Amendment of the Law

Debate between Douglas Carswell and Neil Parish

Thursday 20th March 2014 Commons Chamber

[Mr Carswell]

I would love to cut tax right across the board on a whole range of things, which would help people in that situation. The reduction in income tax for people on relatively low incomes will undoubtedly be welcomed.

I am also thrilled and delighted—it warmed the cockles of my free-market heart—to hear about tax breaks for savers. With interest rates having been so low for so long, it has been a pretty torrid time for savers. The raising of the personal tax-free savings allowance is fantastic news. So, too, is the removal of the artificial distinction between different types of ISAs. The more we can encourage people to save, the better. One person’s deferred consumption and saving is somebody else’s loan or credit.

I cheered, too, when I heard about giving folk flexibility as to how they use their pension pot. The implications of that are potentially profound and radical. It could mean that pension pots no longer die with people. It could mean that they become a vehicle for passing wealth down the generations. The implications are potentially huge and welcome.

[Neil Parish (Tiverton and Honiton) (Con)]

My hon. Friend is making a powerful speech. I agree with him that it is absolutely right to allow people to have their own pensions and spend their own money. Will the changes not also deliver better annuities for those who want to buy them, by introducing more competition into the financial services sector?

[Mr Carswell]

My hon. Friend is absolutely right. The need to buy an annuity was something that troubled a lot of my constituents, and I am pleased about this change. The fact that the Government are no longer going to presume, rather paternalistically, that they know best how folk should manage their pension pots will have big implications, and we need to reflect on them. The change will have big implications, not least for the people who will now be taking steps to plan for their own financial security.

I was encouraged to hear the Chancellor talking about energy costs. He was absolutely right to say that the low energy revolution was helping to re-industrialise the United States, and that that could happen here too. However, rather than simply reining in the worst excesses of the carbon price fixing scheme and other corporatist market-rigging systems, I would like us to abolish some of those schemes entirely.

I was slightly less enthusiastic about one or two aspects of the Budget, and I shall talk about those now—albeit briefly, those on my Front Bench will be delighted to hear. First, I am concerned that the Budget is fiscally neutral. We have relied for the past few years on cutting the deficit by increasing spending in cash terms and hoping that tax receipts will rise faster. I do not think that that is the best way to do it. We need to take a slightly more robust approach. As a result of the approach that we have taken, the deficit has fallen from 11% in 2010 to approximately 5%, which is good, but we said in 2010 that we would close the gap within four or five years. We are still saying that today. It means that we are still borrowing more than £100 billion a year—money that we do not have. That will have enormous consequences when this cheap money merry-go-round comes to an end and interest rates rise.

I am also baffled that the Opposition are unable to ask the obvious questions about this. Perhaps that is because they have no coherent alternative, or because their policy is simply to borrow more. However, as someone who occasionally opposes his Government on certain things, I find it extraordinary that the party whose job it is to ask the awkward questions seems to be unable even to understand the questions.

I am delighted that the Government are taking action to encourage exports, but I am not absolutely convinced that giving cheap credit to exporters is the only way to do it. I wonder whether this country’s relatively poor export and productivity performance over the past decade is partly a consequence of malinvestment, and whether that in itself is a consequence of cheap credit. Perhaps we need to flush out malinvestment and remove what is, in effect, the cholesterol in our economic arteries. Cheap credit can boost exports, just as it can boost the housing market in the short term, but I wonder whether it can have those effects in the longer term.

I shall spend the minute I have left making a wider point about economic output. It will soon exceed the pre-crash peak, which is wonderful news. The revision of output to 2.7% is impressive, but I ask the House to bear two things in mind. I say this in a spirit of non-partisanship. First, we are seeing a massive fiscal stimulus in this country, even though we do not call it that. We do not call it a massive Keynesian fiscal stimulus; we all prefer to pretend that it is not happening. By definition, however, if we spend £100 billion more each year than we take in tax, that is a Keynesian fiscal stimulus, and it is happening on a vast scale.

At the same time, we are having a massive monetary stimulus, with record low interest rates, cheap credit and quantitative easing. Without question, fiscal and monetary stimulus will raise output. I want to ask whether that is sustainable. I am genuinely baffled—I say this frankly and honestly—as to why the Opposition are unable even to ask these questions. Overall, I think this is a good Budget and it is to be welcomed, but I am genuinely surprised by the response of the party opposite.