Danny Alexander
Main Page: Danny Alexander (Liberal Democrat - Inverness, Nairn, Badenoch and Strathspey)Department Debates - View all Danny Alexander's debates with the HM Treasury
The Economy
Danny Alexander Excerpts(11 years, 11 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
I beg to move,
That this House has considered the matter of the economy.
I am pleased that this House has the opportunity to discuss the economic challenges that our country faces. The statement delivered by the Chancellor last week was a statement for the world as it is, not a statement about the world as we had hoped it would be, but in it we took the tough but fair decisions needed to fix the mess that we inherited, by bringing the deficit down, maintaining our international credibility and creating a platform for jobs and growth.
We ensured that the burden was fairly shared, asking those who have the most to contribute the most, bringing the cost of our welfare system under control and further squeezing Whitehall bureaucracy. We also addressed issues to make life easier through these tough times by cutting income tax and fuel duty and putting more money back into the pockets of working families.
That is why the autumn statement has been welcomed widely by the CBI, the British Retail Consortium, the Institute of Directors, the British Chambers of Commerce, the Federation of Small Businesses, the Engineering Employers Federation and many others that have the best interests of the British economy at heart. We inherited a mess, but we are clearing it up and building a stronger economy and a fairer society so that every person in Britain is able to get on in life.
As the Chancellor made clear last week, the road to recovery is longer than we had hoped, but this Government are committed to finishing the job and strengthening the British economy. Despite the mess we inherited and despite the headwinds from the eurozone and the impact of the banking crisis, we are making progress. The deficit has been cut by a quarter and, as the shadow Chancellor himself rightly observed last week, the deficit is falling in each and every year of the forecast. More than 1 million private sector jobs have been created and nearly 1 million young people have started apprenticeships, and exports of goods to major emerging markets have doubled since 2009.
Mr David Hanson (Delyn) (Lab)
Two years ago I sat on the National Insurance Contributions Bill Committee, which considered the national insurance contributions holiday. The Government then promised that some 400,000 employers would take up that scheme, but we were told by the Exchequer Secretary in a parliamentary answer today that only 20,000 have done so. If the Chief Secretary is not even good enough at forecasting the development of his own schemes, how can we trust his forecasts for the economy?
Danny Alexander
The right hon. Gentleman is right that take-up of that scheme has been much lower than we had expected. I think, therefore, that he would welcome the additional measures that we have taken in the autumn statement to support small businesses by, for example, continuing the small business rates relief holiday for another 12 months. The additional increases in capital allowances, which are particularly directed towards small and medium-sized enterprises, are precisely designed to encourage small businesses to invest.
Danny Alexander
I want to make some progress first. I know that many Members want to speak and there is already a time limit on speeches.
The forecasts are those of the independent Office for Budget Responsibility, and I do not think that the Labour party’s trend of attacking it is welcome.
Gavin Shuker
Will the Minister confirm that, under any measure, this Conservative-led Government will borrow more in the five years of this Parliament than Labour did in 13 years?
Danny Alexander
It is transparent from the figures presented by the Office for Budget Responsibility that borrowing is higher than it forecast in 2010. If the hon. Gentleman was being fair-minded, he would also draw the House’s attention to the analysis by the Institute for Fiscal Studies, which suggests that if we had continued with the path of spending set out by the previous Chancellor, we would be borrowing a further £200 billion —something that the country can ill afford.
Alison Seabeck (Plymouth, Moor View) (Lab)
The OBR, which is independent and gives interesting forecasts, has said that the unemployment count is likely to rise in each of the next four years. Will the right hon. Gentleman explain why that is?
Danny Alexander
The OBR has forecast that unemployment will be slightly higher next year and then fall in subsequent years. It also forecasts a rise in employment over that period. If the hon. Lady is looking for variances between reality and the OBR’s previous forecasts, it is fair to say that unemployment is now considerably lower than the OBR forecast a year ago. I hope that she welcomes that fact.
It is true that the OBR has lowered its growth forecasts and that the recovery is slower than we would have liked, but we are on the right road and the announcements that we made last week will help the country to make further progress along it. I should add that the OBR does not attribute the slower growth to the Government’s fiscal policy, but to external pressures from the eurozone and other parts of the world, and to the long-term impact of the financial crisis, especially on our banking system. If the Labour party wants to accept the OBR’s figures, it also needs to accept its analysis.
As the House knows, savings had to be found and we have decided to reduce departmental resource budgets by 1% next year and 2% the year after. We are confident that that will not impact heavily on front-line services. For example, according to the recently published “Digital Efficiency Report”, if all Departments continued to move their transactional services online and became digital by default, we could save £1.2 billion over the next two years. If all Departments moved to the property occupation benchmark of 10 square metres per person, they could save a further £300 million each year.
Emily Thornberry (Islington South and Finsbury) (Lab)
Does the right hon. Gentleman agree with the following analysis? Two and a half years ago, he asked for five years to balance the books, but without a plan for jobs and growth, he needs another five years. He still does not have a plan for jobs and growth, so it will always be five years.
Danny Alexander
No, I do not agree with the hon. Lady’s analysis.
There are still savings to be made in day-to-day administration costs. I am confident that the civil service can continue to produce more for less and provide excellent value for money to the public.
The welfare system makes up more than £200 billion of public spending and cannot be immune from the effort to deal with the deficit. As a result of the financial pressures that we are facing, we have had to take the difficult decision that we can uprate working-age benefits by only 1% in the coming three years. That figure represents a rise each year, but it will be below the rate of inflation. It is not as high as some may have expected, but it is what the country can afford. That is a tough choice, but an even-handed one, and it avoids some of the more punitive proposals that have been floated in recent months.
Most benefit claimants would love to work and are trying their best to find a job. However, we need to recognise that in-work incomes have risen at half the rate of benefits since the financial crisis. Those who are in work will be better off thanks to our income tax cuts. When we are increasing public sector pay by only 1%, it would simply not be fair to increase the benefits of those who are out of work at a higher rate than those we employ to work for us.
Even while making those cuts, we have taken steps to protect those who are most in need. That is why disability living allowance and other benefits specifically for the most disabled and their carers will continue to increase in line with inflation. It is also why the basic state pension will increase by 2.5% next April, which is higher than either earnings or prices, honouring our commitment to the triple lock. The application of the triple lock means that there will be a better rise in the basic state pension than pensioners have seen before. Pensioners will see a cash increase of £2.70 a week in the basic state pension in 2013-14.
While we are protecting those in need, it is only right that we ask the most from those who earn the most. That is why the higher rate threshold for personal income tax will also be uprated by only 1% in 2014-15 and 2015-16. It is also why the annual allowance for pensions tax relief will be reduced from £50,000 to £40,000, and the lifetime allowance from £1.5 million to £1.25 million. That will raise more than £1 billion a year by the end of the period and is something for which I, for one, have argued for quite some time. The savings from Whitehall, welfare and the wealthy, and the targeted tax rises, are helping to cut the deficit in the medium term and to boost growth now.
Our capital spending plan will see £5 billion switched from current spending to investment in infrastructure, providing a better connected UK on roads, on rails and online. We will provide £350 million for the regional growth fund, enabling it to continue its success in creating jobs throughout the country. We are rolling out rural broadband across the country and have announced £50 million for the second wave of super-connected cities across the UK from Portsmouth to Perth, via Newport and Northern Ireland.
We have announced funding for a number of road building and maintenance projects. We will be dualling the A30 in Cornwall—an improvement that has long been campaigned for, not least by my hon. Friend the Member for North Cornwall (Dan Rogerson), who is in his place. I congratulate him on his efforts. We will also bring the A1 up to motorway standard all the way to Newcastle. I have been made aware of the need to improve that road north of Newcastle, not least by my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith), and have asked my right hon. Friend the Secretary of State for Transport to work up plans for potential improvements north of Newcastle.
The capital projects will not only create jobs in the short term, but crucially will raise the quality of the country’s infrastructure and our growth potential in the medium term. Labour Members may be interested to know that during the previous Government’s time in office, we fell from eighth to 33rd in the global league table for the quality of infrastructure. That is not good enough and is why John Cridland of the CBI said last week that it is
“absolutely right to shift the focus from current to capital spending to boost jobs today and the UK’s competitiveness tomorrow.”
As colleagues will know, our plans will mean that as a share of the economy, the investment that the Government are putting forward in this Parliament is greater than the average over Labour’s period in office. These investments, not just in roads, but in schools, colleges and flood defences, can only serve to help our businesses in the future.
Andrew Gwynne (Denton and Reddish) (Lab)
I am pleased by the Chief Secretary’s recent conversion to investing in capital projects, such as building new schools. Now is perhaps an opportune time for him to apologise to the schools in my constituency that had their Building Schools for the Future funding taken away. Can they expect it back?
Danny Alexander
I have not had a recent conversion to capital expenditure. The hon. Gentleman will remember that in the spending review in 2010, we committed over £2 billion a year more to capital expenditure than had been set out in the previous Government’s plans. In the autumn statement last year we added £5 billion and in this year’s autumn statement we added another £5 billion for a range of projects. I hope that he will recognise that the Building Schools for the Future programme was expensive and bureaucratic. The proposals that have been brought forward by the Department for Education are a better and more cost-effective way to meet at least some of the needs in the school system in this country.
Mr Stewart Jackson (Peterborough) (Con)
On the subject of apologies, will my right hon. Friend invite Her Majesty’s loyal Opposition to apologise for the debt millstone of the private finance initiative in the national health service, which amounts to more than £63 billion? The right hon. Member for Morley and Outwood (Ed Balls) is aware of that, because it was all about hiding the debt off balance sheet and ensuring that our children struggle with it. [Interruption.]
Mr Jackson
I am sure that my right hon. Friend will agree with my analysis of PFI.
Danny Alexander
My hon. Friend adds another item to the long list of items for which the people of this country deserve an apology from the Labour party. We have had no such apology yet, but we live in hope. Perhaps the shadow Chief Secretary will begin her speech with an apology for the many and various mistakes. [Interruption.]
Madam Deputy Speaker
Order. Let us try just once more. By Whips, I mean Government Whips as well as Opposition Whips. Government Whips are not to shout across the Chamber. Is that clear?
Danny Alexander
Thank you, Madam Deputy Speaker. I hope this debate will be conducted in a calm manner as befits the seriousness of the issues we are discussing.
Frank Dobson (Holborn and St Pancras) (Lab)
Can the Chief Secretary to the Treasury tell the House of a single Tory or Liberal Democrat MP who objected to a PFI hospital or school being built in their constituency under the Labour Government?
Danny Alexander
Not off the top of my head, but I dare say that hon. Members on the Government Benches can speak for themselves. I have, however, heard a number of objections to the structure of PFI contracts. In fairness to the right hon. Gentleman, the PF2 model is not designed to abolish PFI and can play an important role in developing new projects. We want to strip away some of the most egregious features such as facilities management costs—a couple of years ago the Treasury was going to be charged several thousand pounds by the PFI holder for putting up a Christmas tree. That issue was resolved but it is a small example of the excessive costs involved. In Treasury questions earlier today the Chancellor gave an example concerning the cost of changing a light bulb in a hospital in Cumbria.
I am sure that on reflection the right hon. Member for Holborn and St Pancras (Frank Dobson) would agree that reforming PFI to strip out some unnecessary features such as facilities management costs and so on, and having a simpler, clearer model in which the taxpayer can share in any gains, is a big improvement. I hope that when he has looked at what is being proposed, he will welcome it.
Mr Stewart Jackson
My right hon. Friend may wish to comment on the fact that another example of Labour prudence was spending £250 million on private contractors in the NHS for operations that were never carried out.
Danny Alexander
The Government are trying to move to a system of payment by results. Too often the model of spending under the previous Government was payment for absolutely no results—[Interruption.] I will make some progress, despite the shouting from the second row of the Opposition Benches.
The Government know how important businesses are to growth, and we are taking the necessary steps so that businesses can increase employment and exports and lead the country back to prosperity. That is why we have announced, among other things, an extension of the small business rate relief scheme that will benefit over 500,000 small businesses. The extension of empty property rate relief to newly built commercial property has been called for by Members across the House, and I hope it will enable commercial property development to move forward in many parts of the country that have recently been blighted.
We have announced increased funding for UK Trade and Investment to support the growth in exports, particularly in emerging markets, alongside a substantial new trade finance scheme that will significantly help medium-sized exporters looking to win new markets across the world. Most importantly, we have announced an increase in the annual investment allowance limit from £25,000 to £250,000 for a time-limited period of two years—a capital allowance relief that I hope will send a signal to medium-sized manufacturers that now is the best time to invest in new plant and machinery. I pay particular tribute to my hon. Friend the Member for Burnley (Gordon Birtwistle) and the Liberal Democrat campaign for manufacturing that he has set up for arguing so cogently and strongly for that measure.
The Government have also announced a further drop in corporation tax to encourage investment in the United Kingdom. From April 2014 the rate in Britain will stand at just 21%—significantly lower than current levels in France, Germany or the USA. We want the world to know that the United Kingdom is open for business and that companies that invest and employ people in this country are very welcome. At the same time, however, Her Majesty’s Revenue and Customs is also receiving a further £77 million in this spending review period to ensure that where taxes should be paid, they are paid—I am sure that even the shadow Chancellor welcomes that. That increase, on top of the £900 million I announced at the spending review, will mean that HMRC will bring in total additional revenues of £9 billion each year by the end of 2014-15.
Our agreement with Switzerland to recover previously unpaid UK tax is expected to bring in a further £5 billion over the next six years. We have signed a ground-breaking agreement with the United States on automatic exchange of information, setting a new standard in tax transparency. Today we are publishing the draft Finance Bill for 2013, which confirms the introduction of the UK’s first ever general anti-abuse rule in the tax system. That measure will act as a significant deterrent to all those engaged in abusive tax avoidance. It could have been introduced at any point in Labour’s 13 years in office, but it was not. That is an example of the failure to act on tax avoidance and evasion that we saw during that time. This is not just a matter of finance; it is a matter of principle. Millions of small businesses and tens of millions of people across the UK pay the proper amount of tax, day in, day out. Ensuring that people cannot avoid our tax system is a priority for the Government so that the burden can be spread fairly.
There has been a lot of recent interest in this area, particularly with regard to the tax payments of specific multinational companies. I will not comment on individual cases but I am sure that all businesses, large or small, will take note of the reaction of the British people to recent events. Everyone understands that we must all work hard to get the economy going again and that businesses will play a key role in ensuring that growth. The reaction also shows that people believe that those at the top who earn or profit the most should also contribute the most. I agree with that—yes, we want a stronger economy, but we also want a fairer society.
Measures announced by the coalition last week will help millions of people across the country who are working hard. I am proud that we will be increasing the income tax personal allowance by a further £235 next April. That will mean that 2.2 million people have been taken out of tax by this Government, leading to around 20 million people being nearly £600 a year better off from next April. That is £50 a month extra in people’s pockets as a result of the Government’s measures on income tax and is, quite simply, the biggest income tax cut for working people in a generation—from the front page of the Liberal Democrat manifesto to the pockets of 24 million working people.
I am also proud that the coalition Government are cancelling the fuel duty increase that was planned for next month.
Nic Dakin (Scunthorpe) (Lab)
Will the Chief Secretary to the Treasury remind the House which page of the Liberal Democrat manifesto the increase in VAT was on?
Danny Alexander
No, because it was not there. That was one of a number of difficult choices that we as a Government have had to make to clean up the mess in the British economy that was left by the hon. Gentleman and his colleagues.
Danny Alexander
I will give way once more to the hon. Lady and then I will make some progress
Emily Thornberry
Am I right in remembering—I think it was on page 14 of the Liberal Democrat manifesto—a pledge to cut 7,000 tax inspectors?
Danny Alexander
The hon. Lady will know that HMRC has had to make efficiency savings along with the rest of the Government. It had to make savings when the Labour party was in office and it continues to have to do that. We have increased investment specifically in the part of HMRC focused on tackling tax avoidance and evasion—an area that saw underinvestment during Labour’s time in office. As a result, 2,000 extra specialist tax inspectors—[Interruption.] My hon. Friend the Exchequer Secretary to the Treasury brings me up to date and tells me that the figure is 2,500. Those inspectors are specifically focused on tackling tax avoidance in the affluence unit and those units that focus on offshore companies and all other tax avoidance schemes, and on implementing the anti-avoidance rule.
Dan Rogerson
I am grateful to my right hon. Friend, not least for his response to Cornwall’s call for investment in the A30 infrastructure project and his earlier kind words. Does he recall that when in opposition we had to watch the then Labour Government cutting and closing HMRC offices in a lot of regions around the country, and putting on the scrap heap a lot of skilled tax inspectors, the benefit of whose experience we sadly no longer have?
Danny Alexander
As always, my hon. Friend makes a good point. We need people with experience in compliance and enforcement, and we are expanding employment in those areas. That is the right thing to do and it should have been done a long time ago.
The previous Government set out plans to increase fuel duty above inflation last year, this year and again in 2013 and 2014. However, as a result of repeated action by this Government, pump prices will remain at least 10p per litre lower for the remainder of this Parliament than they would have been had the Labour party remained in government.
Rachel Reeves (Leeds West) (Lab)
Slide 24 of the report by the Institute for Fiscal Studies shows that, including fuel duty changes and the changes to the personal allowance and tax credits, a one-earner couple with two children will be £534 worse off on average as a result of the changes in the autumn statement. Will the right hon. Gentleman confirm that?
Danny Alexander
No, I cannot confirm that. I do not recognise those figures—[Interruption.] Labour Members are waving bits of paper—
Madam Deputy Speaker (Dawn Primarolo)
Order. The shadow Chancellor absolutely knows that he is not to throw papers across the Dispatch Box. It is no good him blaming his hon. Friend the Member for Leeds West (Rachel Reeves) for following his example. That will not happen again.
Danny Alexander
That is another way in which the shadow Chancellor is setting a bad example. Littering in the Chamber is not to be encouraged, and I am glad you, Madam Deputy Speaker, took a tough line on it.
The Government’s fuel duty measures will keep money in the pockets of millions of fathers on the school run or mothers driving to the office. As a highland MP, I know the burden that fuel costs can place on people in remote areas. That is why we are piloting the fuel rebate scheme for motorists on the Scottish islands and the Isles of Scilly. I am keen to push for EU approval for an extension of the scheme to other remote parts of the country that display similar characteristics. Of course, that will be a long and difficult job, but I am determined to gather evidence to support the case.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The right hon. Gentleman will know that the rebate scheme has been a success. When will mainland areas of Scotland be included? There are already such schemes in continental mainland areas, so why is there a delay in its introduction in mainland Scotland? Areas such as Caithness, Sutherland and Argyll need it—and need it quick.
Danny Alexander
I am grateful for the hon. Gentleman’s endorsement of the current scheme as a success. I hope he will spread the word to his constituents and ensure that the credit goes to the appropriate place.
To win the argument at European level for an extension of the scheme, we must pass the same test and provide the same evidence to justify including such remote areas. We are working with local authorities in various parts of the country to gather evidence to support our case. As the hon. Gentleman will recall, we must take that evidence to the European Commission. If it approves our proposal, it must in turn be approved by all 27 EU member states. There are a number of hurdles and a significant process to engage in to gather evidence.
Danny Alexander
If the hon. Gentleman will forgive me, I will make progress. Many hon. Members wish to speak in the debate.
There has been good engagement between the Treasury and the FairFuelUK campaign, which has pressed its case very strongly. I welcome its engagement.
The Government are on the road to cutting the deficit we inherited, but we are also building a fairer society. The distributional analysis that we publish shows that that continues to be the case, despite the tough choices we have made. It is worth pointing out that, under the previous Government, the Treasury never published detailed distributional analyses of its decisions, but under this Government the Treasury publishes them at every fiscal event. The analyses show that the top 20% of households continue to make the greatest contribution. In fact, the cumulative impact since the June 2010 Budget of tax, tax credit and benefit reforms shows that households in the top 10% see the greatest reduction in their income, both in cash terms and as a percentage of net income or expenditure.
Alex Cunningham (Stockton North) (Lab)
People in my constituency who cannot afford a car and who earn much less than most others tell me that the inflation rate on the things they have to buy is several times greater than the headline figure, which includes goods that they would just love to be able to buy. When will the Government recognise that inflation for the poorest people in our society is much higher than it is for the rest of us, and do something real? The Government have done some things, but when will they do something that makes a difference to those people instead of cutting their food intake, which is exactly what is happening?
Danny Alexander
A range of goods is included in the consumer prices index of inflation, which the Office for National Statistics constructs—it is an independent body and is responsible for constructing those baskets of goods. Some items go up in price faster than others. We are doing what we can and what the country can afford, but our priority must be to get this country back to a position in which we can pay our way in the world. Nothing would hurt the poorest in society more than losing control of our public finances, which I suspect would happen if the Labour party ever again gained the reins of power.
The quad discussed introducing a mansion tax, but a fair tax on homes worth more than £2 million was not agreed. However, the good news is that we have established a sensible, workable plan for raising additional revenues from the highest-value properties. If that does not happen in this Government’s term of office, it will be in the Liberal Democrat manifesto for the next election.
Danny Alexander
I am grateful for the hon. Lady’s support—I take support from wherever it comes these days.
The Government have taken sensible further steps to restrict pensions tax relief. The decisions the Government are taking are not easy, but as a country we must live within our means. The scale of the problems this country faces means that the period of fiscal restraint must continue for longer. That is why the Government will shortly set out spending plans for the financial year 2015-16. I will carry out a spending round in the first six months of next year to set those budgets and ensure that we continue to build a sensible long-term plan for the country’s finances. We will need to find an extra £10 billion of savings from Departments in the spending round. That will mean more difficult choices, but they are also responsible choices as the coalition continues to work to restore stability to the UK economy.
We have heard this afternoon and in Question Time that some criticise the autumn statement. The division in British politics is very clear. Government Members live in the real world. We understand that times are tough and that there is no endless supply of money, and recognise that the right and responsible action is to take the difficult decisions to ensure we can live within our means. Labour Members appear to live in a fantasy world. They still believe that they ended boom and bust, despite the events of the past five years. They still refuse to apologise for the mess they created and fail to be honest with the British people about the tough decisions that any party in government would have to take.
It will come as no surprise to hon. Members that I will not take advice from the Labour party, which wrecked our economy because it allowed the country to become too dependent on revenues from the City of London and paid too little attention to the rest of the country. Labour insulted pensioners up and down the country by increasing the basic state pension by 75p, and insulted 5 million of the lowest-paid workers by increasing their income tax bill with the abolition of the 10p rate.
Danny Alexander
I will not give way—I will finish my speech shortly.
The Labour party thought it was right that private equity managers should pay a lower rate of tax on their earnings than the person who cleaned their office, and insulted hard-working people and businesses up and down the country by failing to crack down on tax avoidance and evasion in 13 years in office.
This Government face some of the most serious decisions we have had to make in our recent history. We are recovering from a decade of debt, we inherited the largest deficit since the second world war, and we have had to face a multitude of problems abroad. However, we continue to take simple, sensible steps towards recovery. We continue to build a strong, sustainable economy and to build a fair society. I commend the autumn statement to the House.