Oral Answers to Questions

David Gauke Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr David Lammy (Tottenham) (Lab)]

8. What recent assessment he has made of the effect on the economy of trends in the rate of inflation.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

The Government consider a range of factors when making their assessment of the United Kingdom economy. The Office for Budget Responsibility is responsible for producing independent economic and fiscal forecasts. The OBR published a full analysis of recent developments and the prospects for growth and inflation in its forecast at the time of the Budget.

[Angela Smith]

Do the Minister and the rest of the Front-Bench team now regret raising VAT at a time of rising commodity prices, which has helped to push inflation up to double the Government’s target rate and has added to the squeeze on pensioners and families?

[Mr Gauke]

First, the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), said that he would have done the same. Secondly, a cut in VAT would do nothing to reverse the rise in global commodity prices, but would do a lot to reverse the Government’s hard-won credibility for getting the deficit down.

[Mr Lammy]

In the light of what the Minister has said, may I invite him to Tesco’s in Tottenham high road, where he will meet some of my constituents who must deal with higher food prices, rising electricity and gas prices and, now, redundancy and the loss of most of the services on which they rely?

[Mr Gauke]

I should be delighted to accept the right hon. Gentleman’s invitation. However, he will be aware that VAT is not chargeable on food, and that we have not raised fuel duty as the last Government did. You do not have to be a mastermind to know that.

[Elizabeth Truss (South West Norfolk) (Con)]

If the Government took longer to reduce the deficit and carried on spending, what would be the impact of that policy on inflation?

[Mr Gauke]

I certainly think that, if we put our credibility at risk, there would be considerable concern about, for example, the currency. The response to that would be higher interest rates, which would do nothing for the growth of the economy.

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

We are already spending £120 million a day on debt interest. What figure does the Minister think would be reached if we had not increased VAT?

[Mr Speaker]

Order. We should be focusing on inflation. I call the Minister to answer, very briefly.

[Mr Gauke]

I shall try to focus on inflation, Mr Speaker, but I think that it is important to the economy all round, in terms of inflation and of other factors, for us to maintain credibility. That is something that the Government have and the Opposition, I am afraid, do not.

[Ms Angela Eagle (Wallasey) (Lab)]

How many of the 34 countries in the OECD have comparable inflation rates higher than the present rate in the United Kingdom?

[Mr Gauke]

The fact that global commodity prices are rising and that the UK experienced a significant devaluation under the last Government mean that we face an issue with inflation, but it is the Monetary Policy Committee of the Bank of England that has responsibility for that. It is one of the few policies of the last Government that still has any credibility. Is the Labour party distancing itself from that policy as well?

[Ms Eagle]

Obviously, the Minister did not know that the answer is only two: Estonia and Turkey. He can huff and puff and blame world commodity prices all he wants, but is it not obvious that the Chancellor’s decision to put up VAT in January because he chose to cut too far too fast is causing real hardship to families throughout the country as they struggle to cope with the most vicious squeeze on living standards in generations? When is he going to realise that his economic policy is hurting and it is not working, and that the whole Treasury Front-Bench team is out of its depth?

[Mr Gauke]

For a moment, the hon. Lady got quite close to supporting the policy the shadow Chancellor announced last week, but she did not quite do so. The fact is that the Bank of England says the main causes of inflation are to do with the devaluation and rising global commodity prices. That is the truth; that is the reality—[Interruption.] Well, that is what the Bank of England says, and I suspect it has a bit more expertise than the hon. Lady.

[John Stevenson (Carlisle) (Con)]

5. What recent estimate he has made of the size of the structural deficit.

--- Later in debate ---

[Caroline Lucas (Brighton, Pavilion) (Green)]

The Chancellor will be aware of the recent Office for National Statistics finding that the regressive nature of VAT means that the UK tax system is doing almost nothing to prevent income inequality. In that context, will he pay particular attention to a Fawcett Society report, to be launched tomorrow, which shows that his fiscal policies, such as increasing VAT, cause particular harm to lone parents, 92% of whom are women?

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

May I also point out that our tax policies include taking hundreds of thousands of people out of income tax altogether? On the particular subject that the hon. Lady raises, of those taken out of income tax following the announcement in the Budget earlier this year, 56% will be women.

[Mr Robin Walker (Worcester) (Con)]

T8. Which does the Chancellor think is better for low-paid workers in Worcester: the Government taking 1 million of the lowest paid out of tax altogether; or the previous Government’s move to double their tax by scrapping the 10p tax rate?