stewart Hosie) identified it earlier when he mentioned Canada. That is a worthwhile example, because if we want to explain what is happening, we need to examine in detail what happened in Canada in the 1990s. The Government are copying not only every single measure that the then Canadian Government introduced but the tactics, including the great consultation with the Canadian people about how to cut the budget.

[Clive Efford]

I am interested in my hon. Friend’s argument, particularly his comparison of the consultation that is about to take place with what happened in Canada. Will he confirm that the consultation in Canada took place on the basis that the Government would reinvest in the public sector after they had got through their budget deficit, whereas this Government are making an ideological change whereby they will cut back the state for ever? They are inviting people to take part in a consultation not to ascertain where we should take short-term measures, but to cut from the state services that people will never see again.

[Mr Jones]

My hon. Friend is right, but in Canada people fell for the trick, because they cut back and did not reinvest.

The Budget is ideologically driven. It is not about deficit reduction, but about driving down the state and ensuring that we can somehow con the British public into accepting the unthinkable.

We must always have someone with whom to compare ourselves and say, “We could be like that.” The current tendency is to compare us with Greece, whereas in Canada in the 1990s, New Zealand was used an example. The process followed the same pattern as today. The starting point is to convince the public that the debt is so horrendous that there is no alternative to ideologically driven debt reduction; some hon. Members have claimed that today. The next step is to whip up the media and get a friendly think-tank or other supportive organisation to put forward selective facts about the size of the deficit. To crank up the national debt as high as possible, everything is added in, including future private finance initiative funding. Revenue accounting is added to capital costs, without explaining to people that capital investment is investment in this country’s economy. That is how to try to scare the public.

As happened in Canada, the next step is to say that if the cuts are not made, the consequences will be dire. Guess what the Canadian Liberals did? They threatened, “If we don’t do this, the IMF will come in tomorrow.” We heard that during the election campaign. There is nothing new about what is happening here. The Conservative party has clearly copied the Canadian model, and even adopted the playbook. Unfortunately, it has been able to con the Liberal Democrats into being its human shield.

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[Andrew George]

I am grateful to the right hon. Lady for that intervention. She has come to the nub of the dilemma in which a number of other hon. Members and I find ourselves. Yes, the VAT increase was not part of the coalition agreement. I presupposed that it would inevitably be regressive and that I would automatically oppose it. The right hon. Lady will be aware that last Monday, I tabled an amendment on the Order Paper that sought to get the Treasury to provide the necessary impact assessment of the 2.5% VAT rise as it applied to families across the income spectrums, to charities and to businesses. There was mention of the rural travelling public as well.

[Clive Efford]

Will the hon. Gentleman give way?

[Andrew George]

I will just make this point, if I may.

There are very significant questions to be asked about this issue. On page 67 of the Red Book, the changes to VAT are described as “progressive”. I question whether it is entirely accurate to describe a VAT rise as being, on balance, progressive. [Interruption.] I am trying to make a constructive contribution to the debate; I am not taking a tribal view of this issue.

[Clive Efford]

rose—

[Andrew George]

I am going to finish making this point about VAT, if the hon. Gentleman does not mind.

The best source that most people pray in aid when engaged in Treasury and Finance Bill debates is the Institute for Fiscal Studies, so I looked at the evidence that it has gathered on VAT. The hon. Member for North Durham referred to that in the context of the graph on page 3 of the Library note. The IFS makes it clear that, taking a snapshot in time, those who are engaged in the highest expenditure will be most affected by changes in VAT.

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[Clive Efford (Eltham) (Lab)]

I congratulate my hon. Friend the Member for Scunthorpe (Nic Dakin), and the hon. Members for North East Cambridgeshire (Stephen Barclay) and for Ipswich (Ben Gummer), on their maiden speeches. The description of the blood-red sunsets by the hon. Member for North East Cambridgeshire showed his passion for his constituency, and my hon. Friend spoke well of his predecessors and his love of his adopted town. The hon. Member for Ipswich, if I may say, spoke very little about his constituency for a maiden speech. It was none the less a maiden speech, and I congratulate him on it.

Nothing sums up the Budget more than the Financial Times headline the morning after: “Well paid breathe collective sigh of relief”. The article discusses the impact of capital gains tax, stating:

“Higher earners expecting to bear the brunt of the chancellor’s tax rises were breathing a collective sigh of relief yesterday, having been spared major increases to capital gains and income tax in the emergency Budget…Capital gains tax rates of 40 or 50 per cent and further restrictions to pension tax reliefs had been forecast by tax advisers in the weeks after the general election. When a smaller increase in CGT - just for higher-rate taxpayers - and a consultation on allowing pension contributions of £45,000 a year were announced, many were pleasantly surprised.”

The director of RBC Wealth Management is quoted in the article. She said:

“Many higher earners will be breathing a sigh of relief.”

The Fair Investment Company, an independent financial advice company, made similar exaltations:

“CGT has not been raised up to 50 per cent as speculated and the exemption allowance has not gone down to £2,500 like the Lib Dems proposed, so many higher-rate taxpayers will be breathing a sigh of relief”.

We were told that the Lib Dems and the Tories want to raise £1 in tax for every £4 they cut in public expenditure, but where is the mandate for making those cuts? At the general election, the majority of the electorate voted for parties that opposed drastic cuts, including an increase in VAT and the proposed austerity Budget to cut public services.

[Stephen Williams (Bristol West) (LD)]

The hon. Gentleman appears to be lamenting the fact that capital gains tax was not increased by more than proposed in the Budget. At which point during the 13 years of Labour Government, when capital gains tax was decreased from 40% to 18%, did he protest that?

[Clive Efford]

The hon. Gentleman misses the point. The point is what the Liberal Democrats said about capital gains tax before the election and what has happened afterwards. I cannot find any record of anybody saying, “Thank God we have the Liberal Democrats to water down this horrible Tory Budget.” No one is saying that—[Interruption.] As much as the Liberal Democrats try to dance on a pinhead over the VAT increases and how they have looked for an investigation into VAT so that they can all cuddle up at night and sleep well knowing that they have not made life awful for poor people—they claim that they have forced the Government into a review—what will they really do about it?

[Mr Kevan Jones]

In fact, the hon. Member for Solihull (Lorely Burt) not only did not make excuses for the increase, she tried to justify it.

[Clive Efford]

What we have heard in several debates is so much hand wringing that I have almost started to feel sorry for the Liberal Democrats. They must be in agony from all the crushed fingers they have from wringing their hands so tightly in trying to explain away the impact of the VAT increase.

[Toby Perkins]

Was my hon. Friend as surprised as I was that during the Budget debate the hon. Member for Bromsgrove (Sajid Javid) said:

“Opposition Members have accused us of being ideological about the matter, but how can we be anything else? They are absolutely right, and there is no shame in it”?—[Official Report, 24 June 2010; Vol. 512, c. 515.]

He was clear that it was a Thatcherite Tory Budget that he was proud of. The Liberal Democrats are being used as a sort of human shield to defend a Budget that in other circumstances would have appalled them.

[Lorely Burt]

That’s an old phrase!

[Clive Efford]

Well, I am sorry, but the hon. Lady will hear it again and again, because it happens to be true.

During the general election the Prime Minister—he was Leader of the Opposition at the time—said to Jeremy Paxman on “Newsnight” on 23 April:

“We have absolutely no plans to raise VAT. Our first budget is all about recognising we need to get spending under control rather than putting up tax”.

In his closing remarks in the leaders’ debate, he said that he believed that the test of a good society is how it looks after the poorest and most vulnerable in difficult times. Well it did not take him long to fail that test. He promises good times ahead and a clean break. Who for? It is certainly not for the poorest in our communities.

The Deputy Prime Minister—I remind the House that he was the leader of the Liberal Democrats in opposition—said during the election campaign:

“The Conservatives have made a series of uncosted tax promises, tax bribes.”

That was referring to Tory promises to recognise marriage in the tax system, limit the national insurance rise, freeze council tax, and raise inheritance tax thresholds. He continued:

“The only way that they are going to deliver their tax promises is by dropping a tax bombshell, a VAT bombshell of £389 a year on every household in this country.”

What changed his mind? Was it when the ministerial Prius turned up outside his house or was it before that?

The Liberal Democrats launched their London election manifesto claiming that under them Londoners would save some £700 a year. They said that tax cuts would be paid for by “closing loopholes” and “increasing aviation pollution taxes”. They said their tax reform would be the most radical in a generation—any takers on the Conservative Benches for a radical change from the Liberal Democrats? I think not! Their manifesto also included a pledge

“to put 600 more police on the capital’s streets and an extra £520 million a year in London schools.”

Instead, however, we have seen a cut in Building Schools for the Future and in police numbers, and we are going to see a rise in unemployment as a result of their support for the Budget.

[Mrs Moon]

Is my hon. Friend, like me, going back to his constituency and finding a high level of concern, fear and anxiety about the future? This is not just about the VAT proposals in the Finance Bill; people are nervous about the future, their budgets and their capacity to spend and have a secure future. People are nervous about, and afraid of, every aspect of the Con-Dem coalition.

[Clive Efford]

My hon. Friend is right. That applies not just to individuals but to businesses. Many people are expressing concern about the impact of this emergency Budget.

On 8 April, the Deputy Prime Minister said on Sky News:

“We will not have to raise VAT to deliver our promises. The Conservatives will. Let me repeat that: our plans do not require a rise in VAT. The Tory plans do.”

Well, we all know it is a Tory plan now, do we not? And we all know who is voting for it.

What are the public to make of this sudden about-face? Who has the moral mandate for this level of tax increase and for taking this proportion of tax to pay for the deficit as opposed to rolling back the state? Where is the mandate for making the poorest pay for this Budget as they will? More importantly, however, where is the contribution from the banks?

[Dan Byles (North Warwickshire) (Con)]

The hon. Gentleman has given us an interesting list of quotes and dates. Will he point to the date on which his own Front-Bench team ruled out raising VAT during the general election?

[Clive Efford]

The hon. Gentleman is new to the House—and he might well be new to politics—but I am sure that, if he looks in his history books and reads all the quotes, he will find that most parties going into an election do not rule out such an increase, unlike in the foolish statements made on “Newsnight” by the now Prime Minister and during the general election by the Liberal Democrats.

Now there is trouble at’ mill—we have some problems here—because Sir Alan Budd has resigned. Can anyone tell me how a man who only a short while ago described his job as

“the most exciting challenge of my professional life”

can have given up so quickly? This man must have the most exciting job coming up to give up such a prospect already. How have we lost the head of the Office for Budget Responsibility so quickly? Perhaps my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) can tell me whether there is a revolving door at the Treasury. We lost the first Chief Secretary to the Treasury and now we have lost the head of the OBR. They are going in and out so quickly that, if they have not got a revolving door, they should put one in pretty quick. It would make it much more efficient for people when leaving their posts so quickly.

What has changed Sir Alan Budd’s mind? Has he changed his mind? The Treasury is assuming that growth in the private sector will create 2.5 million jobs in the next five years to compensate for the spending squeeze. Can the Minister tell me when since the second world war the private sector has ever grown that quickly? When has it ever created that many jobs? We have had unprecedented growth over the past 13 years, and it only just created that many jobs in that period. How can these projections point towards the creation of 2.5 million jobs? Perhaps the Liberal Democrats are going to tell us, because they had a cup of tea with the Governor of the Bank of England, after which we saw a miraculous turnaround—perhaps there was something in the tea. Perhaps they can now explain to us what was said that convinced them that miraculous growth in the private sector was going to solve this country’s economic problems, as we undergo the most unprecedented assault on the state ever attempted in peacetime.

We have also seen figures leaked from the Treasury. The Government expect between 500,000 and 600,000 jobs to go in the public sector and between 600,000 and 700,000 to disappear in the private sector up to 2015, but how is it that the figures leaked from the Treasury contradicted the figures from the OBR? I am wondering about that, so perhaps someone can give me an answer, because the figures are compiled by the very same people. Treasury officials compile the figures for the OBR, and the leaked figures are from the Treasury. I am therefore a little bit confused, but perhaps somebody can explain that one for me—perhaps the Liberal Democrats have an answer for us, as they are so enthusiastic about the Budget.

The Chancellor has said that some have suggested that there is a choice between dealing with our debts and going for growth, but that this is a false choice, and I agree with him. There is indeed a choice, as Sir Alan Budd also agrees. However, the OBR actually agreed with the figures for growth based on our March Budget and the figures for unemployment; in fact, it considered our figures to be conservative. The March Budget statement was also able to announce that debt had been reduced by £11 billion, which is an important point. The debt had been reduced because there was more income tax, more national insurance, more VAT income and more tax from businesses. A further announcement was made subsequent to the general election, with a further reduction of £5 billion, to which my right hon. Friend the Member for Birmingham, Hodge Hill referred in his opening speech for the Opposition.

[David Wright]

Does my hon. Friend agree that, on the basis of the growth figures and cutbacks in public spending that he has outlined, the real danger in the Budget is not that we will see a double-dip recession—none of us wants that to happen—but that we will end up repeating the Japanese model, bumping along the bottom in terms of growth and inflation, without seeing a significant improvement in the position of the economy? That is particularly dangerous at a time when we are making savage cuts in public spending.

[Clive Efford]

I agree with my hon. Friend. There are plenty of eminent economists saying that this is not the time to draw back the fiscal stimulus.

However, the point that I want to make is that the reduction in the debt that the then Chancellor was able to announce in the March Budget was due to the intervention of the Government. There was less unemployment, we were paying out less in unemployment benefit, and there were more people in work and more businesses; therefore, the tax income was higher than had been predicted, indicating that the way through the recession is not this austere Budget, but continuing with the stimulus until growth is stronger.

However, the worrying thing now is that, following the emergency Budget, businesses are starting to question whether growth is on its way. As the Financial Times has said:

“Britain’s…services sector expanded in June…at the slowest rate in 10 months…The Markit/CIPS UK services Purchasing Managers Index…for June was weaker than consensus forecasts among economists, showing a 54.4 headline reading, down from 55.4 in May. Economists had expected a more modest decline…of 55…It was the weakest reading since August 2009…Business expectations went from a reading of 72.1…to 64…The Services PMI is particularly closely watched because it accounts for the greatest share of private sector business output…‘Worrying signs for the UK service sector appeared in June as growth slowed in response to another below par increase in new business…Confidence declined to the greatest extent in 14 years of data collection in reaction to the government’s austere emergency budget, with concern expressed that the fiscal tightening could push the country back into recession.’”

According to the Financial Times:

“The Purchasing Managers’ Index figures came in amid signs that global manufacturing took a hit in June, with China, the US and the eurozone all seeing weaker growth in the sector. The report on exports came as a survey of credit conditions by the UK Bank of England underlined the concern at the prospects for demand in the UK. Credit conditions were expected to deteriorate by the most since the first quarter of 2009, when the recession was at its deepest.”

What we are seeing there is the extreme concern in the business sector since the Budget was announced—[Interruption.] I hope the Liberal Democrats are listening to this. The construction sector in particular accounts for 10% of our GDP, and public sector expenditure accounts for 40% of the construction industry. The announcement yesterday—such as it was—from the Secretary of State for Education that he was drastically cutting back on schemes such as Building Schools for the Future will make it even more difficult for the Government to deliver growth in employment and growth in the private sector, because they are rowing in completely the opposite direction.

[Mr Kevan Jones]

Does my hon. Friend agree that the VAT rise will have an effect on new house starts in the construction sector, which is very fragile in my constituency and many others? The increase will have a dramatic effect not only on new builds but on the local builders who rely on building extensions and loft conversions.

[Clive Efford]

It will indeed; my hon. Friend is absolutely right.

The Guardian website on Sunday 4 July stated:

“CBI disappointed by extra £4 billion capital spending cut. Spending on building and infrastructure projects, many of them to support private sector businesses, will fall faster than expected after the chancellor announced £6.2 billion emergency cuts three weeks ago, with £2 billion of the total from capital expenditure projects. The CBI said: ‘Capital investment is crucial to driving the economy forward and the government needs to make sure we get back to the long-run average of 2.25% of national income as soon as possible’.”

Are you listening on the Liberal Democrat Benches? What they are voting for is just above 1%.

[Stephen Williams]

I am enjoying the hon. Gentleman’s oral press cutting service. I was listening, enraptured, and waiting for him to contradict the hon. Member for North Durham (Mr Jones) and tell him that VAT is not applied to new builds.

[Clive Efford]

My hon. Friend—

[Mr Byrne]

Was my hon. Friend alarmed, as I was, that the Finance Bill says nothing about preserving either zero rating or exempt categories for VAT, including for building services, for the rest of this Parliament?

[Clive Efford]

We have seen so many unexpected changes from the parties opposite, and my right hon. Friend is absolutely right to draw our attention to the fact that they have been silent on that issue.

I have another question about the Bill. Where does it mention the tax on the banks? When can we expect to see that measure before us? Why is it not part of the Bill? Perhaps the Liberal Democrats would like to intervene on me to tell me when we can expect to see it. We are told that it will be consulted on. If that is the case, is it going to go up or down, or is it going to stay as it is? What is the point of consulting the bankers—I assume that that is whom the Government are going to consult—on something that they would rather did not happen?

The Liberal Democrats told us that they were going to break up the casino banking system. The Secretary of State for Business, Innovation and Skills wanted the banks to be broken down into smaller banks, separating casino banking from normal banking. Yet we are told that the Chancellor opposes this and has set up a commission to look into it, which will take at least a year, thereby kicking it into the long grass. [Interruption.] I hear a sedentary intervention that we are dealing with the Finance Bill. Yes we are, and this is not in the Finance Bill, but it is an integral part of the Budget. It is therefore legitimate to ask where it is, when it is going to happen and what the consultation will be about, because it impacts on what taxes we raise on the people we represent. [Interruption.] I say to the hon. Member for St Ives (Andrew George), who did not make a very good job of defending his position on the increase, that that includes VAT.

On 12 March the Deputy Prime Minister called for a 10% tax on bank profits and a £2 billion job creation scheme to rescue the victims of recession. We keep being told by the Liberal Democrats that they have had an enormous impact on this Budget, so perhaps they could explain the impact they made here. I would have supported and voted for a 10% tax on bankers’ profits, instead of for taking people’s benefits away from them or for poor families paying VAT increases. After all, where did the financial problems start?

The Deputy Prime Minister kept digging during the general election, and on 20 April accused the bankers of behaving like “Arthur Scargill in pinstripes”. He then went on to say:

“The banks have basically been given untrammelled support by Labour and Conservative governments to do exactly what they like, and take massive risks with our livelihoods and our savings. They have been holding a gun to the economy. A progressive liberal like myself is not going to be squeamish about blowing the whistle on a vested interest.”

Well, where is it? Where is the whistleblowing on those vested interests?

The Liberal Democrat website—I do not know whether Liberal Democrat Members ever look at it—still says that they are going to bring “fundamental change” to our banking system.

“We will break them up and break them down.”

It continues:

“Until such a time, the taxpayer will have to continue underwriting the banks”—

well, we know that from this Budget.

“To recognise this, we are proposing a new levy on bank profits at a rate of 10%...This levy would be supplementary to corporation tax”.

Well, where did that happen? If we look at corporation tax outcomes—[Interruption.] The hon. Member for Cheadle (Mark Hunter) intervenes from a sedentary position. Would he like to repeat what he just said? I think he said that the Lib Dems did not win. Well, we all know that; that is why we are complaining about what they are doing.

If I look at what the banks are saying about corporation tax, I find that they are rewarded and compensated for the £2 billion levy that the Budget wants to raise. We have some more juicy quotes here; the Lib Dems might want to listen to them. Here is one:

“Bankers were relieved that the chancellor’s speech failed to repeat the coalition government’s threat to end ‘unacceptable bonuses’”.

Deutsche Bank analysts noted the significance of the corporation tax change:

“Taking 2% off the 2012 tax rate for the five banks listed in the UK would increase profit by £1.16bn, that is it should almost offset all of the banks’ tax. Overall a good outcome for the banks.”

A number of bank analysts calculated that some banks could benefit from the Chancellor’s measures. As I have said, Deutsche Bank concluded that it was a “good outcome” for banks, while an analyst at UBS expected Lloyds and HSBC to benefit by 2012 because the cut in their corporation tax bill was larger than the hit that they sustained through the bank levy. HSBC banking analysts concurred:

“We’d expect most domestically-orientated banks, for example Lloyds, to be better off after four years than they were pre-budget”.

How has it come about that a party that went through the general election giving all those quotes about how they were going to break the banks up and break them down, and make the bankers pay until the pips squeaked, has come to support a Budget that takes from the bankers with one hand, pays it back with the other and rewards the banks with a tax benefit at the end of it? And at the same time they will be marching through the Lobbies to the drumbeats of the Tories, voting for cuts in benefits and an increase in VAT, and making the poorest people in our communities pay, when the banks are not paying.

It was all puff and wind from the Liberal Democrats during the election. We have heard it all before, and we are hearing it again. This time, however, they have actually got to vote for something. They are actually in charge and responsible for what they are voting for, and they are going to pay a very heavy price indeed.

[Andrew George]

What about the 10p tax rate?

[Clive Efford]

Perhaps the hon. Gentleman would like to intervene. I think he was shouting about the 10p tax rate. There were problems with that, and I will tell the House what they were. I will be quite frank. The 10p tax rate did not direct enough money to the poorest people in our communities. When we hear about the uprating of the lowest tax threshold from the Benches opposite, what we do not hear about is the clawback from the poorest people, who will lose housing benefit and other benefits. We never hear the full story from the Liberal Democrats when they are spinning on a pinhead to try to protect themselves from the charge of having said one thing and done another.

I could go on. The Liberal Democrats are such an easy target that I could be here all night. However, I will end by saying this. It is clear that what is before us tonight is not about the deficit, whatever excuses we hear from the Government Benches. This is an ideological change. Either Members believe that the state should intervene and assist, in particular, the weakest in our communities, or they do not. A stark choice is involved in terms of what Members support in this Bill.

There are 61 million people employed in the public sector. Some 3.9 million work in health, education, defence and social work, and roughly 2 million are employed in other services, including 530,000 civil servants. Those figures are huge, and those people are essential to many of our communities and to our economy. Moreover, 25% of public sector expenditure goes on private sector goods and services. The private sector will find it impossible to fill the gap left by the reduction in the public sector, as those who support the Budget try to claim it will. That 25% that feeds the private sector will be taken away from it when it is trying to grow. Expecting the private sector to grow at a rate that would enable it to fill that gap is just a pipe dream.

In its document “The Jobs Gap”, the Work Foundation predicted that the private sector could possibly absorb 500,000 job losses in the public sector, but that any plausible private sector recovery would be overwhelmed if the number approached 1 million. According to the predictions, it will considerably exceed 500,000. The foundation also warned that it was risky to assume that big cuts in public sector payrolls could be effortlessly absorbed by the private sector. There is often a mismatch in skills, which creates a delay in people finding jobs in the private sector, and the recovery tends to come in the most prosperous areas at the expense of the most impoverished. The Chartered Institute of Personnel and Development has estimated that 725,000 jobs will be lost in the public sector alone by 2015, although the number could be lower if the Government succeeded in pushing through pay cuts.

It is clear that these changes go further than is necessary to deal with the deficit. They do little or nothing to recoup money from the banks that have put the country in its present position, and they are clearly unfair on the poorest in our communities. This is the last point that I shall make to the Liberal Democrats. If they fundamentally believe that cutting back the state is what the country should do, they will come back for the national health service. It is not consistent with the measures in the Budget that it is possible to protect the national health service—a public service that intervenes at every level in people’s lives—and cut back other aspects of the state.

The Liberal Democrats and the Tories will have to come for the NHS. We only have to look at people such as Mr Daniel Hannan and the speech that he made in America. He was personally invited by the Prime Minister to speak at the Tory party conference, lauds the private sector and wants to cut the NHS and to move to a private health insurance system. Those are the people at the heart of the thinking of the Tory party. I suggest that the Liberal Democrats think very carefully before they vote for the Budget. It is an ideological Budget to cut back the state. They will not be able to defend the NHS once they have gone through the Lobby and voted for this Budget.

[Several hon. Members]

rose—

Budget Resolutions and Economic Situation

Clive Efford Excerpts

Thursday 24th June 2010 Commons Chamber

[Clive Efford (Eltham) (Lab)]

This is my first speech in the new Parliament, so let me take this opportunity to say what a pleasure it is to see you in your position, Mr Deputy Speaker.

One of the first things that we need to say about the Budget is that it is quite clear that the underlying narrative is an assault on the size of the state. It is not merely an attempt to deal with the deficit following what has been described as a profligate former Labour Government. It is an ideological assault on the state based on the belief that reducing the size of the public sector will create space and that the private sector will inevitably grow and fill the vacuum. Without question, this Budget is—apart, perhaps from the absence of the NHS from the cuts—the Budget that Margaret Thatcher always wanted to introduce. But who would have thought it would be the Liberal Democrats who would give the Conservatives the power to wield the axe?

The Deputy Prime Minister sat through the Budget nodding in support of every swing. We all remember the warnings that he gave during the election about what the Conservatives would do if they got into power—the VAT bombshell—but what changed? I think he is suffering from Stockholm syndrome, which is what happens when a hostage becomes emotionally attached to the people who are holding him captive. It is quite clear from his response to the Budget that there is something going on. He has now collaborated in the biggest robbery since Patty Hearst just went to the bank.

Perhaps I am being unfair. It could be that the Liberal Democrats just cannot help themselves. I am reminded of an experiment at Stanford university—the Stanford prison experiment—in which students were given the roles of prisoners and jailers. Very quickly, two thirds of the jailers became very sadistic, but the peculiar thing was that the prisoners, although they were free to leave at any time, decided to stay and take the sadistic treatment being dished out. I think that something is going on here. The Liberal Democrats who have taken the thirty pieces of silver and the Toyota Prius cars are clearly taking on the role of the sadistic jailers who have adopted the policies in the Budget. The Liberal Democrats who are left—I do not know what the collective term for them should be, but perhaps it could be dupes, as that is a term that someone has used recently—are unable to free themselves. They have internalised their grief and they are going along for the rollercoaster ride on the track that has been laid by the Conservatives in this Budget; they are hanging on for a white-knuckle ride.

There are endless quotes from the general election in which Liberals warned us about the Conservatives and what they would do in government, so there is no mandate for the Liberal Democrats to support the Budget. The majority of people who voted at the last general election voted for the parties that opposed the sort of cuts that are in the Budget.

The fact that we need to address the deficit is without doubt. If Labour were in government we would be cutting public services, and people would feel the consequences of those cuts; there is no doubt about that. However, the size and scale of what we have got from the coalition Government is beyond anything that anyone has attempted in the UK before. In one Budget, they are cutting back the size of the state, over six years, beyond what it was when Labour came into power 13 years ago. Under the guise of reducing the deficit they have set about reducing the size of the state, with an enthusiasm that Margaret Thatcher could only look on in wonder.

[Kwasi Kwarteng]

The hon. Gentleman mentions the deficit; who does he think was responsible for it?

[Clive Efford]

The hon. Gentleman will probably know the history of this matter. Until November 2008 there was an agreement in this House about how to deal with the deficit. The Conservatives supported what the Government of the time were doing, so I suggest that he go back and look at the facts of what was going on.

The Liberal Democrats conveniently forget the statements that they made expressing their fear of what the Tories would do. I remind the House of one that was made at the start of the general election campaign. In an interview with The Observer, the leader of the Liberal Democrats, the right hon. Member for Sheffield, Hallam (Mr Clegg), said this about a new Conservative Government:

“They then turn around in the next week or two and say we’re going to chuck up VAT to 20%, we’re going to start cutting teachers, cutting police and the wage bill in the public sector. I think if you’re not careful in that situation…you’d get Greek-style unrest…be careful for what you wish for.”

I think that those are very wise words.

The Government have also prayed in aid what has gone on in Greece, Sweden and Canada, but my right hon. Friend the Member for Doncaster North (Edward Miliband) pointed out at the Dispatch Box that comparisons with Greece are utterly ridiculous. In Sweden they cut back public expenditure by 20% over 15 years, an approach that bears no comparison with the scale of what is being attempted here. It is true that the Canadian Government carried out a consultation exercise, but that was confined to short-term measures to deal with the deficit, and the intention was always that there would be a return to expenditure.

What we are seeing is a permanent cut-back of the state, and a withdrawal from expenditure for ever. That is what the people of this country are being asked to participate in through this consultation.

The hon. Member for St Ives (Andrew George) is the only Liberal Democrat in the Chamber. I am not surprised that there no others participating in this Budget debate. I have quoted the party leader as saying

“be careful what you wish for”,

and I hope that the hon. Gentleman will remind his friends of that, especially the ones who cheered this Thatcherite Budget. Supporting this Budget is a proclamation of an intent to reduce the size of the public sector in perpetuity. Liberal Democrat Members cannot support reducing the size of the state and say with any credibility that the axe will not swing against the NHS in the long term. This is an ideological change, and they cannot escape that fact.

[Andrew George (St Ives) (LD)]

Will the hon. Gentleman give way?

[Clive Efford]

I welcome the hon. Gentleman getting to his feet. Perhaps he will explain whether he supports the state being withdrawn in this way.

[Andrew George]

I am grateful to the hon. Gentleman for giving way. I certainly appreciate the attention that he is giving to my party, although he fails to recognise that this is a coalition Government. There will be elements of both the Budget and the coalition agreement about which the Conservatives are especially enthusiastic, and elements about which the Liberal Democrats are especially keen. The measures in the Budget include a raising of the personal tax allowance, a significant improvement in annual increases in pensions, increases in capital gains tax and the introduction of levies on banks—all things that Labour failed to do at all.

[Clive Efford]

If that did not sound like an excuse, I do not know what would. A person on a low income who receives benefits or child tax credits is going to see those benefits reduced, so raising the personal tax allowance will make very little difference to household income.

[Andrew George]

What about the 10p rate?

[Clive Efford]

I assume that the hon. Gentleman has applied to speak in the debate, but it is clear that I have touched a raw nerve with him.

It is as sure as night follows day that those who support this Budget will want to cut the NHS next. Attacks on what has been describe as an “over-bloated” public sector are attempts to soften the public up in preparation for an unprecedented attack on public sector workers and the people who rely on the services that they provide.

The public sector will be hit in three ways, with a triple whammy—a freeze on council tax, a freeze on pay, and a squeeze on workers’ pensions. The claim that none of those would be necessary if the previous Government had not left the country in the state that the present Government say that they did just does not stand up to scrutiny.

In this Budget we are being asked to vote for taking away £1.8 billion from housing benefit, £1.4 million from disability benefits, £11 billion from the welfare state overall—and £2 billion from the banks. The Government say that they oppose nationalisation, but they have certainly nationalised the cost of the banking failure, and it is the poorest people in our constituencies who will pay the price.

The figures show that £1 in every £7 spent by the poorest 10% in our communities goes on VAT, but that drops to £1 in every £25 for the richest 10%. The IFS has confirmed that Labour’s plans would hardly have touched the poorest 10% at all, but this Budget will reduce their income by 2.5%. Labour’s proposals would have reduced the position of the richest 10% by 7%, but the Budget adds only a further 0.6% of that.

[Guy Opperman (Hexham) (Con)]

Will the hon. Gentleman give way?

[Clive Efford]

No. I have given way twice, and other Members wish to speak.

We can see who is paying the price for the Budget. The Government say that we are all in this together, but some of us are in it more than others, and the poorest are in it up to their ears.

There is no mandate for this Tory Budget. Despite all the coverage that we have read about it, no one has said, “Thank God the Liberal Democrats were there to hold back the nasty Tories.” Everyone says that it is a Conservative Budget—the Budget that the Conservatives would have introduced whether or not they had the rag, tag and bobtail of the Liberal Democrats tagging along behind them. This assault on our public services is founded on the misguided belief that as the pubic sector contracts, the private sector will expand and provide new jobs.

There is no intention of returning investment to the public sector. The dogma that drives the cuts is the same that drove the Tories to attempt to destroy the NHS when they were last in power. Anyone who votes for the Budget is signing up to a Thatcherite philosophy of slashing the public sector and paying no heed to the consequences for the most vulnerable people in our communities. Never again will the Liberal Democrats be able to claim that they are the party that stands up for the underprivileged and a party that is in favour of intervention. This is a Thatcherite Budget and anyone who votes for it will be a Thatcherite: Members on the Government side of the House are all Thatcherites now.

--- Later in debate ---

[The Economic Secretary to the Treasury (Justine Greening)]

Mr Deputy Speaker, may I start by saying what a pleasure it is to give my first speech as a Minister with you in the Chair? I thank the hon. Member for Wallasey (Ms Eagle) for her kind words. I very much enjoyed debating with her when I was the shadow Minister and I look forward to continuing to do so in government.

We have had a good debate this afternoon and evening. It was broadly meant to be about the Budget in relation to the environment, but we have not heard a lot about that, apart from in the thoughtful speech made by the hon. Member for Southampton, Test (Dr Whitehead). The hon. Member for Eltham (Clive Efford) said that there is little on the environment in the Budget, but given that the Labour Government had stalled on reducing emissions and wanted to go ahead with polluting measures such as a third runway at Heathrow, I am not surprised that the shadow Secretary of State for Energy and Climate Change failed to mention the environment in the half hour that he was on his feet.

I wanted to start by reflecting on the many speeches—23 or 24, by my count—made today, in particular some excellent maiden speeches. I was delighted to hear from my hon. Friend the new Member for Staffordshire Moorlands (Karen Bradley), especially when she said that she is an accountant. Speaking as an accountant myself, I think that this House needs more of us, and I dare say the Opposition could do with a few more as well, so that they can start adding up properly.

We also heard a great maiden speech from my hon. Friend the new Member for Hendon (Mr Offord). I remember his predecessor—indeed, I think I was present in the Chamber during that very long speech he made. If it is the one I remember, it was about animal welfare and lasted more than two and a half hours. On that occasion, the hon. Gentleman said how sad he was that his dog had died, and I intervened at one point to ask whether the dog had died of boredom. He said that it had not.

The new hon. Member for Kingston upon Hull East (Karl Turner), who is no longer in his seat, made a really good maiden speech. I hope he does not go around hitting people like his predecessor did, but his predecessor was certainly a colourful character, who brought his own personality to this place. We will see whether the new Member for the constituency can match him.

I thought the maiden speech of my hon. Friend the Member for Camborne and Redruth (George Eustice) was excellent, especially when he talked about how it is often individuals—their drive, initiative and creativity in working to tackle climate change and developing new technologies—who make all the difference. We should never forget—we on this side of the House certainly do not—that it is individuals who make the difference, not always Government alone. The latter theory has been tested to destruction by the Labour party.

We have heard a number of other speeches this afternoon, not least that of the shadow Secretary of State for Energy and Climate Change, who seemingly failed to mention anything about the environment. I have to say that the public watching the debate and hearing all the contributions from Labour Members would not have thought that they had just been through an election that they lost. It is as though they have learned nothing. They have not even paused to reflect on the message that they have just been given by the British people. They have handed over to this coalition Government an absolute basket-case of an economy, and what we have heard from Labour Members today is what we heard when we were in opposition: they always know better. They knew better in government and now they know better in opposition. They know better than the British Chambers of Commerce, which said

“The Chancellor’s message that Britain is open for business will be welcomed by companies the length and breadth of the country, and across the globe”.

They know better than the CBI, the Federation of Small Businesses, the Governor of the Bank of England, the G20 and the EU, which says that countries such as ours need to get on faster with reducing their fiscal deficit.

[Clive Efford]

Would the hon. Lady care to comment on a quote from the right hon. Member for Wokingham (Mr Redwood), who urged people hit by budget cuts to wear more clothes, turn down the thermostat and eat more vegetables? Is not that just about the most damning indictment of the Budget that we could have, from one of her own colleagues?

[Justine Greening]

The hon. Gentleman continues in the vein that the Opposition have adopted today, which is to try to score cheap political points. The message from the British public at the last election was that they want a constructive debate about how to solve the deep financial crisis that our country faces. We have had nothing from the Opposition. No alternative is being presented to all of the measures that were raised as concerns by Opposition Members. I presume that we can now start ticking them off as measures that the Opposition would say a Labour Government would take. We will rapidly reach the conclusion that there are no measures that the Opposition would take to solve this deficit. After all, they were happy to cancel their spending review, and now they are happy to play no role in having a constructive debate with the public and the Government about how we dig ourselves out of this mess. It is simply not true to say that the Opposition had no role in it. We were running a deficit long before the global crisis hit. That is why we went into the recession first, that is why we came out of it later, and that is why our recession was deeper. We have now had the longest and deepest recession since the second world war under the Labour Government. We need take no lectures from them.

Banking Reform

Clive Efford Excerpts

Thursday 17th June 2010 Commons Chamber

[Mr Hoban]

One of the roles of the Financial Policy Committee is to identify threats to financial stability as they emerge. I would expect the FPC, in its work of looking at overall trends in the economy, to identify that sort of risk and to make it known not just to the Treasury, but to the wider public through its regular reports.

[Clive Efford (Eltham) (Lab)]

Will the hon. Gentleman say how many people at the FSA and at the Bank of England currently earn more than the Prime Minister? Does he intend to apply the policy in the coalition document? If he decides to pay above the rate of the Prime Minister’s salary, should that element of the pay be performance-related, given the gravity of the decisions that such people will be taking?

[Mr Hoban]

There is an issue about pay levels, which we will need to look at. I am intrigued by the hon. Gentleman’s suggestion that there should be a greater variable element in relation to performance, given that a critique of many is that an excessive bonus culture in the City contributed to the financial crisis.

Office for Budget Responsibility

Clive Efford Excerpts

Monday 14th June 2010 Commons Chamber

[Mr Osborne]

It was repeatedly opposed by Treasury Ministers when I proposed it. Indeed, one of the most vocal and eloquent opponents was the shadow Education Secretary—I know that the shadow Chancellor has not always got on with him—who put the arguments on why Labour was opposed. If the Labour party wants to change its mind, we are all ears.

[Clive Efford (Eltham) (Lab)]

What has the OBR had to say about predictions of levels of unemployment and how they differ from those predicted in the March Budget?

[Mr Osborne]

For the first time, the OBR has published five-year projections of unemployment and employment. The projection for the coming year, for example, is that employment will fall and unemployment will rise—based, of course, on the pre-Budget measures.

Government Spending Cuts

Clive Efford Excerpts

Wednesday 26th May 2010 Commons Chamber

[Mr Laws]

My hon. Friend is absolutely right. It is staggering that we have been able to find so much waste in Government expenditure, in spite of the state of the public finances and public borrowing. We would have expected the previous Government to have taken action to eliminate some of the waste. We are determined that the exercise that we have embarked on will be not only an efficiency drive, but one that delivers real cost savings in a way that some of the exercises under the last Labour Government simply did not do.

[Clive Efford (Eltham) (Lab)]

Does the right hon. Gentleman agree that it is the convention that the letter left for him by his predecessor should be kept confidential between them? Will he say whether any of the officials in his Department have expressed disappointment that he has broken that tradition, and is it not true that he just bought himself a cheap soundbite to cover the fact that on 6 May he did not support £6 billion in cuts, but on 7 May he did?

[Mr Laws]

The only people who have expressed regret are Labour MPs.