Finance Bill

Derek Twigg Excerpts

Tuesday 6th July 2010 Commons Chamber

[Danny Alexander]

My point is that that forecast was made by the independent Office for Budget Responsibility. In the previous Government’s March Budget, their growth forecasts, which were not independent in that sense, were over-optimistic, and I am prepared to accept the forecasts of the independent Office for Budget Responsibility.

[Derek Twigg (Halton) (Lab)]

Will the right hon. Gentleman give way on that point?

[Danny Alexander]

No, I am going to move on.

Let me turn to the first of the measures in the Bill. Given that the structural deficit is some £12 billion larger than the previous Government told us, we have to make difficult choices—whether to fill the black hole with yet more spending cuts or increase taxes. Further spending cuts would have made it impossible for the Government to protect the country’s most essential services in the spending review. The only other option would have been to raise taxes on companies or on personal income, reducing the rewards for work at a time when hard work and endeavour must lead the recovery.

The VAT rise is unavoidable. As I said in the Budget debate, it is Labour’s inheritance tax. Clause 3 increases the standard rate of VAT from 17.5% to 20% from 4 January 2011. Everyday essentials such as food and children’s clothing, as well as newspapers and printed books, will remain zero-rated throughout the Parliament, protecting those on lower and middle incomes. Domestic consumption of fuel and power will remain subject to VAT at 5%.

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[Danny Alexander]

I am sure that the hon. Gentleman is right to exhort people to take out travel insurance. As he will know, when insurance premium tax was established, both its lower and higher rates were linked to VAT. It is therefore right that they go ahead together on the same basis.

We have inherited plans to limit tax relief on pension savings for the wealthiest. We have concerns about the complexity of the changes and their potential consequences for pension saving, UK competitiveness and the complexity of the tax system. However, given the state of the public finances, we cannot be blind to the £3.5 billion of revenue that the policy was set to raise. Therefore we have set out our commitment to protecting the public finances by pursuing an alternative approach that raises no less revenue than existing plans, potentially by reducing the annual allowance. We will therefore engage employers, pension schemes, experts and other interested parties to determine the design of an alternative scheme. To keep our options open, clause 5 provides the power to repeal the regime that was legislated for in the Finance Act 2010.

Secondly, our Budget stands for fairness. This is a Budget that protects the most vulnerable, especially children in poverty and pensioners, while ensuring that those with the broadest shoulders take the greatest share of the burden. As my right hon. Friend the Chancellor said in his Budget statement, it is a progressive Budget.

[Derek Twigg]

rose—

[Danny Alexander]

I hope that the hon. Gentleman will admit that fact.

[Derek Twigg]

As regards fairness, is it fair to my constituents and to the construction industry that the Chief Secretary has already stopped £168 million of expenditure on Building Schools for the Future projects and postponed the Mersey Gateway project? Total expenditure on those projects would have been £500 million. How does that help the construction industry?

[Danny Alexander]

I think it was irresponsible to make commitments to those sorts of projects, which could not be funded on the basis of the previous Government’s plans for halving capital spending over the next few years while building into their plans ever further, unsustainable commitments.

[Derek Twigg]

rose—

[Danny Alexander]

I will press on, if I may.

As my right hon. Friend the Chancellor said, this is a progressive Budget.

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[Ian Lucas]

rose—

[Derek Twigg]

Will the right hon. Gentleman give way?

[Danny Alexander]

I am going to finish this section, and then I will give way to both hon. Gentlemen.

These changes—

[Derek Twigg]

On a point of order, Mr Deputy Speaker. The Chief Secretary hinted a few moments ago that the money was not available for Building Schools for the Future projects in my constituency, yet the shadow Education Secretary has had a letter from the permanent secretary at the Department for Education saying that the money was available. Also, I know for a fact that the money was there for the Mersey Gateway project, yet the Chief Secretary said it was not. Can we have some consistency in the accuracy of answers?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

That is not a point of order. If the hon. Gentleman wants to intervene, it is up to the Minister to give way if he wishes.

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[Mr Byrne]

That is precisely right and I will have more to say on that in a moment.

I promised a ray of good news among all the bad news and depressed expectations from the business community. A command paper was sneaked out last week. It had barely a press notice—it ran to a grand total of six lines—and there was no written ministerial statement with it. What could justify such secrecy? All is revealed on page 52 of the public expenditure survey, published last week, wherein we discover that Departments under Labour’s management underspent their budgets last year by £5 billion. Anyone would think that the Government wanted to keep that news secret. In a knee-jerk response yesterday, they decided to cover it up by announcing another £1.5 billion of spending cuts instead.

[Derek Twigg]

In Halton, £168 million of the Building Schools for the Future project was cut yesterday. The Mersey gateway has been postponed, and if it is cut it will take the total loss of investment—in that one area—to £0.5 billion. In an area like Merseyside and Cheshire, which especially needs that investment, that will be a massive blow to the construction industry. Does not it also underline the fact that public expenditure provides private sector jobs?

[Mr Byrne]

One of the great flaws in the Budget is that the Government are relying on a bounce-back in private investment, for which there is barely a precedent, and nor is there any evidence from the business community that it might happen.

Make no bones about it, since the Chancellor sat down a fortnight ago, the gloom has grown. However, the Finance Bill does not adjust the Government’s strategy. All we have heard from the Chief Secretary this afternoon is a very clear economic credo: where there is worry, let us spread fear, and where there is risk, let us bring danger. Whereas the Labour Government planned to halve the deficit in four years—a plan that the Chancellor’s own independent advisers said we were on track to deliver, and which the G20 said met its timetable—this Chancellor has added nearly £40 billion in new tax rises and spending cuts. He has locked us on a course to slash away come what may, and, in a world full of risk, he is now preaching to others to do the same.