Amendment of the Law
Debate between Ed Balls and Harriett Baldwin(12 years, 9 months ago)
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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.
Financial Services Bill
Debate between Ed Balls and Harriett Baldwin(12 years, 10 months ago)
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Ed Balls
The problem was the US sub-prime mortgage market, and that the failure of regulation there rippled around the world. There were failures also of lending and regulation at Northern Rock here in Britain. I do not in any way deny that there were failures here in Britain and failures of regulation, but I do not accept that it was solely a UK failure, because it happened in America, France, Germany, Japan and all around—
Ed Balls
I will make some progress and take both interventions in a minute.
I understand why politically the Chancellor is so keen to blame the structure of UK regulation—the tripartite relationship between the Bank, the Treasury and the FSA. He wants to claim that his particular institutional reforms are the solution, but my advice to him is to be very careful indeed, because this was not a peculiarly British crisis; it was a global crisis. It hit countries with tripartite systems of regulation, quartet systems, twin peaks, more powerful central banks, less powerful central banks and statutory and non-statutory regulators alike, and it was not a failure of regulatory structure, but a collective global failure to see the risks inherent in the structure of the global financial services industry.
We heard from central bankers earlier, but Alan Greenspan, the former chair of the US Federal Reserve and architect of the US system, when asked by The New York Times about his and the world’s understanding and management of risk, said:
“The whole intellectual edifice…collapsed”.
He was right. It was not simply a failure of structure, but a flaw in the way regulators understood the financial system, and that is why the British Bankers Association is right in its submission on the Bill to say that
“we consider that successful regulation depends more on regulatory culture, focus and philosophy than structure.”
Harriett Baldwin
On that very point, I should like to understand where the right hon. Gentleman is coming from in his objections to the Bill. What was his philosophy in terms of separating the supervision of banks from the Bank of England, which has day-to-day responsibility for monitoring that canary in the goldmine—their day-to-day funding operations?
Ed Balls
I am going to come on to explain my analysis. I am not sure I fully understood the question, but I might as time passes.
At its heart, the regulatory failure of the global financial crisis was not a failure of one approach to the institutions of regulation, but a failure of understanding and risk assessment which covered central bankers, regulators and Treasuries throughout the world. That line is not in the Conservative party Whips’ briefing, but it is absolutely true none the less.
Jobs and Growth
Debate between Ed Balls and Harriett Baldwin(13 years, 2 months ago)
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Ed Balls
The hon. Gentleman would know the answer if he listened. I said that attempting to go £40 billion faster in deficit reduction than the plan the Chancellor inherited is not working, but pushing borrowing up. The right thing to do now is to expand demand—[Interruption.] Look, a one-year cut in VAT in its own terms would cost £12 billion. The question is what would be the impact on jobs, growth and deficit reduction. I am afraid that the Chancellor is borrowing not £12 billion more, but £46 billion more. The flatlining economy and rising unemployment mean that his deficit reduction plans are going off track. He should take the advice of the IMF and the OECD and change course.
Ed Balls
I will make a little more progress, but I will take interventions from people who have not intervened. Good grief, I have given the hon. Member for Dover (Charlie Elphicke) enough of the wrong type of publicity already and do not want to do his career any more damage.
There is a credible alternative. Why will the Chancellor not act? He used to be so confident that his plan was working. It is patently not working. He and his cheerleaders on the Government Benches claim that however bad things get, he is trapped by the financial markets. He cannot take the advice of the IMF and the OECD and change course because it would lead to higher interest rates and recession. However, the IMF has said that we cannot have credibility without growth.
The markets know that rising unemployment and zero growth are undermining the Chancellor’s deficit reduction plan. One chief economist in the City at Baring Asset Management said last week:
“Growth is essential if the UK is to be able to finance new debt, repay old debt and convince the markets and credit rating agencies there is a modicum of competency in policymaking. The longer we pursue current policies, the more likely it becomes that the UK will be the next target”.
That is the real market view. We know that the credit rating agencies put out their press releases, but the real view, as the IMF has told us, is that having a flatlining economy and rising unemployment is the wrong way to get the deficit down. As I said, even the Chancellor’s friend at the IMF has said that
“growth is necessary for fiscal credibility”.
Britain has no growth. That is why our Chancellor is losing credibility.
Harriett Baldwin
Will the shadow Chancellor confirm that cutting VAT to 17.5% would cost £12.5 billion a year? Would that not simply shift demand from one year to the next?
Ed Balls
The Chancellor’s whipping team really must tell people to listen to the answers before they intervene.
The Nobel prize winner himself, Chris Pissarides, says in the New Statesman tomorrow that a temporary VAT cut is the right way—[Interruption.] I say to Government Members that Nobel prize winners who give good advice to the Chancellor should be listened to. Given that 70 more people are unemployed in the constituency of the hon. Member for West Worcestershire (Harriett Baldwin) than a year ago, perhaps she should start to listen too.
The Economy
Debate between Ed Balls and Harriett Baldwin(13 years, 6 months ago)
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Ed Balls
I find that baffling as well. The fact is that cutting VAT was an effective stimulus, as the IFS said, which led to strengthening growth and falling unemployment a year ago. Now that cut has been reversed, and our position on the policy has been consistent. We propose not a move all the way from the Government’s deficit reduction plan to halving the deficit in four years, but a step along the road. That would be the right thing to do, and it would deliver for the constituents of Government Members a boost of £450 a year for a family with children, and of £275 a year for a pensioner couple. Why do they oppose action that would put money in people’s pockets and help to get the deficit down in a fairer way?
Harriett Baldwin (West Worcestershire) (Con)
The right hon. Gentleman says that he likes to do his politics on the record. On the “Daily Politics” show on 14 March, he said:
“We’ve made no commitments at all, it would be totally irresponsible for an opposition to behave”
in that way. What is responsible about an unfunded £51 billion tax cut?