The Economy

David Gauke Excerpts

Tuesday 11th December 2012 Commons Chamber

[Emily Thornberry (Islington South and Finsbury) (Lab)]

The autumn statement showed that this Government’s handling of the economy has been a profound failure. It shows what happens when a Government do not have any plan for jobs and growth. If they do not have a plan for jobs and growth, they come back after two and a half years and say, “Actually, we need another five years,” and if they still do not have a plan for jobs and growth, they will come back after another two and a half years and again say they need another five years, and so it will go on, because borrowing is up and debt is up and economic growth is down. The Government have wasted two and a half years. People simply do not buy it any more. The Business Secretary said that the Government’s credibility hinges on whether or not they eliminate the deficit. After the autumn statement it is clear that the credibility of this Government, supported by the Liberal Democrats, is in tatters.

I want to talk about the poor, because my poor constituents believe they are being punished for the failure of this Government and their reckless welfare reform. I also want to talk about the rich and how they are being let off the hook—again, that is because of the Government’s failure to make sure we collect all the tax we are owed. Why did the Government, when they first came into office, cut the number of tax inspectors by 7,000? The ambition was to cut the number of tax inspectors to an all-time low of 56,100. I remember that I wrote to the Chancellor in November 2010 saying that that would be counter-productive. When the Government are cutting the staff who prevent tax avoidance and evasion, how can my constituents believe that tackling it is a priority? Indeed, in answer to a parliamentary question, the Government admitted that every new tax inspector brings an additional £600,000 a year into the Exchequer.

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

indicated dissent.

[Emily Thornberry]

The Economic Secretary shakes his head, but I am just quoting what was said in the Government’s answer to a parliamentary question. He is welcome to intervene if he wishes to correct me.

[Mr Gauke]

As the hon. Lady has invited me to make this point, I will do so. If someone looks at the number of people working for Her Majesty’s Revenue and Customs in enforcement and compliance—not the other areas; there are a lot of processing jobs—they find that under the previous Government’s plans it fell by 9,000, whereas under this Government’s plans it will increase by 2,500.

[Emily Thornberry]

The fact is that 7,000 jobs have gone under this Government’s plans, and the gap between what we collect and what we are owed is estimated to be £35 billion, which is twice the housing benefit bill. Independent research commissioned by the Public and Commercial Services Union reckoned that the real figure was more like £120 billion, which is six and a half times the housing benefit bill. Whatever the true sum, the fact is that without a sufficient number of tax inspectors we cannot ensure that the rules apply to everyone. Everyone should pay tax; it should not just be for the little people. Paying one’s taxes should not be some sort of charitable gesture, and I have little understanding as to why it was seen as appropriate for this Government to continue to cut back on tax inspectors. If we are to have rules, they need to be applied. The Exchequer Secretary says that there were many processing jobs, but presumably people in that job need to make sure that the sums add up, that everything has been claimed that should have been claimed and that everything has been paid that should have been paid. Without that essential processing we will never know whether or not tax avoidance has been taking place—this is not just about major companies; it happens throughout the system. At a time like this, we need to make sure that everyone plays by the rules. If everyone does that and if the rules apply to us all and we have a fair society, we have the very one nation that Labour Members have been talking about.

Of course, the rules also apply to those who claim benefits and of course if someone can work, they must work. That is what unites this whole House. What does not unite this House is the language used by Government Front Benchers—the language of “scroungers”. Such language is simply offensive, as the highly eloquent maiden speech by my new hon. Friend the Member for Middlesbrough (Andy McDonald) so well set out. Such language is a smokescreen that covers up a great deal of what this Government are actually doing. Although they talk about scroungers and those who stay in bed, keep the curtains closed and do not go out to work—the remarks are highly offensive—they do not address the issue, which is that many, many people who are out of work want to work, but the fact of the matter is that people cannot go from welfare into work if the work is not there.

Furthermore, many of the changes that this Government are making and announced in the autumn statement will affect those very people who work. I want to go on to address the issue of not just those who are poor and not working, but that of those who are working in my constituency and are dependent on benefits. Sometimes I feel as though I live in a different world where Government Members believe that only those who are out of work claim benefits. In fact, many people who work depend on benefits. Surely that is a conundrum. Many people meet me on the street and say, “How can the welfare benefit bill be going up if a million additional people have got work?” The truth is self-evident. Many people who are now working work part-time or are self-employed rely on housing benefit and tax credits, the very things that the Minister will be cutting as a result of the autumn statement. Let us use the terms that he uses, such as the strivers. Those very strivers are having their support system cut away by this Government. Even in the hon. Gentleman’s offensive terms, that cannot be justified.

I want to talk specifically about housing benefit because the issue affects my constituents particularly. I hear Government Members say, “Why should it be that people on average earnings receive less than people on benefits?” That has a certain ring to it and I know that the Conservatives are out of touch, but surely some of them must know someone who rents a flat and who understands that housing benefit goes not to the tenant, but to the landlord. It is because rents have gone up so much in London and the south-east that the housing benefit bill continues to rise. In the past two years, private rents in London have gone up by 25%, according to London Councils. In those circumstances, how can it be justified to attack housing benefit, to put an arbitrary cap on housing benefit, or to believe that housing benefit should be the same level in London as it is anywhere else in the country? How can that be fair?

It is not the fault of my poor constituents that their rent is high. It is the fault of my Government and of Conservative Governments who did not build enough housing. There was a time when Conservative and Labour Governments used to compete with each other as to how much affordable housing they could build. In the 1970s, four fifths of the housing budget was spent on building new homes and one fifth on housing benefit. Now it is completely turned on its head and we continue to pay the price of failure. We must build more housing and we must not simply dance on a pin, analysing what affordable housing means.

The Minister represents a party that defines affordable housing as costing 80% of market rent. He and his party should get some sort of George Orwellian prize for double-speak. Eighty per cent. of market rent in my constituency could not be afforded by ordinary people in my constituency. I went on to the Rightmove website this morning and looked at the prices of three-bedroom flats in my constituency. Does the hon. Gentleman know how much the rent for a bog-standard three-bedroom flat in my constituency would be? Four hundred pounds a week. How much is the housing benefit cap? Three hundred and forty pounds a week. There was only one flat on Rightmove that was under the amount of the cap so how can people in my constituency, who will be subjected to the housing benefit cap, afford to continue to live in Islington?

There is an argument that the poor should not be living in Islington, but I respectfully disagree. My constituency should be a mixed constituency and should have rich and poor. Generations of poor people who live in my constituency should be allowed to continue to live there. Furthermore, the housing benefit cap is one atrocious measure that this Government have introduced, but we wait for the next, which is universal credit. There will be a cap of £500 a week for a four-bedroom flat in my constituency. There were 69 that were under the £400 current housing benefit—

--- Later in debate ---

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

This has been a passionate and thoughtful debate. I begin by congratulating the three hon. Members who made their maiden speeches this afternoon—all three were of the highest standards. The hon. Member for Rotherham (Sarah Champion) spoke with great pride and passion for her constituency. The hon. Member for Croydon North (Steve Reed) brought his local government expertise to the debate, and his understanding of the area he represents was most impressive. He also spoke movingly about his predecessor, Malcolm Wicks. The hon. Member for Middlesbrough (Andy McDonald), who is the first Middlesbrough-born Labour MP, spoke with great pride about his constituency. I imagine that being the MP for one’s home town must bring a particular pleasure to delivering a maiden speech and representing one’s constituency. He also spoke warmly of his predecessor, Sir Stuart Bell. I congratulate them all and wish them well in the House of Commons. I am sure they will make many further eloquent and passionate speeches from the Opposition Benches over the years ahead.

I also thank a number of my hon. Friends for their contributions. My hon. Friend the Member for Macclesfield (David Rutley) spoke about how it is necessary to get growth in the economy and discussed ways of achieving that. My hon. Friend the Member for Spelthorne (Kwasi Kwarteng) made a strong and persuasive critique of the previous Government’s record and, indeed, of the level of borrowing under them.

My hon. Friend the Member for Dudley South (Chris Kelly) set out some of the benefits for businesses in the autumn statement, highlighting in particular the corporation tax cuts and the annual investment allowance, which will benefit many west midlands businesses. My hon. Friend the Member for Bristol West (Stephen Williams) made the point that it is right to reduce the deficit, even though it is taking longer than we had envisaged.

My hon. Friend the Member for North Swindon (Justin Tomlinson) welcomed the cancellation of the fuel duty rise, which was due in January, and set out the case for greater tax transparency. He was absolutely right to raise that and this Government are taking steps to ensure that people understand the tax they pay.

My hon. Friend the Member for Burnley (Gordon Birtwistle) spoke about apprenticeships, of which there are 1 million more as a consequence of the Government’s actions. He talked about help for businesses in the north-west, including in the aerospace industry. He also spoke about the annual investment allowance.

My hon. Friend the Member for South Dorset (Richard Drax) made a strong and passionate speech calling for lower taxes. My hon. Friend the Member for Mid Norfolk (George Freeman) set out the steps that the Government are taking to turn around the economy, and drew a parallel with the steps taken by Margaret Thatcher’s Government in the 1970s and 1980s.

I will not go through the list of all the right hon. and hon. Members who contributed to the debate, but I thank them all. In particular, I acknowledge the speech by the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling). As ever, he brought great expertise to these matters. I did not agree with everything he said, but I thought that his was a far better response to the autumn statement than some that we have heard from Opposition Members, not least the shadow Chancellor.

The right hon. Member for Edinburgh South West said that we live in difficult times. When there is clearly major disagreement between the parties in government and the Opposition about the correct response to the difficulties, we should all acknowledge that growth is lower than we would like it to be and lower than the independent Office for Budget Responsibility anticipated, but we should also acknowledge that there are encouraging factors in the economy. We should all welcome the fact that private sector employment has grown significantly in recent months. The fact that the deficit is falling in every year of this Parliament is to be welcomed. It would be regrettable if the Labour party sought to undermine the Office for Budget Responsibility in making its independent assessment of the public finances.

These are clearly difficult times, not just for the UK economy, but elsewhere. Growth in the UK economy next year has been revised down from where we had hoped it would be, but it is still likely to be greater than the growth in Germany, France and the eurozone. The key question is why growth is lower. The analysis of the Office for Budget Responsibility is very clear: it is because of the uncertainties created by the crisis in the eurozone, because commodity prices are rising more than we would have liked and because the damage done to the economy by the crash of 2007-08 was greater than had been realised.

The answer from the Labour party, essentially, is that we could solve all those problems simply by borrowing more. Very few Labour Members say that explicitly, although the hon. Member for Great Grimsby (Austin Mitchell) was happy to say that that is the right approach. The Labour party says that borrowing is higher than we would like, which it is, but its solution is to borrow more. That makes no sense at all.

It is also not the case that the high level of borrowing that we inherited—a record amount outside wartime—was purely to do with bailing out the banking sector. The shadow Chancellor may not accept this, but the International Monetary Fund tells us that the structural deficit before the crash was 5.2% of GDP—a hugely dangerous level. Any Government who ignored that and failed to address it would be taking the most enormous risk with the country. It is vital that we have fiscal credibility. We could not have gone on as we were. Had we not taken action and gone further than was set out in the plans of the right hon. Member for Edinburgh South West, we would have faced great difficulties. We could not dismiss the risk of the UK being sucked into a sovereign debt crisis, and it would have been complacent of us if we had done so.

The Government have acted to bring the deficit down, but at every step we have been opposed by the Labour party. Most of us did not come into politics to raise VAT, but it was necessary to do that and we also had to take steps to reduce departmental spending—again, that was opposed by the Labour party. We had to reform the welfare system and find £18 billion of cuts, including the introduction of a welfare cap, and we had to make changes to the child benefit system that hit the top 10% or 15% of households. The Labour party opposed all that and, as far as we can see, will not touch a penny of the welfare budget. That is not a great surprise given its record in office. In real terms, the welfare bill increased by 40% in 13 years. Before Labour Members say that that was a response to the crash in 2007-08, half of that increase—20%—occurred before the crash. In the good times the welfare bill was rising out of control.

[Kwasi Kwarteng]

What does my hon. Friend think about the fact that spending between 1997 and 2007 doubled in nominal terms—it went up more than 50% in real terms—and that the welfare bill more than doubled in that time?

[Mr Gauke]

My point is that we could not continue in that way. The difficulty with the Labour party’s record is that it believes most problems can be solved by throwing money at them. We have run out of money and cannot afford to do that. That is why we are taking difficult decisions and the welfare uprating will be 1%—we now know that the Labour party will oppose that. We must get welfare spending under control. That measure will save £2 billion, and if one looks at other measures introduced in the autumn statement, one sees that working households—including those in the lowest decile—will gain in 2013.

[Sheila Gilmore]

Will the Minister give way?

[Mr Gauke]

I will press on because we are running out of time. If all measures to be introduced next April are taken into account, all working families gain, including those in the lowest decile. It is the right thing to do. We have raised the personal allowance yet further and cancelled Labour’s increase in fuel duty next January. Each time the average car is filled up, the motorist will pay £5 less fuel duty than they would have done had we implemented the Labour party’s plans.

As the Prime Minister and Chancellor have said, we face a global race and must make ourselves more competitive. That means moving from current spending to capital spending, which is why we will be spending £9 billion more on capital in this Parliament than the Labour party would have done. Do Labour Members support that switch from current spending to capital spending? That is why we can afford—and why it is necessary—to reduce corporation tax from 28% to 21%. The Labour party allowed our tax position to become uncompetitive.

There is competition for investment. Businesses can choose where they locate and invest. To ensure they choose this country, we need improved infrastructure and to control public spending. We must reform welfare and public services and we need competitive taxes. The Government are prepared to take difficult decisions but the Labour party consistently ducks those decisions and opposes every spending cut and reform. It opposes getting to grips with welfare spending and panders to every group, and the country will recognise that at the next election.

Question put and agreed to.

Resolved,

That this House has considered the matter of the economy.