The Economy

Emily Thornberry Excerpts

Tuesday 11th December 2012 Commons Chamber

[Danny Alexander]

The OBR has forecast that unemployment will be slightly higher next year and then fall in subsequent years. It also forecasts a rise in employment over that period. If the hon. Lady is looking for variances between reality and the OBR’s previous forecasts, it is fair to say that unemployment is now considerably lower than the OBR forecast a year ago. I hope that she welcomes that fact.

It is true that the OBR has lowered its growth forecasts and that the recovery is slower than we would have liked, but we are on the right road and the announcements that we made last week will help the country to make further progress along it. I should add that the OBR does not attribute the slower growth to the Government’s fiscal policy, but to external pressures from the eurozone and other parts of the world, and to the long-term impact of the financial crisis, especially on our banking system. If the Labour party wants to accept the OBR’s figures, it also needs to accept its analysis.

As the House knows, savings had to be found and we have decided to reduce departmental resource budgets by 1% next year and 2% the year after. We are confident that that will not impact heavily on front-line services. For example, according to the recently published “Digital Efficiency Report”, if all Departments continued to move their transactional services online and became digital by default, we could save £1.2 billion over the next two years. If all Departments moved to the property occupation benchmark of 10 square metres per person, they could save a further £300 million each year.

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

Does the right hon. Gentleman agree with the following analysis? Two and a half years ago, he asked for five years to balance the books, but without a plan for jobs and growth, he needs another five years. He still does not have a plan for jobs and growth, so it will always be five years.

[Danny Alexander]

No, I do not agree with the hon. Lady’s analysis.

There are still savings to be made in day-to-day administration costs. I am confident that the civil service can continue to produce more for less and provide excellent value for money to the public.

The welfare system makes up more than £200 billion of public spending and cannot be immune from the effort to deal with the deficit. As a result of the financial pressures that we are facing, we have had to take the difficult decision that we can uprate working-age benefits by only 1% in the coming three years. That figure represents a rise each year, but it will be below the rate of inflation. It is not as high as some may have expected, but it is what the country can afford. That is a tough choice, but an even-handed one, and it avoids some of the more punitive proposals that have been floated in recent months.

Most benefit claimants would love to work and are trying their best to find a job. However, we need to recognise that in-work incomes have risen at half the rate of benefits since the financial crisis. Those who are in work will be better off thanks to our income tax cuts. When we are increasing public sector pay by only 1%, it would simply not be fair to increase the benefits of those who are out of work at a higher rate than those we employ to work for us.

Even while making those cuts, we have taken steps to protect those who are most in need. That is why disability living allowance and other benefits specifically for the most disabled and their carers will continue to increase in line with inflation. It is also why the basic state pension will increase by 2.5% next April, which is higher than either earnings or prices, honouring our commitment to the triple lock. The application of the triple lock means that there will be a better rise in the basic state pension than pensioners have seen before. Pensioners will see a cash increase of £2.70 a week in the basic state pension in 2013-14.

While we are protecting those in need, it is only right that we ask the most from those who earn the most. That is why the higher rate threshold for personal income tax will also be uprated by only 1% in 2014-15 and 2015-16. It is also why the annual allowance for pensions tax relief will be reduced from £50,000 to £40,000, and the lifetime allowance from £1.5 million to £1.25 million. That will raise more than £1 billion a year by the end of the period and is something for which I, for one, have argued for quite some time. The savings from Whitehall, welfare and the wealthy, and the targeted tax rises, are helping to cut the deficit in the medium term and to boost growth now.

Our capital spending plan will see £5 billion switched from current spending to investment in infrastructure, providing a better connected UK on roads, on rails and online. We will provide £350 million for the regional growth fund, enabling it to continue its success in creating jobs throughout the country. We are rolling out rural broadband across the country and have announced £50 million for the second wave of super-connected cities across the UK from Portsmouth to Perth, via Newport and Northern Ireland.

We have announced funding for a number of road building and maintenance projects. We will be dualling the A30 in Cornwall—an improvement that has long been campaigned for, not least by my hon. Friend the Member for North Cornwall (Dan Rogerson), who is in his place. I congratulate him on his efforts. We will also bring the A1 up to motorway standard all the way to Newcastle. I have been made aware of the need to improve that road north of Newcastle, not least by my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith), and have asked my right hon. Friend the Secretary of State for Transport to work up plans for potential improvements north of Newcastle.

The capital projects will not only create jobs in the short term, but crucially will raise the quality of the country’s infrastructure and our growth potential in the medium term. Labour Members may be interested to know that during the previous Government’s time in office, we fell from eighth to 33rd in the global league table for the quality of infrastructure. That is not good enough and is why John Cridland of the CBI said last week that it is

“absolutely right to shift the focus from current to capital spending to boost jobs today and the UK’s competitiveness tomorrow.”

As colleagues will know, our plans will mean that as a share of the economy, the investment that the Government are putting forward in this Parliament is greater than the average over Labour’s period in office. These investments, not just in roads, but in schools, colleges and flood defences, can only serve to help our businesses in the future.

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[Danny Alexander]

No, because it was not there. That was one of a number of difficult choices that we as a Government have had to make to clean up the mess in the British economy that was left by the hon. Gentleman and his colleagues.

[Emily Thornberry]

rose—

[Danny Alexander]

I will give way once more to the hon. Lady and then I will make some progress

[Emily Thornberry]

Am I right in remembering—I think it was on page 14 of the Liberal Democrat manifesto—a pledge to cut 7,000 tax inspectors?

[Danny Alexander]

The hon. Lady will know that HMRC has had to make efficiency savings along with the rest of the Government. It had to make savings when the Labour party was in office and it continues to have to do that. We have increased investment specifically in the part of HMRC focused on tackling tax avoidance and evasion—an area that saw underinvestment during Labour’s time in office. As a result, 2,000 extra specialist tax inspectors—[Interruption.] My hon. Friend the Exchequer Secretary to the Treasury brings me up to date and tells me that the figure is 2,500. Those inspectors are specifically focused on tackling tax avoidance in the affluence unit and those units that focus on offshore companies and all other tax avoidance schemes, and on implementing the anti-avoidance rule.

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[Danny Alexander]

A range of goods is included in the consumer prices index of inflation, which the Office for National Statistics constructs—it is an independent body and is responsible for constructing those baskets of goods. Some items go up in price faster than others. We are doing what we can and what the country can afford, but our priority must be to get this country back to a position in which we can pay our way in the world. Nothing would hurt the poorest in society more than losing control of our public finances, which I suspect would happen if the Labour party ever again gained the reins of power.

The quad discussed introducing a mansion tax, but a fair tax on homes worth more than £2 million was not agreed. However, the good news is that we have established a sensible, workable plan for raising additional revenues from the highest-value properties. If that does not happen in this Government’s term of office, it will be in the Liberal Democrat manifesto for the next election.

[Emily Thornberry]

Hooray!

[Danny Alexander]

I am grateful for the hon. Lady’s support—I take support from wherever it comes these days.

The Government have taken sensible further steps to restrict pensions tax relief. The decisions the Government are taking are not easy, but as a country we must live within our means. The scale of the problems this country faces means that the period of fiscal restraint must continue for longer. That is why the Government will shortly set out spending plans for the financial year 2015-16. I will carry out a spending round in the first six months of next year to set those budgets and ensure that we continue to build a sensible long-term plan for the country’s finances. We will need to find an extra £10 billion of savings from Departments in the spending round. That will mean more difficult choices, but they are also responsible choices as the coalition continues to work to restore stability to the UK economy.

We have heard this afternoon and in Question Time that some criticise the autumn statement. The division in British politics is very clear. Government Members live in the real world. We understand that times are tough and that there is no endless supply of money, and recognise that the right and responsible action is to take the difficult decisions to ensure we can live within our means. Labour Members appear to live in a fantasy world. They still believe that they ended boom and bust, despite the events of the past five years. They still refuse to apologise for the mess they created and fail to be honest with the British people about the tough decisions that any party in government would have to take.

It will come as no surprise to hon. Members that I will not take advice from the Labour party, which wrecked our economy because it allowed the country to become too dependent on revenues from the City of London and paid too little attention to the rest of the country. Labour insulted pensioners up and down the country by increasing the basic state pension by 75p, and insulted 5 million of the lowest-paid workers by increasing their income tax bill with the abolition of the 10p rate.

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[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—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order.