Finance (No. 2) Bill

Geraint Davies Excerpts

Wednesday 25th March 2015 Commons Chamber

[Chris Leslie]

My hon. Friend’s point about distributional analysis is a good one. We know that those on lower and middle incomes have been hit particularly hard: people on the lowest incomes do not benefit from many of the changes that the Government have made, and we must consider what data we need.

My point about parliamentary procedure is not just about the political dates of Budgets and so forth; it is also about the time that officials and civil servants have to draft some of the provisions and proposals. I do not understand why it has to be so last minute and by the seat of their pants. It is one thing to exclude one’s political opponents from the reveal moment of the Budget, but surely it would be good to ensure that proper internal arrangement are in place in the Treasury for drafting these arrangements.

The Institute of Chartered Accountants in England and Wales has its concerns:

“we do not think that Parliamentary consideration amounting to only one day is in any way sufficient to consider and pass another significant Finance Bill that runs to 349 pages and contains a considerable amount of controversial legislation.”

An article in today’s Financial Times quoted Heather Self of the law firm Pinsent Masons. She said that the decision to rush through the Finance Bill was

“an abrogation of the parliamentary process…Legislation this complicated should not be going through without parliamentary scrutiny”.

My hon. Friend the Member for Edmonton was right when he talked about Tolley tax handbooks—I know his walls are adorned with the tax code in fine, leather-bound tomes. He will know that when the coalition came to office, there were 17,795 pages in that tax handbook, but by the end of this Parliament that has risen to 21,414 pages. The Minister says that is not a good barometer. I suppose it is good for publishers and perhaps makes my hon. Friend’s library a little more expansive and extensive, but I suspect it makes things more difficult for people to understand and follow. I think that our constituents deserve better and want proper scrutiny of the Finance Bill, and we will try our best to do that. The House should bear in mind the fact that the Bill appeared in the Vote Office yesterday, so it is difficult even for my diligent hon. Friends properly to absorb and assimilate all the provisions and to do justice to the Bill. Nevertheless we will give it a go and try our level best.

Ultimately, the Finance Bill could not disguise the coalition’s failures of the past five years. There is a slow recovery, but it is not being felt far and wide. By the standards and tests that the Government set when they came to office and made their promises in 2010, the Conservatives and Liberal Democrats have failed, particularly on the public finances. They have failed to eliminate the deficit, which should have gone by now. In fact, in the autumn statement 2010 the Chancellor trumpeted that he would bring forward to 2014-15 the year by which the current structural deficit would be eradicated, yet we find ourselves with a £90 billion current budget deficit, which fell by only 5% on the previous year—not exactly the rate we were promised.

There are many other structural issues in the economy. I do not know whether my hon. Friends remember the Chancellor’s promise about the march of the makers, but I am afraid that this country’s exports have not lived up to the £1 trillion target set for 2020; we are already a mere £300 billion off course in achieving that. Before the last election the Chancellor set the litmus test of cherishing our triple A rating, but of course that was downgraded.

One thing in the Finance Bill that supports the Government’s fiscal strategy was the revelation of how extreme the cuts will be to public services over the next three years—twice as deep over the next three years as we have seen for the past five years. In the words of the Office for Budget Responsibility, the “rollercoaster” is about to go over the precipice, and public finances, social care, the police, defence and many other public services will be pushed over the edge of that cliff should the coalition parties Government have a further five years in office.

It is no wonder that when people look at the impact of deep and extreme cuts to what Government Ministers term “non-protected Departments”, and see how deep they will be, they say, “Well that isn’t going to happen; it’s impossible to countenance that they would end up taking 30%, 40% or 50% from some of those Departments.” It is no wonder that people then believe there must be another plan, either for raising taxes or for cutting other services that some assume ought to be protected, in particular the national health service.

We had the debate on VAT, but I find it difficult to take the Prime Minister’s words seriously. These days, he has a habit of shooting from the hip—about whether he is retiring or what his views are for the day—so I am not sure that people will necessarily say, “Oh well, the Prime Minister said he’s not going to do it. That’s that then.” That is sort of what he said before the last general election about having absolutely no plans to raise VAT, but it was only a matter of weeks before he got round to doing it.

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

My hon. Friend will know that the number of people earning more than £20,000 has fallen by 800,000 since 2010, and the slack has been taken up by more and more people on low pay and zero-hours contracts. Does he accept that we are facing these draconian cuts because the Government are overseeing a completely unsustainable business model and creating more and more low-paid people who cannot pay any tax? The revenues are not coming in, which is why they have borrowed more in five years than Labour did in 13.

[Chris Leslie]

As ever, my hon. Friend manages to sum up the Government’s record in a pithy and simple intervention. I had not heard those statistics about the number of people earning more than £20,000, but I shall certainly take a look at the points he makes. We shall perhaps look at those statistics in more detail.

My hon. Friend’s point about living standards is a good one that all Members should intuitively and properly understand. If we do not include everybody in the growth of the economy, if everybody does not have a stake or a share in it, if their consumer capabilities are not stronger, and if we do not tackle the sustainability challenge for growth in the future, we should not be surprised to find that we have an unequal recovery. Britain will only succeed if working people succeed. That is a catchy way of summing that up, and Government Members may well hear it a few more times in the coming weeks, but it is true.

Ultimately, our public finances are not determined in isolation, as though they are frozen in aspic. They cannot simply be dealt with in terms of cuts or changes in revenue: there is a dynamic, strategic set of issues that relate to what is happening in the real economy and the real world. The health of our economy will ultimately determine the health of our public finances. The Prime Minister and others say, “Why are you talking about living standards? Why are you talking about these things? That is not really the economy; it’s not about growth.” Of course it is. Ultimately, these things are related.

The low-wage economy the Chancellor has been heading us towards is a danger to our public finances. We are enduring an epidemic of job insecurity. The number of zero-hours contracts has ballooned by more than 20% in the past year alone. That is a problem for those who cannot plan even for the child care they need for the week ahead, let alone for getting a mortgage. It is also bad because it undermines the tax receipts the Treasury needs to sustain and pay for public services. It means that tax credits need to be higher to subsidise low pay and it is why the social security bill is £25 billion higher than the Chancellor expected.

Those living standards issues come up time and again in surgeries, meetings and encounters that my hon. Friends have with our constituents. Some 900,000 people are using food banks, and some 600,000 people have been hit by the cruelty of the bedroom tax. These issues will come back to haunt Ministers. They have attempted to deal with the deficit by hurting those on the lowest incomes. It has not worked; it has not succeeded; and it is a strategy that will just get worse in the coming years.

--- Later in debate ---

[Chris Leslie]

We are delighted that the Government took a shine to our proposals for pension tax relief changes—I suppose that imitation is the best form of flattery. We will stick with our policy to reduce tuition fees to £6,000, and we will set out in our manifesto, in a matter of days and weeks, how it will be funded. Still at this late hour, the full costings in our manifesto are available for the Office for Budget Responsibility to audit and verify—if only the Minister had shaken my hand on that. I offered him the hand of friendship—was it on the “Daily Politics” the other day?—but sadly he could not do it. It is important that we have fully costed and funded manifestos and that all parties engage in the process. We will look closely at the Conservative party manifesto. The Conservatives have made some grand promises about tax which will cost at least £10 billion to implement, even in the final year of the next Parliament, yet we have not seen a dicky-bird—even in the Budget figures—on how they will be paid for. I am looking forward to reading that chapter in its manifesto.

[Geraint Davies]

I mentioned that low productivity was driving down wages. Is not the point of tuition fees policy to increase the number of qualified people, productivity and national wealth, to end the deterrence on going to university, to stop people having credit ratings that prevent them from buying houses and to stop them not wanting a pay increase in case they have to pay back more of their fees? Surely this makes economic sense, while the Conservative party’s unsustainable economics of low pay and austerity is sending us into bankruptcy.

[Chris Leslie]

My hon. Friend knows that the change from £9,000 to £6,000 would make an appreciable difference. Of course, it is still a significant fee, but we will only ever make promises we know can be kept and that are fully funded. I would love to do more on many other tax issues, but given the state in which the Chancellor will be leaving the public finances in only a matter of weeks, we must show students that we understand the burden of debt on them and the nation. The Government never appreciated that so many students would never be able to pay back their debts and that the bill would have to be picked up by the taxpayer sooner or later.

As well as measures on tuition fees, the Bill should have contained a proper bank bonus tax for the starter jobs that many young people who are having trouble finding employment need.

--- Later in debate ---

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

It is a great pleasure and privilege to follow my hon. Friend the Member for Edmonton (Mr Love), who has been a distinguished Member of the House, particularly through his service on the Treasury Committee, which has added enormous insights into the deliberations of successive Governments. It is a great joy to follow my good friend and colleague.

I just want to make a few remarks. The budgetary process in the immediate run-up to the election has been very much a political stunt. The first thing to deal with is the illusion—or delusion—that there has been economic success and turnaround under the Conservatives. That is simply not the case; it is simply not borne out by the facts. The national debt is about £1.4 trillion—up 44%. Reference is made to the deficit and how much the debt is going up, but of course the current Government have borrowed more in five years than Labour did in 13 years—and we had to bail out the banks. The Government have lost the triple A rating. As I pointed out earlier, the number of people earning more than £20,000 is down by 800,000. There is a reliance on a fudging of the facts; this is a “fudge it” Budget, to make up for the fact that we have more and more low-paid people who cannot make a contribution towards the revenues in a sustainable way. Meanwhile, the Government continuously put up the tax threshold and say, “Who’s going to disagree with that?”, knowing everyone is scared to disagree. But that is the management of irresponsibility, because the money simply is not coming in to pay the bills.

So what we need is not a spat about tax and spend, but a serious consideration of how we generate productivity and growth, in order to have higher wages and a more sustainable plan for the future. Obviously, part of that was the debate about tuition fees and about enabling people to go, without fear, to university, so that we could get higher productivity and the students would not be hobbled by massive debt throughout their lives. Such debt can mean that they cannot get a credit rating and cannot get a house, and are scared of moving into a higher pay bracket because it pushes up their repayments.

Sadly, the Tories are creating a two-nation Britain. One nation will be the better off, who, lucky for them, own their own house, can get their sons and daughters into university and pass on money for them to put down a deposit on a property. There are others who may be equally or even more capable of going to university and of boosting the productivity in our collective economy but who are being stopped from getting houses in the future. We are at a turning point now. The party that gets elected will determine whether we have a more unequal or a less unequal future. I very much want us all to pull together as one nation to invest in the future.

The Conservatives have this massively political Budget profile, which has been described as a “rollercoaster”. Deep and savage cuts were going to take us back to the 1930s, but because that was pointed out by the BBC, the Office for Budget Responsibility and the Institute for Fiscal Studies, an adjustment was made. Bank shares were sold off and oil prices went down so that the public service time machine was moved back only to the year 2000. None the less, we all saw the Tories in their true oils. They were happy to make those savage cuts until the BBC highlighted what they were doing. Then they said, “Oh no, we’re not going to do that.” But there will still be savage cuts until the final year of the next Parliament, 2019-2020, when there will be a sudden acceleration in public spending—the biggest spending increase for 10 years—presumably to try to get Boris Johnson elected as the next Tory Prime Minister. That is probably what will happen in the unfortunate event of the Tories getting in again in some strange alliance with the UK Independence party, which would be a disaster for Britain.

We must strike a balance between trying to achieve economic growth and having to balance the books, instead of scrabbling around trying to decide which poor people to clobber. As my hon. Friend the Member for Edmonton pointed out, welfare cuts such as the bedroom tax raised only £400 million, which is small change compared with the numbers that we are talking about. Two thirds of the people hit by that tax are disabled. The cuts to tax credits are hitting people with children who are trying to work. It is ridiculous to try to squeeze more and more out of the poorest to make ends meet. Clearly, it is right that the richest pay more, whether those with more than £2 million pay the mansion tax—

[Mark Garnier (Wyre Forest) (Con)]

They do pay more.

[Geraint Davies]

They need to pay lots more, not a bit more. Of course some of the very rich are paying more, but that is because they are getting richer and richer on massive pay awards. They are earning so much more than anyone else, and the situation is getting out of control

[Charlie Elphicke]

rose—

[Geraint Davies]

I will not give way to the rover from Dover, thank you very much. He is known as the Dover soul. [Laughter.] Obviously, that was the highlight of my speech.

Finally, I wish to comment on the rabbits that have been pulled out of the hat. Today, we were told, “Oh, there will be no VAT increases.” Is the Prime Minister going to commit himself to that in his five-year plan? A couple of days ago, we heard that another £46 billion was being spent on various railway connections in the north. There seems to be a desperate attempt to make things up on the hoof.

I do not necessarily disagree with this devolution of economic and service power to the north—to Manchester. We did that in Wales, but it was done on the back of an Act of Parliament and a referendum. In their haste to generate higher ratings at the polls, the Government are doing anything, including undermining the constitution and the economic balance and fragmenting the NHS in the process. Their recent track record, therefore, has not been impressive. The future looks bleak. I very much hope that we can focus on increasing growth. We should consider tuition fees, a cast-iron promise to stay in the EU, which is so important for inward investment, and procurement. The reality is that when it comes to procurement we should look at favouring, if we can, small British companies that pay British tax—corporation tax and income tax—rather than giving the work to foreign companies that do not pay our tax and do not contribute towards growth.

[Charlie Elphicke]

rose—

[Geraint Davies]

I will finally give way to the hon. Gentleman.

[Charlie Elphicke]

I thank the hon. Gentleman for being so generous in giving way to the rover from Dover. I gently point out that the reason why we cannot show a preference towards our own businesses in matters of procurement is to do with the European Union, which he loves so much.

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. Believe it or not, that discussion is outside the scope of the Budget resolutions. But given that the hon. Gentleman had just acquired a nickname—although I will not be addressing him as such—I decided to allow him to intervene. Mr Davies, I should be grateful if you returned to the Finance Bill.

[Geraint Davies]

Clearly, I accept the ruling on the rover from Dover. I was simply making the point that, in our growth strategy, we should be encouraging small businesses. In Wales, something like 60% of procurement goes to small businesses, half of which are based in Wales. In England, the comparable figure is something like 25%. I am suggesting that, through encouragement rather than breaking EU rules on competition, we should make things easier for small businesses in order to help growth, tax, and supply chains. We should do that, rather than just say, “What can we do?” Labour increased this economy by 40% in the 10 years to 2008, before the banking crisis.

[Madam Deputy Speaker]

Order. Mr Davies, you are way out of scope now, so we will go to the concluding remarks of this debate, because we are running out of time.