Finance (No. 2) Bill

Geraint Davies Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

[Geraint Davies (Swansea West) (Lab/Co-op) [V]]

I, too, pay tribute to Prince Philip; in tribute to him, I am wearing my father’s tie. Like Prince Philip, he served in the Royal Navy in the second world war. He lost his own father at the age of 12; Philip was, of course, estranged from his father at 13. Both fought the Nazis.

I mention this partly because the main conflict there was the battle of the Atlantic, which was the attempt by the Germans to starve Britain. In 1939, half our meat, 80% of our fruit and 70% of our cereals were imported. Last year, 80% of our food was imported. Thanks to the botched Brexit deal—there was no mention at all of this in the Budget—we now have the prospect of self-imposed food shortages. In January our exports to the EU, our largest market, were down more than 40%. Imports were down by 29%. They will go down more when we introduce non-tariff barriers. The reality is that in Britain today, a carrot pulled up in Spain on Monday could be on our shelves by Thursday. That will no longer be the case. We face the prospect of food shortages and food inflation.

The Office for Budget Responsibility found that the botched Brexit deal would cost the economy 4% within 15 years, and something like 1.4 million jobs and £1,300 each. The reason we are seeing tax increases, taking us to a share of taxes not seen since the 1960s, is not the pandemic, which is a one-off hit that will be recovered, but the ongoing problems of the botched Brexit. We need to remember that. We need to look towards better realignment and better trade with our closest marketplace.

The other thing to bear in mind is that last year something like 1 million people from the EU left this country to go back to Europe. Many will not come back, partly because of the hostile environment here, and that creates an issue about the size and quality of our labour market when it comes to productivity and production. The EU is already questioning the legality of our breaches of the Northern Ireland protocol and there is a question mark over divergence of standards and protections in the future that might lead to tariffs. If we manage this badly, we may be hit even harder.

For those on the Government Benches who say, “Oh, don’t worry—we’re opening up loads of other markets,” it is worth remembering that, the Japan deal, for example, is worth £1.5 billion to GDP, but if it had been done through the EU, it would have been worth £2.6 billion, because it can negotiate a better deal because it is bigger.

The truth is that while the Government are spending enormous amounts of money on covid, that is not really the explanation for the massive personal tax increases that Britain will suffer.

The other thing to mention about productivity, other than the loss of young workers to the EU, is that not only have we had the highest rate of death in the world from coronavirus, but there is clearly a move, once we have got people over 50 vaccinated, to be reckless again. The issue is the fall in productivity of younger people with long covid. We all know anecdotal examples, but we do not know the full impact of that. I have knowledge of music students, for instance, who have had a shake—a violinist—or who cannot blow the trumpet as well because they have lost lung capacity. These issues are significant for the overall productivity of our economy in the future.

On the workforce being fit and ready to work for our recovery, we should also think about the fact that in today’s Britain, 7.6 million people are living in hunger, 1.7 million of whom are children—it is an absolute disgrace. They are left in food insecurity, as the UN calls it and as the Environment, Food and Rural Affairs Committee recently reported. In essence, that means that they do not have sufficient nutritious food on a daily basis. That is deplorable.

Interestingly enough, in 1952, when the Queen came to the throne and Philip was 35, rationing was still in place for sugar, butter, meat, cooking fat, cheese and so on. In that year, Aneurin Bevan, the founder of the national health service, famously wrote “In Place Of Fear”, in which he warned that while we had to confront poverty and that it was difficult to define, the basic requirement was to ensure that there was no hunger. He warned that if millions were left in hunger, our civilisation would be at risk. It is certainly the case that we now face a depleted, physically weakened and hungry workforce. That surely is not the recipe for the productive economy that we need for the future. On top of that, our youngsters have lost a year in education—[Interruption.] I apologise for that, Madam Deputy Speaker.

The Government say that they have spent a lot on coronavirus and of course they have, but we have read in the newspapers and elsewhere that, in many cases, the money has not been well spent—personal protective equipment, track and trace and food parcels that have been done through Tory party dealers. We have also heard about David Cameron being involved with Greensill. There are question marks about how well this Government are treating taxpayers’ money.

When it comes to the Chancellor, of course we know that he was a founding partner of the hedge fund, Theleme, which presumably had a partner stake. We do not know about that because those tax returns and details are in the Cayman Islands, but we do know that that particular hedge fund appreciated in value from something like £7 billion to £39 billion shortly after we heard news that the Health Secretary had ordered 5 million doses of the Moderna vaccine, in which the hedge fund had invested. We do need to get to the bottom of these things and find out what happened. If it was the case, for example, that the Chancellor had, say, 15% of that hedge fund, his share of that increase—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. I do think it is quite important that we address some of the issues in the Finance Bill, so I am sure that the hon. Gentleman will be doing that.

[Geraint Davies]

Thank you very much for that advice, Madam Deputy Speaker. I was just going to turn to the nurses’ pay increase. Had the nurses been granted a 5% increase in pay in this Budget, that would have cost £1.7 billion gross, but in fact, after looking at the recovery of taxes from both income tax and sales tax—consumer tax—we see that it would have cost just £330 million a year. On my calculation, that is about a 10th of the value of the appreciation in the hedge fund that I was mentioning—the 15%—that would have been privately earned by the Chancellor. Obviously, we need to have these figures disclosed. I am trying to put in context the fact that we can afford to pay the nurses a decent wage. There are tremendous amounts of money moving around at the moment and we do not really have a proper tie on it.

We should contrast that with what is happening in Wales, where we have a more effective system of track and trace, PPE is bought more effectively, food parcels are not bought privately but down to local authorities, and the sickness rate and death rate from coronavirus are much lower. We should contrast it with the way that money has been invested to help business. The Chancellor has put money into cutting stamp duty, and lots of that has been spent on second homes—but not in Wales—because that money is not well targeted where it is needed. Money has been given to large businesses with large properties, but again not in Wales, where the larger supermarket stores with big properties will not get the council tax relief because they are making extra-normal profits during coronavirus. The issue is investing money where it is most needed.

Turning back to the nurses, in Wales we have the highest proportion of single earner households in the country and the lowest average wage, which is 70% of gross value added in terms of the UK average. These people might include a nurse as the only earner in a poor household who has faced nearly 10 years of pay freezes and now another pay cut. It is no surprise that nurses are going to food banks. These things are not necessary; they are political choices. I am just drawing the contrast between those who have so much and those who have not enough.

Mention has been made of Amazon and the fact that it and others have basically decimated our physical retail side. There are questions about what should be done about that. In my view, local authorities should be empowered to provide digital marketplaces to support local businesses to sell to local people with overnight delivery so that people would have a choice between sending their money offshore to some huge American organisation that does not pay tax, is destroying local jobs and undermining workers and supporting local businesses through a collective approach with a modernised online service.

We have of course elections coming up, as you know, Madam Deputy Speaker, and people are making these financial choices and comparisons—including, in Wales, those aged 16 to 18. In this Budget, prescription charges in England are now going up to £9.35, whereas in Wales people do not pay for prescriptions. In Wales, we have ensured greater safety by giving advice that people do not travel more than four or five miles, whereas in England people could go wherever they liked. In Wales, a two-metre rule was put into legislation—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. May I just interrupt the hon. Gentleman again and say that we really need to address the Finance Bill? I think the feeling is that perhaps he might be bringing his remarks to a close fairly shortly.

[Geraint Davies]

Yes, that is my feeling as well, Madam Deputy Speaker. I was simply making the case that owing to a more cautious approach in terms of coronavirus, we have got to a situation where productivity is better supported.

I will bring my remarks to a close as you suggest, only finally to say that we need to do more on the issue of climate change and the environment, because 64,000 people a year are dying from air pollution, while nothing has been done about diesel or accelerating towards electrification. We need to look at a different approach whereby we can generate growth and opportunity for the future.

Finance (No. 2) Bill

Geraint Davies Excerpts

Committee stage & Committee of the Whole House (Day 2)
Tuesday 20th April 2021 Commons Chamber

[Gareth Bacon (Orpington) (Con)]

As the Committee is aware, this year’s Finance Bill is presented at an unprecedented time in British peacetime history. The pandemic has hit the economy very hard, and the Government have not stood idly by over the past year. Extensive levels of economic interventions have been introduced to protect jobs, businesses and our people in order to help them through this pandemic. The impact of this on the state of the public finances has been drastic, with the budget deficit rising to £355 million in 2020-21 and our national debt rising to £2 trillion.

That is of course not a sustainable position, but, as we know, the tide is turning. The Government’s excellent vaccine planning, procurement and roll-out means that we can now see the end in sight. The economy and society have begun to open up, but we are not there yet. The Budget introduced by my right hon. Friend the Chancellor of the Exchequer in March therefore had to achieve a very delicate balance in maintaining high levels of economic support during the continuing global health crisis while also laying the groundwork to repair the public finances and support our economic recovery.

The part of our economy that is the housing market comes in both property sales and construction. I will address my remarks primarily to the decision to extend the temporary stamp duty land tax holiday. As my right hon. Friend the Minister said, when the pandemic struck and the first lockdown began in March last year, the housing market experienced a sharp decline in sales, falling by 43% in the second quarter of the financial year compared with the same period of the previous year. Historically, a sharp drop in transactions, if left unchecked, has led to a fall in the level of house building. The Government’s action in introducing revised thresholds at the lower end of the market, abolishing stamp duty on the first £500,000 of the purchase price and setting the level at 5% for the next £425,000, has greatly alleviated the problem. In my constituency of Orpington, the average house price is currently £528,000, and the Government’s intervention has reduced the level of stamp duty on an average transaction by 91%, leading directly to a strong recovery in the local housing market.

That recovery is also reflected in the picture nationally. According to HMRC figures, in the third quarter of the most recent financial year, housing sales increased exponentially on the previous quarter, and in the fourth quarter transactions were at their highest level since 2007. In the short term, that is extremely welcome because the Government have achieved their objective of stabilising the housing market and maintaining confidence in the construction market. By introducing an extension of the initial stamp duty holiday, followed by a tapering of relief, the Government have taken steps both to remove the danger of a cliff edge that could have reversed all the good work done in the latter half of last year and to prevent an unsustainable long-term boom in house prices. I believe that is the right approach at this juncture.

In the longer term, though, I urge the Government to take a long, hard look at the structure of stamp duty. Stamp duty thresholds have not kept pace with the rise in house prices, meaning that stamp duty has become a significant barrier to purchasing. That is particularly true in places such as Orpington, and even more so in other areas of south-east England in particular, where housing shortages are most acute. In the light of the strong link between house construction and housing transactions, coupled with the Government’s desire to ramp up house building and level up the country, a review of the wider stamp duty regime would bear consideration. However, that is an argument for another day, once the battle with the pandemic is finally won.

For the moment, I believe that the extension of the stamp duty until the end of June is the right move, and its tapering from the end of June until October is both proportionate and unwelcome. I will support the Government on the issue this evening.

[Geraint Davies (Swansea West) (Lab/Co-op) [V]]

The stamp duty holiday tells us all we need to know about the Government’s priorities. Amid an awful pandemic that has seen the highest death rates in the world, when something like 4 million people have been infected and many of them will face long covid, and when something like 7.6 million people are in hunger, we need investment in the wider economy to get us moving again. In fact, with the stamp duty holiday the Government have spent much of £5 billion, over two years, on second homes. That £5 billion could have paid for 5% increases in nurses’ salaries over 15 years, given that a 5% increase would cost £330 million after allowing for the recovery of the tax on the money given in the first place.

In any case, it is not clear that the stamp duty holiday was at all necessary to stabilise the housing market, because immediately as the pandemic began to hit, the Bank of England reduced interests rates and in so doing reduced mortgage costs, supported prices and increased landlords’ margins at a time when tenants were still required to pay their rents. Given that the Bank of England had already taken action to support the market, the stamp duty holiday simply increased house prices by something like 7% between July and December 2020. That is not the right priority, and it is certainly not the right priority to invest money in second homes for people who are basically making money out of that investment from taxpayers and boosting the prices that first-time buyers face. That is why in Wales, where we have a Labour Government, second homes were not included in the stamp duty holiday, which was quite right. I therefore support amendment 81. Indeed, in Wales, we have made provision so that there are no rough sleepers during this pandemic, whereas in England, of course, there are.

The stamp duty holiday will mean that first-time buyers will find it more difficult to buy a house because deposits will need to be bigger. We are moving to a situation in which young people who want to buy a house will almost always have to depend on their parents to do so, so the distribution of the opportunity to buy a house in Britain is getting worse and worse.

In a nutshell, this Budget should have invested in all our opportunities to raise productivity, increase the number of jobs, focus on the future and keep people healthy. Instead, it has been seen as an opportunity to focus on widening inequality unnecessarily. I very much support the Labour party’s amendments.

[The Temporary Chair (Sir Charles Walker)]

We now go to Christine Jardine, who is joining us virtually.