Finance (No. 2) Bill

Gordon Birtwistle Excerpts

Wednesday 25th March 2015 Commons Chamber

[Shabana Mahmood]

It is a pleasure to serve under your chairmanship, Mr Hood. New clause 1 stands in my name and those of my right hon. Friend the Member for Morley and Outwood (Ed Balls) and my hon. Friends the Members for Nottingham East (Chris Leslie) and for Kilmarnock and Loudoun (Cathy Jamieson). It requests the Treasury to commission

“a report on the impact of the increase in the standard rate of VAT which took effect from 4 January 2011.”

The report must estimate the impact of that increase on living standards, small businesses, the fairness of the taxation system and economic growth.

The House has debated issues relating to VAT on a number of occasions, which the Minister referenced in his opening remarks, and it was, of course, a hot topic of debate at Prime Minister’s questions today. If the Prime Minister or any Conservative Member thinks that they can put the issue to bed today, let me tell them that they will not find it that easy, and I will set out the reasons for that during the course of my speech. Frankly, to believe what the Prime Minister has said today about VAT would be rather like believing what the Deputy Prime Minister said about tuition fees before the last general election. The public are simply not going to buy it, and I think the whole House is well aware of that.

Our new clause asks for a review because Oppositions are limited in what they can call for in amendments to a Finance Bill, but no Member can be in any doubt about our argument about the consequences of the political choices that are being—and that have been—made by the Conservative party and signed up to by the Liberal Democrats, even though they have been desperately trying to pretend that they had nothing to do with the fiscal assumptions given to the OBR, on the basis of which it made its assessments of what is likely to happen in the next Parliament. I welcome to the debate the lone Liberal Democrat on the Government Benches, the hon. Member for Burnley (Gordon Birtwistle). Perhaps if I give way to him he can rule out raising VAT.

[Gordon Birtwistle (Burnley) (LD)]

I thank the shadow Minister for inviting me to give my views on the fiscal situation. My constituency has seen unemployment fall from 7.5% to 2.5% and has received more than £50 million of Government money. I remember 1959, because I was 16 and had just started work. I canvassed for a guy called Arthur Davidson, who was a Labour Member, and he said the same old things that the Labour party always says: “Vote for us and there’ll be no problems. We’ll have full employment.” Well, I remember what happened after 1959, because I lived through it. It is very cruel of the hon. Lady to suggest that some of the thing we are agreeing to now are wrong—

[The Temporary Chair (Mr Jim Hood)]

Order. The intervention is too long.

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[Shabana Mahmood]

I have a lot of time for the hon. Gentleman and we spend much time debating Finance Bills, but I must say to him as gently as I can that that was an absurd intervention. We have made a clear commitment to the British people on what will happen to VAT on our watch. It will not go up. We know that it will go up if his party wins the next general election. There are no two ways about it. It does not matter what the Prime Minister has said and it does not matter what the hon. Gentleman says now. We know that because of his party’s record and form on VAT. I shall give a lengthy exposition of that history and form very shortly.

[Gordon Birtwistle]

The hon. Lady says that the Conservative party will definitely increase VAT. What proof does she have of that? If she has proof, will she come clean about it today?

[Shabana Mahmood]

If the hon. Gentleman gives me a few minutes, I shall get on to that point very shortly. He will understand that the past performance and form of the people who sit opposite me today, the Conservatives, is the clearest and surest indicator. Unfunded tax cuts have already been promised and spending plans have been made that require a Government to cut further and faster in the early part of the next Parliament than they have in this Parliament, and that is the clearest indication we can get. They can do nothing else but put up VAT; that is their tax of choice when it comes to raising the tax revenues they are looking for.

As I have said, the independent Institute for Fiscal Studies has said that the Government’s Budget plans mean that spending cuts after the election will be twice as deep as anything seen in the past five years. The cuts will go deeper and be made faster in the early part of the next Parliament than we have seen during the past five years. In reality, that will translate into extreme cuts to our crucial front-line public services, such as the police, defence and social care. The cuts will be so deep that they will be almost impossible to achieve, first, without putting the NHS at risk, and secondly, without making a further rise in VAT on the Tories’ watch simply inevitable.

Not only do the choices that the Government, and the Conservatives in particular, have made about spending and deficit reduction make such a VAT rise inevitable, regardless of the Prime Minister’s bluster today they are ingrained in their collective DNA. Before the 1979 general election, the then shadow Chancellor Geoffrey Howe said:

“We have absolutely no intention of doubling VAT.”

He specifically talked about doubling it. In his first Budget, however, he raised VAT from 8% to 15%. Conservative Members may take comfort from the fact that eight times two is 16, not 15, but they should not be proud of a seven percentage points rise in VAT or show off about its not being the eight percentage points rise that it might have been, given that such a rise had been absolutely ruled out and that there was no intention to double VAT. [Interruption.] Such a point brought no comfort to people who ended up paying the 15% rate of VAT, despite what the Financial Secretary, who is chuntering from a sedentary position, seems to think.

In 1991, Chancellor Norman Lamont increased VAT from 15% to 17.5%, claiming that his approach was “consistent” with the “strategy for tax reform” first set out by Geoffrey Howe in the 1979 Budget. Chancellor Lamont was correct that the approach was consistent: it was consistent with the approach of raising VAT rather than doing anything else. It seems that that approach may have slipped his mind, because just a year later, before the 1992 general election, Norman Lamont told Parliament that he

“again made it clear that the United Kingdom has no intention of changing our VAT rate.”—[Official Report, 13 June 1991; Vol. 192, c. 627W.]

That promise was reiterated by the former Prime Minister John Major, when he promised Parliament:

“There will be no VAT increase. Unlike the Labour party, we have published our spending plans and there is no need for us to raise VAT to meet them.”—[Official Report, 28 January 1992; Vol. 202, c. 808.]

He also said that year that he had

“no plans and no need to raise extra resources from value-added tax.”

The arguments then are almost exactly same as those we are hearing now.

Will Government Members remind us what happened after the 1992 election? There are no takers, because they know the answer: the Conservatives remember their consistent approach to raising VAT. The then Chancellor introduced VAT on domestic heating and fuel in the 1993 Budget, phasing it in at 8% from 1994. When he became Chancellor in 1993, the right hon. and learned Member for Rushcliffe (Mr Clarke) refused to reverse that increase saying that

“no one is going to die from VAT on heating.”

That is a very bad way of making a point, because people have in fact ended up dying from the cold. We know that people, the elderly in particular, often have to choose between heating their home and eating. Had it not been for a Labour defeat in the House of Commons, under the Conservatives we would have seen VAT on electricity and gas bills increase to 17.5% in April 1995.

Twenty years later we find ourselves listening to a familiar story. Before the last general election, the Prime Minister, the then Leader of the Opposition, said:

“We have no plans to put up VAT, it’s not part of our plans.”

I like the double emphasis: say it twice, and that might make it true. The Chancellor, the then Shadow Chancellor, said:

“The plans we set out involved around 80 per cent of the work coming from spending restraint”—

cuts—

“and about 20 per cent from tax increases. The tax increases are already in place, the plans do not involve an increase in VAT.”

So such a rise was ruled out by the Prime Minister and by the Chancellor when they were in opposition. However, just weeks after taking office, like all the former Conservative Chancellors before him, the current Chancellor increased VAT to achieve his plans of 20% consolidation coming from tax increases and 80% coming from spending cuts. He said:

“To achieve that additional tightening while maintaining the right ‘four-to-one’ balance between spending and taxation means that I have to announce further tax rises today. On 4 January next year, the main rate of VAT will rise from 17.5% to 20%.”—[Official Report, 22 June 2010; Vol. 512, c. 177.]

There is no doubt that such a rise has hit family budgets hard. Despite knowing that that would happen, and that there would be a huge impact on the economy as a whole, the Chancellor chose to do what every Conservative Chancellor has always chosen to do—put up VAT. That is why we can say so emphatically—I say this to Liberal Democrat Members in particular—that if the Tories are elected at the general election in just a few weeks’ time, they will do it again. It is in their collective DNA, and ruling it out but then doing it is precisely what they have form on. That is their history, and I believe that they will honour their history if they are elected.

Analysis produced by the Treasury in July 2010 showed the estimated impact of a one percentage point rise in the standard rate of VAT. That analysis means that we know, for instance, that in the past four years the Government’s VAT rise has cost a single pensioner £500, a one-parent family £900, a pensioner couple £1,100 and a couple with children £1,800.

Charter for Budget Responsibility

Gordon Birtwistle Excerpts

Tuesday 13th January 2015 Commons Chamber

[Guy Opperman (Hexham) (Con)]

I support the charter for budget responsibility. I think it is a good thing and a vital part of the long-term economic plan. For four and a half years we have been faced with a Labour Opposition who have opposed every single budget reduction, and I have no faith in Labour choosing fiscal discipline in future years. As various Members have eloquently explained, the Labour party is effectively France in all but name. It wishes to have a socialist Government with higher taxes, and all the financial and economic consequences that that would bring.

This coalition Government have turned around manufacturing—we have seen tremendous increases in manufacturing, particularly in the north-east. We have infrastructure support, city deals, regional devolution on a scale not seen before, support for apprenticeships, fuel duty frozen, increases to the fairer funding formula on education, and reductions in unemployment in every constituency across the north-east, including by 50% in my constituency. We should be proud of that genuinely good record.

The consequences need to be addressed, too. The shadow Chancellor, as usual, did not answer my question. I put it to him that the north-east has the fastest rate of growth of private sector business in the autumn quarter and the highest growth in the value of exports, and it is the No. 1 exporter, with a positive balance of payments.

[Gordon Birtwistle (Burnley) (LD)]

My hon. Friend mentions manufacturing. Has he heard anything from the Opposition about how they intend to expand manufacturing? He will remember that they managed to reduce it from 22% of GDP to 11%. Has he heard anything about how they plan to reverse that trend, if they come to power?

[Guy Opperman]

Absolutely nothing whatever. My hon. Friend and I are leading lights in the all-party apprenticeships group, which has seen fantastic work. I should probably make a declaration that I am the first MP to hire, train and then retain an apprentice as an office manager—not as an MP, I hasten to add—because she was doing a fantastic job.

On what the Opposition intend to do, we have to address the deficit. The Chancellor eloquently put it that the Leader of the Opposition is practising Basil Fawlty politics by not mentioning the deficit at every opportunity. We also have to look at fiscal consolidation. We all heard what the shadow Chancellor said today, but what did the Leader of the Opposition say only on Sunday on “The Andrew Marr Show”? He said that

“if we…cut our way to getting rid of this deficit, it won’t work”.

So there goes fiscal tightening in any way whatever. To the clarification put to him that

“that requires a £30 billion fiscal tightening”,

he replied, “I don’t accept that.” Whatever the Opposition say today, the reality will always be that the Labour party will introduce greater taxes and greater borrowing, and greater difficulties for our children.

On attempts to address the deficit, other Members have made the point, including my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), that raising the tax rate to 50% will not increase the tax take by any margin and will actually decrease investment. On the minimum wage, tax credits from the coalition have already addressed that in a very successful form and we intend to raise it. I heard on the BBC “Daily Politics” today the hon. Member for Nottingham East (Chris Leslie) proposing that his plan for addressing the deficit was an increase in gun licences. That may be laudable, I do not know, and I am sure he has fiscally costed this matter in great detail, but if that is his plan to address the entirety of the deficit, we really are in more trouble than we thought.

We were indeed fortunate to hear from the hon. Member for Rochester and Strood (Mark Reckless). It is always a pleasure to comment on his speech. I will not cast aspersions on his honour, but I will attack his memory and grasp of economics. He supported the coalition as we did the tough work from 2010.

Oral Answers to Questions

Gordon Birtwistle Excerpts

Tuesday 9th December 2014 Commons Chamber

[Danny Alexander]

I am not sure that that is a matter for discussion at a European Union level.

[Gordon Birtwistle (Burnley) (LD)]

Rebalancing the economy has been crucial in delivering the coalition Government’s economic plan. Delivering skills for the future is vital. Does my right hon. Friend agree that the funding of professional careers advice must be part of the plan, to ensure that the growth in manufacturing is secured for the future?

[Danny Alexander]

I wholeheartedly agree with my hon. Friend on that. He has done more than most Members of this House to promote apprenticeships, the creation of skills and the manufacturing industry, and I pay tribute to him for his work. I ask him to look at what we have said about this in the autumn statement, which contains particular measures to promote the provision of better careers advice in schools.

Autumn Statement

Gordon Birtwistle Excerpts

Wednesday 3rd December 2014 Commons Chamber

[Mr Osborne]

I have long thought that there is a challenge in ensuring that commitments to reduce carbon are consistent with having a vibrant and successful steel industry and other energy-intensive industries. What we hear when we go to Port Talbot and elsewhere is a real concern that UK energy prices could be higher than they are on the rest of the continent of Europe if we adopt measures such as a decarbonisation target. That is why the Conservative party is not in favour of a decarbonisation target. Unfortunately, the Labour party is in favour of it and the steel industry might be one of the industries that will bear the cost.

[Gordon Birtwistle (Burnley) (LD)]

I congratulate the Chancellor on his plan to reduce the job tax on apprentices up to the age of 25. The country is obviously on the rise and manufacturing industry is booming, but we have a big problem with skills shortages. I am sure this measure will go a long, long way towards training young people to do the jobs of the future that this country will desperately need.

[Mr Osborne]

My hon. Friend has been a consistent champion of apprentices in Burnley and of the apprenticeship policy. He sends me and other colleagues in the Government a regular report of what is going on in Burnley and what more we can do to support apprentices. I am careful to make sure that I read that report each time it comes in. It is partly because people like him have been raising this issue with us that we have taken the big decision today to abolish the job tax when it comes to employing young apprentices. It is a major step forward in supporting apprentices and I think it will open the path to having 3 million apprentices in the next Parliament.

The Economy

Gordon Birtwistle Excerpts

Wednesday 26th November 2014 Commons Chamber

[Chris Leslie]

How disappointed the hon. Gentleman’s constituents must be to hear his comments, which contained no reflection or recognition of any of the problems that they face, including their cost of living difficulties. No, as far as the hon. Gentleman is concerned, everything is fine and wonderful: it is all working totally as it should be. I must tell him that he will have to face his electorate in a few months’ time, and that he will face their anger and concern about his failure to deal with the living standards that they have been experiencing.

[Gordon Birtwistle (Burnley) (LD)]

rose—

[Chris Leslie]

A Liberal Democrat! I will give way to the hon. Gentleman.

[Gordon Birtwistle]

Will the shadow Minister remind the House what the growth of the economy was in 2009?

[Chris Leslie]

We had a global banking crisis, but, as I recall, growth was 1% in the first quarter of 2010. We had a strong level of growth as we came out of that crisis, because we took up the challenge to stimulate the economy and get it moving again. There was a VAT reduction at that time, and then what happened? What did the Chancellor of the Exchequer do? What did he do, with the help of the hon. Gentleman’s votes? He whacked up VAT to 20%, although the hon. Gentleman had not mentioned that in his election manifesto. He, too, will have to face his electorate and account for the decisions that he has made.

I do not want to take up too much time, because I know that many other Members wish to speak, but it is important for me to say something about the fiscal challenge. There will have to be other difficult decisions, which is why Labour is looking at every single Department and every item of expenditure, line by line, in our zero-based review, and identifying the different choices that can be made to enable us to live within our means. We have already proposed scrapping winter fuel payments for the richest 5% of pensioners, cutting Ministers’ pay by 5%, capping child benefit rises at 1% for two years, reviewing the value for money of assets and non-essential buildings owned by the Government, and making savings of £250 million in the Home Office budget—by, for example, scrapping police and crime commissioners—in order to better protect front-line policing. Over the weeks ahead, we will set out more of our early findings from other Departments.

Our plan is to balance the books and get the national debt falling as soon as possible in the next Parliament. While the Prime Minister and Chancellor think it is okay to make £7 billion of unfunded pledges—the Prime Minister said that again today at Question Time—although even the Secretary of State for Business, Innovation and Skills has described that as a “total fantasy”, our manifesto will not make commitments that would be paid for by additional borrowing. When we make promises, we will say where the money will come from. We would willingly put all our costings before the OBR so that it could check and validate them—but, of course, that would upset the Chancellor’s plan to smear our proposals and run a dirty election campaign based on fear rather than fact. If the Chancellor only had the guts to put his plans, and all our plans, in front of the OBR, perhaps we could let the public form a judgment based on the values and merits of the manifestos and their policy proposals.

--- Later in debate ---

[Priti Patel]

The hon. Gentleman will recognise that had it not been for Labour’s great recession, living standards in this country would be much higher. Thanks to our economic plan and policies, we are now seeing booming inward investment, often by more than the rest of the EU combined, with all the main sectors of the economy growing. A growing economy, a falling deficit, record numbers in work: those are the economic facts that Opposition Members seem to want to deny. They want to continue to scaremonger and misrepresent the economic reality. We said we would get the deficit down, and the deficit has come down. We said we would recover the economy, and recovery is taking place. The Opposition predicted that 1 million people would lose their jobs, but 1.7 million jobs have been created.

It would not be realistic to pretend that the job is done, however, or that the situation is perfect. We know it is not, and that is a result of Labour’s great recession, but I am sure that all Members will agree that responsible government means being straight with the public about the economic situation we are in.

[Gordon Birtwistle]

My hon. Friend said earlier that 1 million apprenticeships had been created. May I advise her that 2 million apprenticeships have now been created?

[Priti Patel]

My hon. Friend is right: over 1 million apprenticeships have been created.

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[Gordon Birtwistle (Burnley) (LD)]

The performance of the economy is a great debate for today. As a brief history of the problems that we face, we all accept that in 2009 the country suffered a catastrophic heart attack in its economy. We can blame the collapse of the banks or the incompetence of the previous Government—I think that both were responsible for the problem. But that is past. What we have to do now is repair the economy.

My belief is that the economy can be repaired only by prosperity. We have to create prosperity, but Governments do not create prosperity—they create the environment for prosperity. Prosperity is created by the thousands of companies that are creating jobs and the millions of people working in those jobs. There has been more prosperity created in a nanosecond outside than there has been in the Chamber since this debate started. Prosperity needs investment by companies. The Government do not invest, but they do provide the environment and the confidence for companies to invest. That is what has been happening over the last four and a half years.

Four and a half years ago, the country was basically bankrupt. We cannot turn that round in four and half years—it will take longer. As long as we create the environment to ensure that the turnaround takes place, I am confident that it will happen. Look at my constituency. When I became the MP in Burnley—[Interruption.] The shadow Minister may think this is funny, but I think it is very serious. I really hope that the Government create the environment for the prosperity that we all need.

Four and a half years ago, unemployment in Burnley was approaching 9%. It is now 3.5%. There has been massive investment by the Government and the private sector. Almost £100 million has been invested in the small town of Burnley. The hon. Ladies in the Chamber might know Boohoo, an online ladies fashion company. Boohoo came to Burnley in 2009 with 46 people. It now employs more than 700 people and is investing £20 million in a brand-new factory. Hopefully, it will have 1,500 people by this time next year. It is so confident in the Government’s economic plan that it realises it can afford to invest £20 million of its own money, while giving the whole work force a 15% increase. It is investing for the future. [Interruption.] It may well not be happening in the shadow Minister’s constituency, but I can only say what is happening in Burnley.

The Government, thanks to the Business Secretary, are managing to rebalance the economy. It was way of out of sync when the coalition came to power, relying on the banking and service sectors while forgetting about manufacturing. What have we done? We have backed the aerospace industry with vast sums of money. It is the most successful industry in the country, creating hundreds of thousands of jobs.

[Sheila Gilmore]

Earlier, the hon. Gentleman said that in his view Governments do not create jobs, but he has just given an example of where Government investment has enabled jobs to be created.

[Gordon Birtwistle]

I did not say that Governments do not create jobs; I said that Governments do not create prosperity. Prosperity is delivered by the people who are working outside this building.

We have rebalanced the economy. We have backed aerospace and there are now hundreds of thousands of people working in the aerospace industry. In Burnley, we have invested more than £20 million in the old Michelin tyre factory, which is now serving an advanced aerospace supply chain. Lots of new American and British companies have come in and created high skills jobs with higher salaries. We backed the automotive industry. As was said earlier, we now export more cars than ever before. In fact, we are plus on exports—we used to import more cars than we exported, but we now export more than we import.

[Jason McCartney (Colne Valley) (Con)]

I would like to thank my hon. Friend for highlighting the success of manufacturing in the north of England. If shadow Ministers actually came out of their London mansions and went up north, they would see that manufacturing is flourishing not only in his Burnley constituency but in Colne Valley and Huddersfield. The textile industry in Huddersfield has produced the green jacket for the Augusta national and the red carpet for the royal wedding of the Duke and Duchess and Cambridge. It is also producing the soft furnishings for the White House and the upholstery on Boris’s Routemaster London buses. They are all made in Huddersfield.

[Gordon Birtwistle]

I am very grateful for that intervention. I am delighted that my hon. Friend’s area is doing so well. [Interruption.] The comments about “five months” really do not do this debate justice. We are talking about real people doing real things and creating the wealth for this country. That is what I want to talk about. I do not want to talk about who might lose a seat in five months. Provided I have done what I can do by then, that is fine.

The problem with the prosperity coming along through the aerospace, automotive, textile and chemical industries is that we have a desperate lack of skills. There has been no investment in skills for the past 25 years under various Governments. The previous Government were culprits as were the Tory Government before that. However, this Government have recognised the problem; we are working on it and are approaching 2 million apprenticeships. I am proud to be the apprenticeship ambassador for the Government. I travel to all sorts of different companies including Starbucks, Next and Rolls Royce—every aspect of business—to talk to young people who believe that they can create prosperity for themselves, the companies they work for and the country they live in. They are proud and pleased to be doing that. The Government have done a major thing in recognising the shortage of skills and giving those young people a chance.

University technical colleges were mentioned earlier. The new UTCs are fantastic. In secondary schools in my constituency the teacher used to say, “If you don’t work hard and pass your exams you won’t be able to go to university and you’ll have to go to the factory.” Let me tell hon. Members, if pupils do not work hard and pass their exams, they will not get a job in the factory. They will have to go to university. The skills we now need, particularly in my constituency and across manufacturing, are very high tech. I hope that the prosperity being created by the people of this country will deliver a future that I want—I am getting on a bit—my children want, and my grandchildren want. They do not want to be saddled with debt. They want to work their way out of our debt by delivering prosperity across the country. The young people of the future will be the ones to deliver that prosperity. We have to train them to be able to do that.

Finance Bill

Gordon Birtwistle Excerpts

Wednesday 2nd July 2014 Commons Chamber

[Catherine McKinnell]

The hon. Gentleman is obviously not able to rule in or rule out any slashing of the annual investment allowance, but we have had so much chopping and changing that there is major uncertainty over whether the Chancellor and other Conservative Ministers have a sensible approach to investment. It is as though they do not understand that chopping and changing—slashing the annual investment allowance from £100,000 to £25,000 and then increasing it again—is the worst approach if we are trying to encourage business investment in this country. That is the kind of uncertainty that we have seen under this Government. Although the hon. Gentleman cannot rule anything in or out, I am interested to hear whether the Minister will rule out any further chopping or changing on this policy.

[Gordon Birtwistle (Burnley) (LD)]

I am in favour of capital allowances. I had an engineering company, and we believed that the Government should support successful engineering and manufacturing companies. Does the hon. Lady accept that a capital allowance of £50,000 on its own is not enough to encourage growth in the economy? Under the Labour Government, from 2007 onwards, GDP went down by 7% in the manufacturing sector, and probably by even more in some manufacturing sectors. I accept that we should have capital allowances, but they should be linked to other things. Does she agree with that?

[Catherine McKinnell]

That is very much the point that I was making and that we have made all along. We had a financial crisis in 2008, and the Labour Government did everything that could be done in those difficult times to support businesses in order to maintain investment levels, safeguard jobs and lay the foundations for the jobs of the future. That is why Labour decided to bring in the investment allowance, and then to double it in the Budget in March 2010. We knew that businesses needed certainty at that difficult time in the economic cycle to make investment decisions. That proved successful.

The U-turn by this Government was not quick enough. We called for it in every Finance Bill. Their eventual U-turn proved that the annual investment allowance was a successful policy, because they recognised that it needed to be reinstated. We have had these debates many times. We have supported the reductions in the corporation tax rate as part of a package of measures to support investment, jobs and growth. Unfortunately, the Government thought that corporation tax rates would do the job on their own. That is why they decided to slash the investment allowance, and to put all their eggs in one basket—the corporation tax basket. We have made it clear that we support a competitive rate within the G7 and the current rate, in order to provide the competitiveness that will create jobs and growth. The hon. Member for Burnley (Gordon Birtwistle) is right that that has to be part of a package of measures.

One key issue that businesses always raise is certainty. In chopping and changing this policy, the Government have undermined the certainty that is needed to give businesses the confidence to invest for the future.

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[Catherine McKinnell]

As ever, my hon. Friend makes an insightful intervention and raises the key question. The Government need to take a step back and look at the impact their decision-making is having on businesses and their ability to make the long-term decisions necessary to secure the jobs, economic growth and the rebalancing of the economy that we all wish to see.

The Chancellor and his Treasury Ministers cannot have it both ways: either the annual investment allowance supports growth and the creation of jobs or it does not. Labour welcomed the decision to increase the allowance from January 2013 to £250,000, because we know it is important to support business growth and to foster long-term investment. However, we are concerned—this is why we have tabled new clause 10—about the Chancellor’s erratic and, frankly, bizarre approach to this important issue. Slashing the allowance from £100,000 to £25,000 and then announcing that they would temporarily increase it to £250,000, all in the space of just two and a half years, does not, and did not, inspire confidence in the Government’s long-term approach and strategy for supporting growth and investment.

[Gordon Birtwistle]

As I said, I fully support any funding that goes into capital allowances, but we have to remember that in 2010 companies were not making much profit. They were mainly on their knees from the recession that had been created previously. Companies can only set their allowance against profit, so if they are not making a profit there is no allowance to claim. The Inland Revenue was probably right to say that only 5% of companies were taking it up, because we were coming out of recession. A lot more companies are now busy working hard and making a profit, so the capital allowance is more beneficial to them as they are getting it back against the tax that they are paying now that they were not paying in 2010.

[Catherine McKinnell]

I know the hon. Gentleman’s interest in this issue is sincere. The Treasury may or may not have been right in its assessment that only 5% of businesses would be affected, but that is still 100,000 to 200,000 businesses—not to mention the supply chain. The new clause seeks an assessment of the impact of the decision taken at the time. How much of an impact did it have?

The hon. Gentleman says that, as we come out of recession, some businesses will be making more profit and will therefore be able to make more use of the annual investment allowance. That was exactly the point of bringing in the allowance in 2010. We had been through a global financial crisis and we knew that many businesses would be very uneasy about making the sort of long-term financial investments, on which they would not see a return immediately, that are necessary to create jobs. The intention of introducing and doubling the allowance in 2010 was to give businesses the confidence to invest. We know that it was welcomed by business at the time and we know that this Government’s decision to slash it to £25,000 was abhorrent to many businesses, particularly in the manufacturing sector. They needed the support and confidence to make the investments that we need to start seeing the benefits of now.

[Gordon Birtwistle]

The hon. Lady is being very generous. Does she accept that if a company is not making a profit, it will not have the capital resources to purchase the assets against which they can get the capital allowance? What is the point of the Chancellor making it available if companies, which are coming out of recession and really struggling with cash flow, will not be able to find the cash to buy the assets to claim the allowance against? Surely it is better saving it until companies are beginning to make cash profits. They can then buy the assets to improve the profitability of the company and claim the asset back.

[Catherine McKinnell]

I think the hon. Gentleman is rather confused. The purpose of the allowance is to enable companies to invest and to take advantage of tax support. If they are not able to take advantage of the annual investment allowance, there is no cost to the taxpayer, so why chop and change the regime and create uncertainty? Businesses need, from one year to the next, to be able to project and say, “This year we cannot afford to make an investment, but next year we can afford to invest so much in plant and machinery and we will be able to offset so much of that against tax.” The Government, however, have been chopping and changing the allowance. Companies cannot make long-term investment decisions from one year to the next without knowing exactly what their tax position will be.

The hon. Gentleman is actually making a very good argument for new clause 10 and I will be very surprised if he does not support us in the Lobby this afternoon. He speculates on companies that may or may not be able to invest and take advantage of the annual investment allowance. Our new clause asks the Government to undertake a proper review of the impact of slashing the annual investment allowance and then increasing it on a temporary basis. Many businesses have said to me—I am sure they have said it to the hon. Gentleman—that it is that uncertainty that creates the difficult environment for businesses to invest. They do not know, from one year to the next, what any tax allowance might be. We want to get to the bottom of that, so the mistakes the Chancellor made in 2010 will not be repeated.

Andrew Gotch of the Chartered Institute of Taxation commented on the increase announced at the 2012 autumn statement:

“This is a very generous increase that will be warmly welcomed by many small businesses...However, we note that it is only a temporary increase. Business would really welcome some stability in this area. In recent years, the allowance has fallen from £100,000 to £25,000. Now it will rise to £250,000 before, apparently, coming back to £25,000. Businesses like certainty above everything and the chopping and changing of the AIA has been a problem”.

Hon. Members do not need to take it from me, but from a whole range of sources who have raised this as a concern. The Institute of Chartered Accountants in England and Wales welcomed the increase to the allowance, but said:

“We are less enthusiastic about the frequency of the change to this amount.”

Let me be clear, the Opposition welcomed the 2013 increase in the annual investment allowance to £250,000, but we share the very serious concerns about the extremely complex manner in which that was implemented. As hon. Members may be aware, many organisations and individual businesses raised concerns that the increase to £250,000 would run from January 2013 to January 2015, rather than over companies’ usual accounting periods, making it problematic for firms, particularly small ones, to administer. Indeed, as the Association of Taxation Technicians neatly put it at the time,

“the chopping and changing of capital allowances will lead to error, confusion and higher professional costs for small businesses.”

The Opposition also welcomed the Chancellor’s announcement in Budget 2014 to extend the period of the temporary increase to 31 December 2015, with the allowance being temporarily increased again to £500,000 from April 2014. The straight fact, however, is that the Chancellor and his Government have tied themselves in knots over this vital issue. Just last year, when we considered in Committee what is now the Finance Act 2013, the then Economic Secretary to the Treasury, the Secretary of State for Culture, Media and Sport, the right hon. Member for Bromsgrove (Sajid Javid), explained why the increase in the allowance to £250,000 from January 2013 would be a temporary measure only. He said:

“We recognise that the change follows quite soon after the decrease in the annual investment allowance to £25,000 that was announced in the June 2010 Budget and implemented in the Finance Act 2011, which took effect from April 2012. The Government’s central position has not changed and remains that, in general, a lower corporation tax rate with fewer reliefs and fewer allowances will provide the best incentives for business investment, with the fewest possible distortions. That is why we have announced a further reduction in the main rate of corporation tax, as we discussed earlier, from April 2015 and is also why the current 10-fold increase in the maximum annual investment allowance is time limited rather than permanent.”––[Official Report, Finance Public Bill Committee, 16 May 2013; c. 145.]

A matter of months later, at Budget 2014, the Chancellor decided to about-turn once again, and extended and temporarily increased the annual investment allowance further—before, presumably, he intended it to return to £25,000 from 1 January 2016. As the Chartered Institute of Taxation put it so well, the one thing businesses need most, particularly in challenging economic times, is certainty. They need long-term stability and predictability to give them the confidence to invest, to make plans for the future and to take on more staff. What they have got from this Government, however, is a continual chopping and changing, with U-turn after U-turn and what seems to be a complete lack of strategic thinking.

What we need to hear from the Minister today is confirmation that the Treasury and his Government have taken seriously the impact of their decisions on business confidence, investment and jobs. We need to know that they have learned from the Chancellor’s mistake back in 2010, and that they will properly review its impact to ensure that the same mistake is not made again.

What assessment has the Minister made of the number of businesses that were not able to grow after the annual investment allowance was slashed? How many jobs could have been created during the last three years of flatlining growth while we have undergone the slowest recovery for 100 years? How many households could have been better off as a consequence, but will find themselves worse off in 2015 than they were back in 2010? Let us not forget that in 2010, back when the Chancellor was slashing the annual investment allowance, he said that the economy would have grown by 9.25% by now. Instead, it has grown by just 4.6%—far slower than in the United States or Germany. Indeed, GDP growth this year is still expected to be lower than the Office for Budget Responsibility forecast in 2010.

On Monday, my right hon. Friend the shadow Chancellor made an important speech about Labour’s approach to developing a business tax system that promotes long-term investment, supports enterprise and innovation and, most importantly, provides a stable and predictable policy framework for business, which is founded on fairness. Yesterday, my right hon. Friend, the Leader of the Opposition set out how a future Labour Government will mend Britain’s fractured economy and develop a genuinely long-term approach to backing growth in every part of this country to ensure rising prosperity for all.

It is this long-term approach to growth and backing Britain’s business and jobs that has been so lacking from this Government, and nothing illustrates it better than their shambolic and chaotic approach to the annual investment allowance since 2010. For that reason, I urge hon. and right hon. Members to back new clause 10 this afternoon, to ensure that the Government understand the impact of the Chancellor’s dreadful decision making back in 2010, and that they do not make the same mistakes ever again.

--- Later in debate ---

[Mr Robinson]

I wish I had not given way, because when I do we always get into this tiresome point. The Government seek to find refuge by going back nearly five years. The Minister has been at the Treasury for four and a half years now, and his party has been in government for that long. They own the situation now, although I know they do not want to, as all they want to do is airbrush the last four and a half years out of existence—they did that again today—and concentrate on where they are now as if they took power just six months ago. When we are having a narrow debate on the question of our having a review of a particular failed policy of the Government that is relevant to this issue, the hon. Gentleman wants to bring in the whole of Labour party policy. That is tiresome and irrelevant and a waste of this House’s time. I am sure that when the Minister replies to the debate, he will not get into that.

We are discussing a very important point. If there is genuine change introducing some element of discrimination in favour of investment for the reasons I have given, we will welcome that. Indeed, we welcome the commitment on £250,000 and £500,000. We will welcome it doubly if the Minister will extend that commitment beyond the election, to put it bluntly to him. I do not know what our policy on that will be—or whether we will go into such detail in the manifesto—but I will certainly support such a proposal, both in principle now and as party policy if it finds such favour. The Government, however, can do something about this now. Will the Minister tell us whether there is a change of policy and a change of principle on their part? If so, why will they not maintain the amount of the allowance and achieve the levels of investment, productivity and exports on which our future depends?

[Gordon Birtwistle]

As a business man, I had an engineering company that required a lot of investment. We had to invest heavily to ensure that we were competitive in the markets of the late 1990s and early 2000s. To me, the most important things for investment are confidence and cash. If companies have the confidence to invest, and the cash to invest from the profits they are making, they will invest. The capital allowances that the Government allow them to have against their profits is very helpful and it does persuade—it persuaded me on a number of occasions to buy some very expensive computer-controlled engineering machines. But when there is no confidence and when there is very little cash around, not many companies think about how much capital allowance they will get if they invest.

The country was in a mess in 2007. There was a reduction of over 7% in GDP in 2007-08, so nobody was confident enough to take the step to invest. The confidence had to be put back into the industries to persuade managing directors to invest. We know that billions of pounds were stored in banks waiting to be invested, but the confidence was not there to invest.

If Members look at Hansard, they will see that the Chancellor complimented me for putting pressure on him to bring back capital allowances, and my hon. Friend the Minister will remember the meetings I had when I was the Parliamentary Private Secretary to the Chief Secretary to the Treasury. At every meeting we had I was constantly on to him about the need to try to give confidence to companies, to persuade them to invest in the future of manufacturing in the UK. The answer came back, “There is no confidence at the moment, but we hope there will be soon, but we have all this money stashed away in banks, which is moderately safe.” It was not totally safe, because the banks were not out of the mess they were in, but companies felt it was safer there, rather than invested in capital plant in manufacturing industry.

[Chris Williamson (Derby North) (Lab)]

Will the hon. Gentleman touch on why he objects to the proposal of my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell)? I have not heard any criticism or, indeed, any reference to it so far.

[Gordon Birtwistle]

As I said to the shadow Minister, capital allowances are very close to my heart. I believe they are the way to go, but they have to be linked to other financial policies, which the Government have to put in place to work with them. Capital allowances on their own are no good. We must have other structures within the Government’s scheme of things to ensure companies have confidence. It is no good saying, “You can have a capital allowance against a new machine that you want to buy, but we are not prepared to give you the confidence to do that because we are going to increase our taxes so you aren’t going to make any money—so why would you really want to invest in the UK?” We need to create an environment whereby companies will say, “We’ll invest in the UK because the tax regime in the UK is good. We’ll invest in the UK because we feel that the training programmes in the UK will train our young people to do the jobs. We’ll invest in the UK because of the apprenticeship programme that is going ahead, and because we know we will have the future work force to deliver products that we will be able to sell around the world.”

[Dr Whiteford]

The hon. Gentleman is right to say people will make investment decisions on a range of issues, but does he agree that stability is a very important component of that?

[Gordon Birtwistle]

Absolutely: stability, confidence, cash, training programmes, and an economic strategy for the future are vital for companies to decide to invest.

I agree with, and certainly do not have any real objections to, the Opposition proposal, but it is not linked to anything. If the Labour party wants to put forward a new economic or industrial strategy that links to this, I would be the first to support it, but this is just one element of a major programme that needs to be put in place.

[Ian Swales]

I pay tribute to my hon. Friend’s experience on this issue, and his campaigning, which lay at the heart of the increase to £250,000. Does he agree that tax allowances alone do not prevent investment, and in fact capital allowances are a time-shift—in other words, one still gets the tax allowance, but one just gets it later?

[Gordon Birtwistle]

My hon. Friend is right. We must remember that claiming a capital allowance on a profit is time-lagged, because companies will have worked for a full year and will have produced products at, it is to be hoped, a profit, and it then takes a full year for the accountants to go through the profits, so that is two years from the start, and at the end of the second year the company knows from its audited accounts how much profit it has made and how much it can invest. This does not all happen on day one or even at the end of the trading year, because they do not know just how much can be offset against tax in respect of purchases using capital allowances.

My constituency has a high proportion of manufacturing, and unemployment has gone down from more than 10% to 4.7%. That is because we are manufacturers. We make things. We create the wealth for the country. One company in my constituency, Lupton and Place, was contemplating buying a new injection moulding machine—it makes aluminium castings for the automotive industry—and it thought about that for quite a long time. I had meetings with it to discuss various schemes that might assist it to do that, but no such scheme was available. However, as soon as we announced the new capital allowances, it immediately ordered the machine. It cost €400,000. It did not get the capital allowance against the whole lot, but it did get the capital allowance against £250,000, as the sum was at the time. Although there was some money that it did not get a capital allowance against, under our strategy it was able to write the rest of it off against depreciation of the machine over the next few years.

I accept the need for capital allowances, therefore, and I hope the Minister takes that back to the Chancellor, as I have done on many occasions, to ensure that companies keep investing in this country. However, the main factor before people invest in anything is confidence—confidence that the country is going forward, and that there is growth and companies can see profits coming. People are not going to invest anything in anything unless they get a return. Returns are important for shareholders, business owners and partners in business, and if there is not going to be a return on the investment, they are not going to invest. If the confidence to invest is there and the cash is there to support the purchase, either from their own resources or from banks to ensure that the investment is made, capital allowances will be a major player in the investments that take place. On their own, they are not enough; they need to go with an overall industrial strategy. I am pleased to say that I believe that is happening.

[Mr Gauke]

It is a pleasure to respond to this debate, and in particular to follow my hon. Friend the Member for Burnley (Gordon Birtwistle), who has been a great advocate for manufacturing industry over the years he has been in Parliament. He has provided a strong voice on the issue of capital allowances.

Labour’s new clause asks that the Chancellor review the impact on business investment of changes to the Capital Allowances Act 2001 made by the Finance Act 2011. The new clause is identical to the new clause 5 we opposed in Committee and we will be opposing this new clause for the same reasons. As set out in our corporate tax reform road map, the Government’s central objective is to secure a low corporation tax rate, with fewer reliefs and allowances. We remain of the view that that strategy provides the best incentives for business investment. As part of that approach we reduced the annual investment allowance to £25,000 a year in the Finance Act 2011, at the same time as we were setting out our plans to reduce corporation tax—we have extended those plans and as of next April our corporation tax rate will be 20%, the lowest in the G20.

Budget Resolutions and Economic Situation

Gordon Birtwistle Excerpts

Wednesday 19th March 2014 Commons Chamber

[Gordon Birtwistle (Burnley) (LD)]

I have sat through this debate for the past four hours, listening to the doom merchants from the Labour party, so I would just like to advise them of the position in my constituency, not what people would class as a high-wage, high-cost constituency. In 2010, we had unemployment in excess of 10% and we were in the top 10 of the worst unemployment blackspots in the country. This morning I got the figures for my constituency, and unemployment has now dropped to 5% and the town is listed 173rd for unemployment. That is a dramatic recovery.

The increase in personal allowances was the major issue for me in the Budget. It was something that I had campaigned for and that was on the front page of the Liberal Democrat manifesto at the last election—[Interruption.]

[Jake Berry (Rossendale and Darwen) (Con)]

rose—

[Gordon Birtwistle]

I will give way to my hon. Friend and leave out the shouters on the Opposition Benches.

[Jake Berry]

Let me touch on the unemployment figures in east Lancashire. Like me, my hon. Friend will want to congratulate Rossendale and Darwen as well as Burnley on their reducing figures. Does he not accept, though, that the fact that the three-month claimant count in the north-west has gone up shows just how fragile the recovery is and how dangerous it would be to go back to the Opposition party’s policies of more borrowing, more debt and higher unemployment for east Lancashire?

[Gordon Birtwistle]

I thank my hon. Friend for that remark. When it comes to the north-west, I can only speak about my constituency of Burnley, which is a prosperous manufacturing town. We have invested heavily in manufacturing over the years, and I am pleased to say that we are not one of the problems in the north-west.

I am delighted to hear about the continuation of the triple lock on pensions, which is great for pensioners. I have to declare an interest as I am a pensioner and I understand how it all works. I welcome the end to the hideous 75p rise that was awarded to pensioners under the previous Government.

I am also delighted that we still have the excellent pupil premium, as I have a number of junior schools in my constituency. One school alone receives more than £100,000 a year to help children from really poor backgrounds.

My main interests are manufacturing and apprenticeships. The Chancellor’s decision two Budgets ago to introduce capital allowances was something that I had argued for and that he had agreed were a great idea, but as the scheme had run for two years, I fully expected him to cancel it in this Budget. However, he did not cancel it; he doubled it to half a million pounds a year. An Opposition Member said that she could not understand the reason for capital allowances. She asked what they could do for manufacturing. Obviously, she has never been involved in manufacturing, and probably has never been in business. She is probably one of the few Members who do not understand what is going on.

I also want to comment on the amazing rise in apprenticeships. In my role as apprenticeships ambassador, I have been able to visit apprentices in different industries across the country. I have seen apprentices build Typhoon fighter jets at BAE Systems in Preston, missile systems in Bolton and Airbus aircraft wings in Chester. I have also seen the other side of manufacturing. Only yesterday, I went to see apprentices at Starbucks in the Westfield shopping centre in White City and they showed me how to make a proper latte with a fancy topping. I met some amazing young people.

I have also met apprentices at Next—one would not expect that such industries would have apprentices. The young apprentices at Next were absolutely amazing and a credit to the young people of this country. I did not realise that Next ran such an excellent apprenticeship scheme, which rivals the one run by Rolls-Royce. Next is committed to its young people, and it sees apprentices as its assets for the future. It is fantastic to see the massive rise in apprenticeships. Apprentices are the future—[Interruption.] If the hon. Member for Swansea West (Geraint Davies) wants to intervene, I am happy to give way.

[Geraint Davies]

I am amazed that the hon. Gentleman compares the apprenticeships at Next with those at Rolls-Royce. What a disgraceful thing to say about one of our foremost companies. Picking socks is not the same as fixing engines.

[Gordon Birtwistle]

If the hon. Gentleman had listened rather than talked to his friends, he would have realised that I was talking about the apprenticeship scheme, and not the apprentices themselves. Next treats apprentices properly, and they go through a proper three-year training programme, as do the Rolls-Royce apprentices. It is a different industry, but those young people are as keen as the apprentices at Rolls-Royce to have a proper career—rather than the career that the Labour party offered them when they were in government—and one of which they can be proud.

The hon. Gentleman might not think that is a good idea, and perhaps in his constituency he would like young people to go on Government training schemes that deliver nothing. These schemes are delivered by proper companies for young people.

[Simon Danczuk (Rochdale) (Lab)]

Youth contracts.

[Gordon Birtwistle]

They are not youth contracts. They are proper training schemes, and young people are absolutely delighted to be on them. I am appalled that the hon. Member for Swansea West should try to decry them. It is absolutely disgraceful, and he should withdraw his comments.

[Damian Collins (Folkestone and Hythe) (Con)]

rose—

[Gordon Birtwistle]

Unfortunately, I cannot give way, as I have done so twice, and I regret giving way the second time.

I welcome the new pension scheme. It is a fantastic scheme, but I would like—and this is something a number of my constituents have asked for—an end to the problems with Equitable Life. It is time that the Government looked at how we can finally wind up the problems with Equitable Life. Many Equitable Life members are now very elderly, and they would like a conclusion to the problems, which should have been sorted out by the previous Government. I believe that we should step in and sort them out. It is not a lot of money, so we should do that.

I welcome the Budget. The Government are working towards delivering a strong economy. They are delivering a fairer economy, they are creating jobs for our young people, and they are creating security for our industries. The previous Government had one major success: they managed to reduce manufacturing from 22% to 9% without trying. That was an absolute scandal of their 13 years in office. Fortunately, we are now bringing manufacturing back, and we are bringing apprentices back. Manufacturing is climbing again, and it is saving this country from the mess it was left in.

National Minimum Wage

Gordon Birtwistle Excerpts

Wednesday 15th January 2014 Commons Chamber

[Gordon Birtwistle (Burnley) (LD)]

The Opposition motion mentions that the Liberal Democrats were all against the minimum wage. I do not think that many current Liberal Democrat Members were here 14, 15 or 16 years ago. As a Liberal Democrat, I was always in favour of the minimum wage, and the engineering company that I owned always paid well over the minimum wage. If companies want really skilled people to work for them, they find that the minimum wage is far below what skilled workers are paid today.

I was a little bit offended by the attack on my right hon. Friend the Secretary of State for Business, Innovation and Skills by the hon. Member for Leeds West (Rachel Reeves). She should apologise for the fact that she did not understand the reasons why he was not in the House at the time. I accept that she is new and probably inexperienced, but hon. Members need to know the reasons why someone did something before attacking them in the House.

As has been said many times by the Secretary of State, we went through an appalling crash. There is no getting away from the fact that the Labour party and the bankers drove the country virtually into bankruptcy, and we have had to do something about it. We have managed to maintain employment. As has been said, 1.5 million people are now working who were not expected to work. The Opposition’s hope for a triple-dip recession has not happened. We have managed to drag the economy round and things are moving on, but these things need to be explained.

What can the Government do about the minimum wage? I agree that the Low Pay Commission should look at the minimum wage. I believe that it should be given the right and the power to decide what the minimum wage is, and it is quite right, as the Secretary of State said, that we should not have political interference in things of that nature.

What have the Government done to try to mitigate what we have got? By the fact that the Government have been doing what they have with the economy, we have managed to keep interest rates really low. Let us imagine what would have happened if we had gone along with the Labour party’s proposals on the economy. What would interest rates be now? We have mitigated the effects of a lot of the low salaries by keeping interest rates and mortgage rates down to a very low level. If we look across the rest of Europe, we see interest rates in Greece and similar places that have climbed to as much as 20%. Let us imagine what would have happened in this country if we had allowed that to happen. We have mitigated those effects.

All right, the country has not been able to increase the national minimum wage, and I for one would like that to happen. As the Government’s apprenticeship ambassador, I would certainly like the minimum wage for apprentices to increase, because we should be investing in young people and delivering jobs of the future, and we are now doing so. If I had the authority to speak to the Low Pay Commission, I would ask it to look at that issue.

[Katy Clark]

The hon. Gentleman’s colleagues who sit alongside him like to say that we are all in this together, but he will know that those with the highest earnings, such as the chief executives, are doing very well and their wealth is increasing, and the profits of many companies have risen considerably. Should not those factors be taken into account along with the cost of living crisis when looking at the level of the national minimum wage?

[Gordon Birtwistle]

The very profitable companies, such as the big engineering companies and the major multinationals, invariably pay well over the minimum wage. Many minimum wage payments occur, for example, in the care industry and those industries where low pay is accepted. I agree that if a company is profitable and doing well, it should recognise that its employees are creating not only wealth for the chief executive but wealth and security for themselves and for the country. I agree that companies should recognise what employees do, and the vast majority that do so pay a lot more than the national minimum wage.

[Mr MacNeil]

The hon. Gentleman is actually referring to the productivity gains that have been made. Studies in the United States of America show that the productivity gains have gone to the top 1%. The federal wage in the United States is about $7.25. Had that kept pace with the minimum wage in the 1960s and had the productivity gains been distributed at that level, the federal wage would have been treble the present rate. It is a fair bet that the same would be happening in other western countries, this one included.

--- Later in debate ---

[Gordon Birtwistle]

I am not conversant with what the hon. Gentleman says. I do not study the wage rates of the federal states of America. I have enough to do looking at rates in the UK. But we have kept inflation low and we have mitigated the effect of that on the minimum wage, and we have also managed to create extra jobs and wealth. It is interesting that the motion says that the Opposition agree with making work pay. That is the first time since I became a Member in this House that the Opposition have agreed with making work pay. Hallelujah! They have always had a go at Government Members for promoting work to create wealth for families instead of paying out in benefits. I am over the moon about those three words. If they were in the motion, I would vote for it; unfortunately, they are not.

The Opposition do not have the confidence to include in the motion what they believe the minimum wage should be. I understand that what they suggest runs for only 12 months. What will happen after 12 months? Will everyone go back to what they had before, or will people lose their jobs? It is a half-baked motion. [Interruption.] It is part of the non-economic plan. There is no long-term plan—or a short-term plan. There is no plan at all. The majority of the statements in the motion have been covered in the amendment, which is a far more sensible approach. I urge hon. Members to support the amendment.

Cost of Living

Gordon Birtwistle Excerpts

Wednesday 27th November 2013 Commons Chamber

[Chris Leslie]

Government Members see what they regard as green shoots for our economy. They hope that the public will just forget what has happened for the past three and a half years, but the public have long memories and will remember the harm and anxiety that the cost of living crisis is now causing them. Perhaps those record-breaking extremes from this Prime Minister and Government reflect the new extremism in the Conservative party and the drift away from the centre ground of British politics.

[Gordon Birtwistle (Burnley) (LD)]

Will the hon. Gentleman give way?

[Chris Leslie]

I will come to the Liberal Democrats in a moment. I am talking about the Conservative party.

The Conservatives and the Prime Minister like to pretend that they understand the concerns of hard-working people. When they finally realise the strength of public opinion, they will grudgingly come up with a half-baked effort on energy bills, just as they finally caved in with a long overdue cap on payday loans. The trouble is that they just don’t get it, because their hearts aren’t in it. As with the action on payday loans and banking reform in this week alone, why does the Chancellor always have to be pushed into doing the right thing?

The forces of moderation in the Conservative party—I am looking around desperately to see them; perhaps there are a couple of them here—complain that they are seen as the party of the rich and that voters do not trust their motives. Twenty-five of the dwindling number of those anxious Conservative Members of Parliament had a meeting with the Prime Minister to express their concerns, although that was before some of them announced that they were standing down from Parliament.

The moderates—there is one opposite me—are right to worry, because the Prime Minister’s pretence that he represents the middle of British politics has finally stretched beyond belief, as time and again his true instincts shine through. In the lord mayor’s banquet speech a fortnight ago, the mask slipped as the Prime Minister proclaimed the need for permanent austerity and the shrinking of public investment in perpetuity. The true ideological intentions of the Conservatives are there for all to see. Perhaps that is why the party’s Free Enterprise Group published its plans—

--- Later in debate ---

[Sajid Javid]

My hon. Friend tempts me and I will do just that in a moment, after I have given way to my hon. Friend the Member for Burnley (Gordon Birtwistle).

[Gordon Birtwistle]

The shadow Chief Secretary to the Treasury did not want to take an intervention from a Liberal Democrat, perhaps because it used to be a Labour Member who sat here and now it is a Liberal Democrat. Will my hon. Friend comment on the fact that in 2009 Burnley was classed as a basket case under the Labour Government with a Labour MP, but it has now won an award for the most enterprising town in the UK? Unemployment has collapsed under this Government.

[Sajid Javid]

I will comment on that because it reflects the hard work of the people of Burnley and their local MP. Why are people facing challenges up and down the country? The reason is simple and can be summed up in just three words: the Labour party.

Tax Fairness

Gordon Birtwistle Excerpts

Tuesday 12th March 2013 Commons Chamber

[Geraint Davies]

I am simply saying that those with the broadest shoulders should take the greatest weight, that there is a strong case for a 50p rate of tax and that some people already pay the 50p rate. I am not saying that they should pay that. Our tax system is not very fair, and I will move on to that later.

The problem we face is that there is no growth in our economy because there is no consumer demand, and although the deficit—the rate at which the debt is increasing —has gone down by 25%, as we are constantly reminded, the overall debt continues to rise to unprecedented levels. We are almost back to a pre-1997 situation in which we are paying people to stay on the dole and, at the same time, cutting services. That is the old Tory vicious cycle. We want to get back to Labour’s virtuous cycle, with people in jobs and paying tax and with unprecedented growth.

The other point that is always made is that the banks were unregulated and that is why everything went wrong. The reality is that the Financial Services Authority—I know that it has had a bad name—was introduced in the teeth of opposition from the Tories, who said that there was too much regulation already. Then, when the banks started going bust, the Labour Government said that we had better nationalise them so that people could still get money out at the hole in the wall. The Tories said, “No, let them fall.” That would have been a complete catastrophe. So in other words, the previous Labour Government did a very good job. We now have a situation in which, instead of confronting the deficit, which is what we should be doing, the Government have the wrong balance between growth and cuts, and within the cuts there is the wrong balance—80% cuts and 20% tax.

As for the claim that we are all in this together, we are now in a situation in which the poor are paying the most. I mentioned in a brief intervention—I also raised this in Prime Minister’s questions—a man who came to see me who had £20 a week, after utility bills, for food and clothing. He now faces a further hit of about £7 a week for having an empty bedroom. How will he survive on £2 a day? Allegedly, that change will save the Government about half a billion pounds, but of course it will not, because obviously people will move to the private sector, where rents are higher, and there will be empty houses in the public sector because councils will be forced to evict people. It makes no economic sense at all. However, if it did raise half a billion pounds, which is about one twentieth of what the Chancellor is investing in the tax thresholds, the hit to the very poorest will be similar to the gain to a very large number of people, and that will cost a great deal of money.

The point I am trying to make is that what will probably result in no savings will inflict enormous hardship on the most vulnerable, which is unnecessary and wrong. Those people, because they are very poor, have no option but to spend all their money locally, which helps to boost growth. If that money is redistributed from the very poorest to the squeezed middle, which is obviously good for votes—a callous and cynical manoeuvre in difficult economic times—then clearly that is not in favour of growth either. In so far as it will push money right up the income scale to the millionaires who live in mansions—the people we have been talking about—what will they do with the extra money the Government will have bunged to them? The threshold has gone up, so those at the top will also gain as a result. They will hide it away offshore.

There are therefore difficult issues to confront. We need to invest in our productive economy, but what is a fair way to do that in a—dare I say it—one nation way? Britain wants a one nation future that works and a future that cares, and the question for us all in difficult times must be how we deliver that. How do we invest, as I mentioned during Treasury questions, in super-connectivity for the city of Swansea? We do it on the back of investment in universities, electrified rail and communications and by marketing city regions, and indeed Britain, for inward investment. Those are all important. The Minister mentioned some of the issues about marginal corporate taxation, but the research tends to show that the major inward investment drivers are around research and development skills and access to markets, and we are well positioned on that.

On corporate taxation, there is a lot to be said—to be fair to the Minister, he mentioned this—for the idea of taxing economic activity where it occurs, whether we are talking about Google, Amazon or other companies. Amazon is local to my constituency and provides valuable jobs, but it needs to be fair and there needs to be a level playing field. If people are buying on Amazon rather than at a local shop, it is important that the local shop knows that they are all playing the same game.

Let us take the example of Apple phones and all the technology in the phone I am holding in my hand. The internet was invented here, and the other stuff, such as touch-screen and voice-activated technology, was invented in the national institute of science in California. So Apple is being taken to court by California for $26 billion because it does not pay any tax. Apple has taken innovation from the public sector, repackaged it, branded it, manufactured it overseas and got it taxed somewhere else. A big issue is that global conglomerates need to be brought to account and to pay their contribution to the public services where people are consuming their products.

Some of these people obviously live in mansions. The issue about the mansion tax, of course, is that it is part of a more general review of council tax, as other Members have mentioned, which has not been uprated. There needs to be a progressive system of taxation. Obviously the mansion tax, which is a Liberal Democrat proposal, had not been completely thought out in all its intricacies, but it is a direction of travel. If someone lives in a £2 million house, it is not that difficult to find ways of getting income out of it. It can be rented out and, with the rental income, the owner could have a palatial place in south Wales and a profit, so they could sit by the sea and enjoy themselves. For those people who are stuck in £2 million cupboards in London, allegedly, and we feel sorry for them, there are ways of releasing equity, as they could be rented out and people will pay the market rate.

[Gordon Birtwistle (Burnley) (LD)]

I am listening to the hon. Gentleman make some progress on the mansion tax. Obviously it is a Liberal Democrat policy, and I am really looking forward perhaps to voting for it later. Can he explain to me—I am keen to know—whether it will be in the Labour party manifesto at the next election?

[Geraint Davies]

Sadly, I cannot confirm that at the moment because I am not quite in a position to be writing the party’s manifesto, although I have ambition.

In difficult times we should focus on growth and ensure that those with the broadest shoulders take the weight and that we do not just squeeze the poor for the bankers’ mistakes. This proposal is part of a tapestry of opportunity to move forward on that, and we call on the Liberal Democrats to support us on what is, after all, their idea. Locally in Swansea the Liberal Democrats have been a very strong party with control of the council. Since 2010, they have been in a woeful state because people are worried about their broken promises on tuition fees and so on. This is their chance to redeem themselves so that there can be some glimmer of belief in a future for the Liberal party. If they do not vote for their own policy, what hope is there? Very little, I am afraid.