Ed Balls
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Amendment of the Law
Ed Balls Excerpts(12 years, 9 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
The British economy is stagnating, unemployment is rising month by month, the Government’s deficit reduction plans have gone wildly off track, middle and lower-income families and pensioners are facing rising petrol prices, rising energy bills and falling living standards—and what did the Chancellor do in his Budget yesterday? Did he admit that his economic plan has failed? Did he act to kick-start the stalled recovery? Did he give any hope to young people facing long-term unemployment? Did he set out any vision of how, over the next 20 years, Britain can compete in the world and win the investment and skilled jobs we need? Did he ease the pressure on families by cutting fuel duty, or by cancelling perverse and unfair cuts to tax credits and child benefit? No. The centrepiece of the Chancellor’s Budget, his top priority, and the political imperative for this oh so political Chancellor, was to spend more than £3 billion next year cutting the top rate of income tax for existing top rate taxpayers. People earning more than £150,000 a year—300,000 of them—are getting an average tax cut of £10,000 a year. How out of touch can he get?
To add insult to injury, the Chancellor sprung another surprise tax rise by freezing the age-related personal allowance for 4.5 million pensioners and abolishing it entirely for soon-to-be pensioners. People on modest incomes who have worked hard and saved hard all their lives will be hit by the Chancellor’s tax grab on pensioners while he gives a £40,000 tax cut to 14,000 millionaires. What can we say about that?
Ed Balls
I will in a second—I look forward to it.
As the Financial Times reports this morning:
“Some Tory backbenchers offered support for the measure”—
on pensioners—
“although they refused to be identified for fear of alienating their elderly constituents.”
Perhaps in a second some of those Conservative Back Benchers will break cover and back the pensioners tax grab in the Budget, but they are right to be worried, because all across the country, the real electorate will be thinking, “A tax cut for millionaires, paid for by millions of families and pensioners across this country? Same old Tories: looking after their friends while families and pensioners pay the price.”
Andrea Leadsom
I am grateful to the shadow Chancellor. Is he as delighted as I am that we will be introducing within the next couple of years a single, unmeans-tested pension at a significantly higher rate than the current one?
Ed Balls
We will have to wait to see the details. There will be some winners and some losers, but the one thing that we can categorically confirm today is that thousands of pensioners in the hon. Lady’s constituency will lose up to £300 a year as a result of yesterday’s Budget. She did not say whether she supported that—hardly a clarion call of support for the Chancellor’s pensions tax grab.
Michael Fallon
Could the shadow Chancellor make it absolutely clear—yes or no—whether he would restore the age-related allowance if he came to power?
Ed Balls
I will make it absolutely clear: we will vote against the change in the Budget debates and I hope that he will join us in the Lobby. We will vote against it, but the Chancellor knows very well that I will not go through every tax rate, relief, allowance or spending commitment and make commitments for three years’ time. But if the election were called tomorrow, our manifesto would be clear—we would rescind the measure and the Government would go ahead with it. That is the difference.
Lindsay Roy (Glenrothes) (Lab)
I am a relative newcomer to the House, so can my right hon. Friend explain what he means when he says, “The same old Tories”?
Ed Balls
The same old Tories who thought in 1988 that it was right to cut the top rate of tax for the richest people in our country and who now think that having a second Lawsonian Budget is a good idea. It is important to remember that after hubris comes nemesis. It did not take long for Nigel Lawson to find out the error of his ways.
We set two tests for this Budget. First, does it kick-start the recovery and boost growth and jobs? Secondly, is it fair? The Chancellor has failed them decisively. On growth and jobs, I remind the House what the Chancellor said a year ago in his Budget speech:
“we will create jobs and support families. We have put fuel into the tank of the British economy.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]
Since then, our economy has ground to a halt and thousands of people have lost their jobs.
I remind the Chancellor of what he said in August, when Parliament was recalled:
“Those who spent the whole of the past year telling us to follow the American example…need to answer this simple question: why has the US economy grown more slowly than the UK economy”?—[Official Report, 11 August 2011; Vol. 531, c. 1108.]
What has happened since? Spurred on by the Obama stimulus, the US economy has been growing and unemployment falling. Here in Britain, our economy has flatlined and unemployment has been rising month after month. It does not look much of a safe haven to me.
What did we get in the Budget? We got a gaping hole when we so badly needed action to kick-start the recovery—Labour’s five-point plan for jobs and growth. We will not get the deficit down unless we have a plan for jobs and growth to get our economy moving and get people off the dole. When we needed a vision for the future, a modern industrial policy, what did we get? Roads privatisation and a credit-easing scheme that even the Office for Budget Responsibility says is not large enough to have any material impact.
Just look at the verdict from the OBR. The Chancellor claims it was a Budget for growth. But the OBR has downgraded its forecast for growth next year. What did it say about the ragbag of measures he announced? It said:
“We have made no other material adjustments to the economy forecast as a result of Budget 2012 policy announcements.”
It will have no impact as a growth plan.
The Chancellor claimed that it was a Budget for jobs, but not only does the OBR expect to see unemployment rising, it has increased its forecast for unemployment compared to November by 100,000—100,000 more people out of work at the end of the forecast period. As for the budget deficit, the OBR forecast confirms that the Chancellor is now set to borrow £150 billion more in this Parliament compared to his forecast at the time of the spending review. So much for “expansionary fiscal contraction”. To put it politely, that is oxymoronic. In plain language, it is just moronic.
On fairness, the Chancellor has failed too. Twenty-four hours after the Chancellor rose in the House, the full reality of the Budget is sinking in. At a time when fuel and food bills are going up for families on middle and low incomes, the Chancellor has added to them all. Whatever he says about the personal tax allowance, a family with children earning £20,000 will lose £253 a year from April. Nearly 4.5 million pensioners—[Interruption.] I am sorry for the stammer. Nearly 4.5 million pensioners who pay income tax will lose an average of £83 next April, and people turning 65 next year will lose up to £322.
At the very same time, the Budget gave a tax cut to the richest people in our country. The money could have been used to cut fuel duty or reverse perverse cuts to tax credits. It could have been used to put police officers on the beat. Instead, the Chancellor chose to cut taxes for the 300,000 top rate taxpayers.
Stephen Hammond (Wimbledon) (Con)
I must have missed it, but for the sake of clarity does the shadow Chancellor intend to put the top rate of tax back up to 50%?
Ed Balls
I am just coming to the issue of the top rate of tax. The Chancellor tries to claim that the top rate of tax does not raise any money, and that he is raising in stamp duty and tax avoidance five times the cost of cutting the top rate of tax. But his own HMRC report makes the true position clear, in table A2 on page 51. It says that next year he will give £3.01 billion in tax cuts to existing and legitimate top rate taxpayers, paid more than £150,000. That is a fact. That is six times more in tax cuts to the richest than he is raising in the stamp duty and tax avoidance measures. He is gambling that this will then bring in £2.9 billion in new tax revenues from people currently not paying tax, without any hard evidence to justify that claim—an estimate that the OBR says in the Budget documentation is “highly uncertain” and could lead to a much higher cost.
The head of the OBR said last night:
“This is a judgement based on not even a full year’s data based in terms of how people have responded to the 50p rate, in particular in terms of those self assessment tax-payers.
The costing of these sorts of changes is by no means unarguable”.
Just a few weeks ago, the Institute for Fiscal Studies said:
“If the future of the 50p rate is to be determined on the basis of evidence...then Budget 2012 will be too soon to form a robust judgement.”
Another expert has said on these matters:
“Some believe that if taxes on the wealthy are cut, new revenue will miraculously appear. I think their reasoning is this—all those British billionaires who demonstrate their patriotism by hiding from the taxman in Monaco or some Caribbean bolt-hole will rush back to pay more tax but at a lower rate. Pull the other one.”
That was the Business Secretary speaking to the Liberal Democrat conference last September. Pull the other one indeed. A £3 billion tax cut giving £10,000 each to 300,000 taxpayers and we are supposed to believe that all these people in tax havens are suddenly going to say, “I want to pay more tax.” Let me say to the Chancellor, “Pull the other one, it’s got bells on.”
Harriett Baldwin (West Worcestershire) (Con)
May I therefore assume that a 50p tax rate will be in the shadow Chancellor’s next manifesto?
Ed Balls
There will be a vote next week, and we will vote against the 50p change. It is the wrong tax cut at the wrong time. I have always said that no tax rate is set in stone, but how can anyone believe it is right to take tax credits from working families, child benefit from middle-income families and more tax from pensioners, but give £10,000, on average, to every top rate taxpayer in the country? If there were a general election tomorrow, our manifesto would state clearly that we would reverse it. That is the clearest answer I will give.
Thomas Docherty (Dunfermline and West Fife) (Lab)
Does my right hon. Friend think it would be helpful, ahead of next week’s debate, for the Prime Minister to place in the Library a list of which members of the Government will benefit from that cut in the top rate?
Ed Balls
I think we should leave people’s trust funds out of this. I will come back to that in a moment, but I will not press the Government on it.
The Chancellor took a reckless gamble on jobs and the economy, the Prime Minister and the Chancellor have taken a reckless gamble on NHS reform and police cuts, and now the Chancellor is taking a reckless gamble with the fairness of our tax system by handing out massive tax cuts to legitimate taxpayers in the hope—based on no evidence—that the cuts will pay for themselves by somehow bringing all the tax avoiders back into the fold. That is a fact.
Angie Bray (Ealing Central and Acton) (Con)
Will the right hon. Gentleman confirm that under the previous Labour Government the 50p tax rate applied for just 37 miserable days and that for the rest of the time their tax on the highest income earners was lower than under the coalition Government?
Ed Balls
In reply, let me quote what the Chancellor said in October 2010:
“The public must know that the burden is being fairly shared. That's why I said last year: we are all in this together. And I am clear…that those with the most, need to pay more. That is why… I have stuck with the 50p tax”—
the Chancellor of the Exchequer, Conservative party conference, October 2010. Eighteen months on, what has changed? The public still want the burden to be fairly shared, but far from keeping the top rate of tax, he is ditching it.
Let me read another quote. In October 2009, the Chancellor said:
“we could not even think of abolishing the 50p rate on the rich while at the same time I am asking many of our public sector workers to accept a pay freeze to protect their jobs. I think we can all agree that would be grossly unfair.”
We can all agree on that. What has changed? What is the truth? It was all a con. The mask has slipped. To 200,000 families struggling on less than £17,000 a year, he says, “I’m going to cut your tax credits to make you work harder”, but to the highest earners, he says, “I’m going to cut your taxes because if I don’t, you won’t work hard and pay your taxes.” That is it. To make the poor work harder, the Chancellor makes them poorer. To make the rich work harder, he makes them richer. Does that not tell us everything we need to know about the Chancellor? He is cutting tax credits for the poor, cutting child benefit in the middle, cutting tax help for pensioners and cutting taxes at the top. That is his priority.
Christopher Pincher (Tamworth) (Con)
It is apposite that the shadow Chancellor used the word “con”. If he believes that the top rate of tax is about economics, not politics, why, in 13 long years, when they had the money, time and majorities, did the Labour Government not introduce that top rate of tax?
Ed Balls
We all agree that, after the global financial crisis, tough choices need to be made on tax spending and pay to get the deficit down, and we all agree that it needs to be done fairly. Two years ago, the Chancellor said that he had a plan—with tax rises and spending cuts, the economy would grow and unemployment would fall—but he has had to come back to the House and announce further tax rises because his plan is not working. But who is paying more tax? The pensioners. And who is getting a tax cut? The millionaires. That is the reality.
The Liberal Democrats call this a Robin Hood Budget, but they have got it the wrong way around. Robin Hood took from the rich to give to the poor, but the Budget takes from lower and middle-income families to give to the rich. Do they not see? The Chancellor is not Robin Hood; he is the Sheriff of Nottingham. As for jobs and growth, he could not give a Friar Tuck. As for Maid Marian—trapped in the castle, desperate to escape—we all feel sorry for the Business Secretary, and not just because, as a result of the pensions tax grab, he is probably the only member of this millionaire Cabinet who will be not better off but worse off as a result of the Budget—possibly with the Justice Secretary as well. I am not sure. But he cannot say he was not warned.
Chris Skidmore (Kingswood) (Con)
I would be interested to know whether the shadow Chancellor has actually read the Budget and chart B5, which shows that the effect is worst on the top quintile? If he could be bothered to look at that and read the Budget, he might want to come back and change his mind.
Ed Balls
The hon. Gentleman should have read the small print. It is fine for him to accuse me of not having read the Budget, but is the effect of the 50p tax cut in that chart? I think not. I have read it. He has not. It is not there. If it were, the benefits would be off the scale.
After that disastrous and woeful intervention, let me return to the Business Secretary. The Business Secretary cannot say that he was not warned. In fact, he did the warning. On deficit reduction, before the election, he said:
“The IFS is right to point out that cutting spending further this year would be extremely dangerous given the weakness of the economy.”
He also said that
“it’s very difficult to believe that large sudden cuts would do anything other than a great deal of harm”.
He was right in his analysis of the dangers of going too far, too fast, and he is right today. In his devastating leaked letter to the Prime Minister, he said that the Government were without a
“compelling vision of where the country is heading beyond sorting out the fiscal mess”.
So why has he signed up to this completely vision-free Budget?
Ed Balls
No.
I am going to read again what the Business Secretary said on the top rate of tax, because it is such a great quote:
“Some believe that if taxes on the wealthy are cut, new revenue will miraculously appear. I think their reasoning is this—all those British billionaires who demonstrate their patriotism by hiding from the taxman in Monaco or some Caribbean bolt-hole will rush back to pay more tax but at a lower rate. Pull the other one.”
I have to ask him then: why is he going to stand here today and defend a Budget that tries to do just that?
We all know what the Deputy Prime Minister said last September. Let me tell the House—if anyone is interested in what he says. He said:
“I do not believe that the priority at a time like this is to give a tax cut to a tiny, tiny number of people who are much, much better off than anybody else.”
Let us be honest. None of us is remotely surprised that the Deputy Prime Minister has completely capitulated, just as he did on VAT, tuition fees and the NHS, but the Business Secretary is another matter. He knows that our proposal to kick-start the recovery is right because he told the Chancellor to do it. He knows that our proposal to set up a business investment bank is right because he told the Prime Minister to do it. And he knows that cutting the top rate of tax now is the wrong priority, deeply unfair and a betrayal of his and his party’s values and progressive tradition.
We all know all we need to know about the Deputy Prime Minister, but we all had—and have—higher hopes for the Business Secretary. I have to say to him—and to his colleagues—that I understand the incredibly difficult position he is now in, but I have to ask him: what on earth would the Vince Cable of five years ago think of what he is doing now? As the sketch writer in The Independent wrote last week:
“Vince has been so hammered by events…It isn’t clear any more that he could ‘press the nuclear button’ hard enough to make it go off.”
Prove us all wrong, Vince—prove us all wrong.
The Chancellor used to say, “We’re all in this together.” Not any more. In tough times, the choices that this Tory-led Government are making tell us everything we need to know about them and how totally out of touch they are with what life is like in our country. Here are the facts. The Chancellor’s plan has failed. Trying to raise taxes and cut spending too far and too fast has backfired. The country needs a Budget for growth and jobs. Instead, we got more of the same, and with his tax cut for millionaires, he is piling insult upon injury for millions of families and pensioners across this country.
Ed Balls
The HMRC report states that, in 2013-14, the static cost—that is, the cost to existing top rate taxpayers—will be £3 billion, rising to £3.35 billion, then £3.7 billion and £4.2 billion. It then states that that will be offset by a behavioural impact of £2.9 billion, £3.2 billion, £3.6 billion and £4 billion, which I think is heroic. The document states that behavioural responses are often “highly uncertain”, and the Business Secretary himself said that such assumptions were utter nonsense. He said, “Pull the other one!” Is he now saying, “Mea culpa—I got it totally wrong”?
Vince Cable
I am just trying to deal with the facts. I believe in evidence-based decision making. The information in the Budget document, which has been validated as the best central estimate by Robert Chote of the OBR, suggests that we are talking about a revenue loss of £100 million. I think that the right hon. Gentleman is fundamentally underestimating the financial significance of something that happened on an epic scale when his Government moved on the top rate, which involved simply switching from one year to another. The underlying impact on revenue has been independently estimated at £100 million.
Ed Balls
The document from HMRC makes it absolutely clear in section A.19 that that is not HMRC’s view but the Government’s view. It was a ministerial decision on those estimates. But that does not take away from the fact that a £3 billion cost—£10,000 on average for top rate taxpayers—will be offset by a behavioural impact that is huge and, in the Business Secretary’s own words, absolute nonsense. Let us deal in the complexity of the facts, not the simplistic nonsense that the Chancellor told the House yesterday. Does the Business Secretary, with his integrity, look at those numbers—£2.9 billion, £3.2 billion, £3.6 billion and £4 billion—and say, “Yup, I agree”?
Vince Cable
I think we are talking about integrity and statistics. Of course there has been a big change under this Government, compared with their predecessor. The numbers that the shadow Chancellor used to use were his own numbers. The numbers we are quoting here are independently verified by the Office for Budget Responsibility. We will analyse the underlying assumptions in those figures. The figures in the Budget document are absolutely unambiguous and they have been endorsed by an independent assessor—something that the right hon. Gentleman was never used to when he was in government—which confirms the value of the numbers that we have described.
Vince Cable
I do not know where the hon. Lady has been for the past 24 hours. The central feature of the Budget was a very large tax cut for exactly the group of people she describes, and it will have exactly the consequences that she describes.
Let me get back to the core issue, which exercises me and the shadow Chancellor. The basic economic strategy of the Government is to get back to a stable, sustainable form of economic growth. I want to address head-on his central criticism, which he has made many times. It can be summarised in the phrase “too much, too fast”. This Government have a deficit reduction programme that was developed following the autumn statement, and it involves removing the structural deficit over a period of six years.
The Darling plan, which the last Government set out, involved a deficit elimination programme of seven years. What I am not clear about, particularly in view of the stridency of the shadow Chancellor’s views, is: what is the Balls plan? Is it for seven years, eight, 10, 20 or never? What is the alternative speed of deficit reduction that the Opposition are urging on us?
We are acting, successfully, on good advice. A few weeks ago, the head of the International Monetary Fund, Christine Lagarde said:
“Those countries that have fiscal space, and that can slow down their fiscal consolidation efforts are very few, and I’m afraid Britain is not in that particular group.”
That is because of the sheer scale of the structural deficit that we inherited.
Vince Cable
I will give way in a moment.
The CBI, quoted in evidence by the Opposition, was equally clear, as reflected in its view that we cannot afford to slow down the austerity programme. That is what authoritative people have to say about “too much, too fast”.
Ed Balls
The Business Secretary is a former chief economist. He read out a quote from the head of the International Monetary Fund. On the previous day, the chief economist of the IMF said exactly the opposite—that if growth was “undershooting”, a country like Britain should
“slow the pace of deficit reduction”.
Is the Business Secretary really saying that he is ignoring the advice of Olivier Blanchard, the chief economist of the IMF? I would have thought that the right hon. Gentleman would have recognised Mr Blanchard’s economic credentials.