Finance Bill
Gordon Birtwistle Excerpts(13 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
I want to outline my support for new clause 10, and for reviewing the impact of VAT within three months of passing the Bill. The increase in VAT is having a real impact on the spending power of people in my constituency, many of whom are really feeling the pinch of inflation, pay freezes, and rising energy and food bills, and for thousands of people across the north-east, this all comes at a time when many of them are facing redundancy.
The previous Labour Government’s decision to reduce VAT temporarily to 15% was judged by the independent Institute for Fiscal Studies to be an effective stimulus, putting additional money into people’s pockets, and helping to support an increase in consumer confidence, a return to economic growth and a fall in unemployment, all of which are needed now. Of course we must reduce the deficit, but I do not accept that the right way to do so is on such a scale and at such an intensity that ideological deficit reduction is delivered at the expense of economic growth and job creation. Indeed, there is widespread and well founded concern that this will only make it harder to get the deficit down in the long term. Finding ways to kick-start economic growth must therefore be a priority. It is therefore vital that the impact of VAT be kept under review.
Finding a means of kick-starting growth is vital, particularly for regions such as the north-east, where I fear we risk a lost generation of young people if new economic and employment opportunities are not created, and created quickly. A key concern in my region remains the level of youth unemployment, with around 19% of 16 to 24-year-olds in the north-east not in education, employment or training, compared with the national rate of around 15%. Of particular concern is the fact that over the last 12 months the north-east has seen a 10% increase in the number of 18 to 24-year-olds claiming jobseeker’s allowance. Only Northern Ireland, Scotland and London have also experienced such rises over the same period, and then only to a maximum of 4%. With measures such as the previous Government’s future jobs fund axed by the coalition and nothing lined up to take its place specifically to support the long-term unemployed into work, we need to consider as many steps as possible to kick-start economic growth and increase employment opportunities for young people. Keeping VAT under review is vital to ensuring that.
The coalition’s decision to increase VAT to 20% in January has hit many businesses hard, particularly as that VAT hike helped to push fuel prices up to record levels. Let me take just one example from my constituency. The owner of a small electrical services company in Gosforth has made clear to me the impact of high fuel prices on his firm, which he says have hit the small business sector hardest. From its base in Newcastle upon Tyne North, his company carries out most aspects of domestic electrical work and small commercial work, travelling across the Tyneside, Northumberland and Durham areas.
Catherine McKinnell
I will give way in one moment.
The owner of the company has an expanding network of clients from the private and voluntary sectors, and he would therefore like to be able to take on his first employees within the next 12 months. However, he has said that the cost of fuel and running a second van will be a significant influence on whether he decides to take on new staff, which he would like to do, thereby doing his bit to help the economy recover. That is just one example of a local company in my constituency really feeling the impact of high fuel prices, which are hugely affected by the rise in VAT, but there are others. They include the small driving school in Lemington that saw fuel costs rise by £20 a week over the last year, the self-employed businessman from Fawdon whose work requires him to travel around 10,000 miles a year, and the young man from Gosforth who set up a Facebook page on the issue and has 475,000 supporters. All those companies are affected by the rise in VAT. The Government must make a commitment to keep it under review, to ensure that all steps are taken to help businesses survive and thrive through these difficult times, and to support those that wish to expand and create new employment opportunities to be able to do so.
Chris Ruane
You’re doing their dirty work! Look! There’s three times as many of them—
Nia Griffith
I am delighted to be given this opportunity to speak, perhaps a little sooner than anticipated. I shall speak to new clause 10 and I specifically remind Members that it is about having an assessment of the impact of the VAT rate on UK economic growth. That is the area on which I shall focus; it is what we need to talk about if we want to get this country back on its feet.
We are not asking for a knee-jerk reaction. We recognise that there is a complex relationship between the various different fiscal measures that can be taken—between VAT and all the other types of fiscal measures. We also recognise the importance of a changing environment, as events elsewhere might affect our ability to export, for example, and economic events in different countries will impact on our economy in all sorts of ways.
Let us look at what has happened recently. We have massive inflation and businesses are having real difficulty. They are being badly squeezed. They are experiencing rising costs, rising costs and more rising costs, and they are having to make difficult judgments about how many of those costs they can pass on to consumers before they begin losing sales. Their difficulties have been compounded by the fact that they have had to contend with a higher VAT rate since January. They are making calculations daily. The costs of their raw materials are changing constantly. They must keep asking themselves, “What must we do in order to keep afloat?”, but the problem is, of course, that many of them are going under.
Nia Griffith
I will if the hon. Gentleman is going to ask a sensible question.
Gordon Birtwistle
Does the hon. Lady agree that businesses—[Interruption.] I was asking the hon. Lady, not the animal in front of her. Does the hon. Lady agree that businesses can reclaim the VAT that they are charged?
Nia Griffith
I fully understand that businesses reclaim the VAT, but the consumer purchases the end product for a composite price that reflects everything that has been done to produce the thing in the first place, as well as the transport costs—that was explained by my hon. Friend the Member for Chesterfield (Toby Perkins)—and, of course, the VAT. The customer pays the VAT in the end, but the business has already been affected by the rise in costs that it is incurring, which do not include VAT. The price of raw materials, particularly fuel, has risen, and every business is being squeezed to the limit. Every penny counts, and businesses are asking themselves, “At what point can I put the price up? At what point does the purchaser not buy?”
Many of my hon. Friends have mentioned the impact on hard-pressed families, and they have indeed been hit very hard. The hon. Member for Redcar (Ian Swales) recited a long list of goods that do not attract VAT. Was he suggesting that every middle-income and lower-income family should exist solely on food and children’s clothing? Has he not thought of the numerous household items—
The Economy
Gordon Birtwistle Excerpts(13 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Tom Blenkinsop
I am sorry, but I want to continue. I will give way to someone else later.
The Tories are creating a vicious circle in our economy by cutting too far and too fast, hitting families and costing jobs. In fact, they are set to borrow £46 billion more than they had planned last autumn because of slower growth, higher inflation and higher unemployment, which are the consequences of the decision, announced in the Chancellor’s first Budget, to cut too far and too fast.
In the 12 months since the emergency Budget, all the key economic forecasts have worsened. On borrowing, for example, the OBR has steadily increased its forecasts for Government borrowing over the next five years, which means that the Chancellor is now forecast to borrow £46 billion more than he expected to last November.
Tom Blenkinsop
Sorry, no.
That is because slower growth and higher unemployment, which means more people claiming benefits, makes paying down the deficit harder.
Tom Blenkinsop
No.
The best way to reduce the deficit in the long term is by focusing on growth and jobs in order to get people into work and off benefits. Since the emergency Budget, the UK’s GDP for this year has been downgraded twice by the OBR, and three times since it analysed Labour’s plans. It is not only the OBR that has downgraded its growth forecasts; other respected organisations have done the same. The OECD, in its most recent forecast, downgraded the UK’s growth in 2011 to 1.4%, and to 1.8% for 2012. The British Chambers of Commerce, in its recent quarterly forecast, downgraded growth in 2011 to 1.3%, and to 1.2% for 2012. The International Monetary Fund, in its latest report on the state of the UK economy, downgraded its growth forecast to 1.5% in 2010, down from 2% last autumn. The OBR is now forecasting higher unemployment and a larger number of people claiming jobseeker’s allowance in every year of this Parliament. Its latest forecast now expects inflation to peak at 4.2% this year, up from 1.6% last June when it evaluated Labour’s plans.
The international comparisons are stark. Recent figures show that in the first quarter of 2011 the French and German economies grew by 1% and 1.5% respectively, compared with the 0.5% growth in the UK, which merely cancelled out the 0.5% contraction of the previous quarter. Over the past six months, the UK’s growth has been flat. The Business Secretary has admitted that it is “worrying” that we are lagging behind France and Germany. The OECD’s deputy secretary-general and chief economist told The Times that he sees merit in slowing the pace of fiscal consolidation if growth continues to be slow.
Tom Blenkinsop
No.
This pattern is borne out in my constituency and the local area. Recent figures from the Office for National Statistics show that the volume of new construction orders in the first quarter of 2011 fell by 23%, compared with the fourth quarter of 2010. Orders are also down 18% from that time last year. That coincided with 1,500 job losses in the steel industry at the Skinningrove steel works in my area, in Hartlepool, at the Teesside beam mill, and also down the road in the constituency of my hon. Friend the Member for Scunthorpe (Nic Dakin). This Government have taken away public sector orders in steel that provided 46% of the Teesside beam mill’s orders, which have just vanished. Figures published on 10 June show that the seasonally adjusted index of production in April 2011—
Mr Deputy Speaker (Mr Nigel Evans)
Order. Mr Birtwistle, just to save your legs, I do not think that Mr Blenkinsop is keen on allowing you an intervention.
Owen Smith
I answer candidly that we have already said that we need a rebalancing of our economy. On both sides of the House, there was far too great an emphasis on the belief that we were in a post-industrial society and manufacturing was not an important part of the mix. We have learned the lessons, as I hope Government Members have. I hope that there will therefore be an active industrial policy from the Government, like the one that the Opposition are talking about. That is the only way in which we will improve manufacturing.
Gordon Birtwistle
Does the hon. Gentleman agree that, if the country takes on the debts that the Opposition suggest by cutting VAT and spending vast sums, interest rates will rise? That alone will stifle any economic growth.
Owen Smith
No, I do not agree with that for a moment. A VAT holiday right now would stimulate the economy. We saw it work previously and it would work today, and that is why we advocate it. The hon. Gentleman is entirely wrong.
It is clear that the past year has been disastrous, so let us look ahead. Let us not rely on the Opposition or the Government, but instead examine the Office for Budget Responsibility’s projections. It projects lower growth than it did last time, lower in fact than in its last three projections. It projects increased unemployment, with 200,000 more people unemployed by the end of this Parliament. Most critically and damningly of all, it projects ballooning borrowing, with £50 billion extra in borrowing in this Parliament as a result of the dreadful mistakes that the Government are making. [Interruption.] That is the reality—borrowing went down by £20 billion last year as a result of the stimulus, and it is now going up. No amount of shouting can get Members away from that fact.
What do those desiccated numbers mean for ordinary working people in this country? They mean heartache and misery. As one leading economist said last week when reflecting on a market survey that showed household income going down and household debt rising at the fastest rates since the depths of the crisis,
“The grim figures show household finances deteriorating at the fastest pace since”
2008-09, with people
“eroding their savings and taking on more debt to finance strong rises in living costs”
and reductions in their wages. That is the reality, as the Governor of the Bank of England recognised when he said that we were facing the biggest squeeze on living standards and wages since the 1920s. We can lay the blame for that directly at the door of the Conservative party.
In Wales, my part of the country, we are feeling the pinch harder than most. We have already heard the number of people unemployed in the midlands, the area that we hear the Chancellor have the temerity to talk about from the Dispatch Box. Employment there was down by 6,000 in the last period. In Wales it is barely creeping above the positive line, and in the north-east it is down by 14,000. The notion that there is a private sector-led jobs recovery spreading equitably across the country is absolute fantasy, and we must expose it.
Consumer Focus Wales, the body that looks after ordinary working people’s rights, says that some of the most vulnerable people in our society, including older people, those on low incomes and those with long-term conditions, are right now cutting back on essentials such as groceries and energy usage. That is a disgrace in this day and age, and the Conservative party must face up to it.
In my constituency of Pontypridd, three times the number of people are looking for every job this year than last year. That is the reality of employment in my constituency. Three people on jobseeker’s allowance looked for every job in the jobcentre last year, but now nine are looking for it. The citizens advice bureau is in jeopardy as a result of another of the Government’s cuts—the cut to legal aid—but in one single year, there has been a 20% increase in the number of people going to the CAB for advice about debt, family breakdown and job insecurity. That is the largest increase in the history of that CAB. Those are all clear indicators that it is not working but it is hurting. More austerity and pouring misery on misery will not help my constituents, just as it is not helping Greece.
Fuel Prices and the Cost of Living
Gordon Birtwistle Excerpts(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Ms Eagle
I will get on with my remarks and give way to the hon. Lady shortly.
The cost of oil has been rising on world markets as a result of underlying increases in demand from Asia and uncertainty because of the unrest in the middle east. Just a week ago, petrol prices hit a new high at the pumps. The average price for unleaded fuel is, a week later, still £1.32 a litre. That means that the cost of fuel has risen 7p a litre since the beginning of the year. The AA pointed out that the £6 gallon has arrived for the first time, and that prices for diesel have soared even higher, currently averaging £1.38 a litre.
Gordon Birtwistle (Burnley) (LD)
I am grateful to the hon. Lady for giving way—[Interruption.] May I refer to an e-mail that I received—[Interruption.]
Mr Speaker
Order. That is not an orderly way in which to conduct the debate. An hon. Member should not stand up in the Chamber with an electronic device and read from an e-mail as a means of debating. That is the current position—such matters are always subject to review, but I assure the hon. Gentleman that that is the position at the moment, and we will leave it there.
Ms Eagle
I am not willing to give way to the hon. Gentleman. [Interruption.] He can show me the e-mail afterwards.
The Conservative-led Government’s decisions to raise VAT to 20% may have been expertly disguised before the election so that the voters were kept in the dark about it, but we all know about it now. Increased VAT has added an average of £450 a year in extra cost to a family with children and has pushed the headline CPI figure to 4%, which is double the Bank of England’s target.
Ms Eagle
I will not give way to the hon. Gentleman.
As we all know, VAT applies to petrol. The Library calculated that the Conservative Government’s 2.5% increase in VAT has added nearly 3p to the cost of a litre of petrol when people are least able to absorb that extra cost.
Finance (No. 2) Bill
Gordon Birtwistle Excerpts(14 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Sheila Gilmore
I thought I had covered that issue. We are not saying that there is no deficit or that there will be no reductions; we are saying that if you cut too far and too fast, you will worsen the current position.
Gordon Birtwistle (Burnley) (LD)
I am extremely interested in the fact that you admit that you would have cut the deficit, and I am extremely interested to know how you would do so.
Madam Deputy Speaker (Dawn Primarolo)
Order. Tempted as I am to answer the questions that are being posed about the deficit, I remind the House that the hon. Gentleman is not the only one in this debate currently blaming the Chair for everything, so I would be grateful if we could return to the convention, ensure that our language is correct and, if possible, keep me out of this argument—for now, anyway.
Equitable Life (Payments) Bill
Gordon Birtwistle Excerpts(14 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Nia Griffith (Llanelli) (Lab)
I am grateful for the opportunity to take part in the debate today, and I certainly want to support the Bill, because we do not want to do anything to delay the payments. The important thing now is to get those payments made as quickly as possible to the many ordinary hard-working people who made sacrifices in order to put money away in a scheme that they trusted to provide for them in later life. Those people were thinking ahead; they were the responsible citizens who had no intention of having to rely on the state. They continue to worry, however, and to suffer hardship, because they fear that there will be still more delays. They are also worried by the mention of a cap being placed on the funding of the payments. Most importantly, those people do not want smokescreens, spurious justifications or complicated explanations. They simply want the Government to take notice of the ombudsman’s letter of 26 July and move as swiftly as possible to making proper payments. They want those payments to be realistic, not just a sop; they want them to be made in the spirit of the ombudsman’s report.
I am very concerned by the fact that the Minister spoke today of linking the amount to be paid out to Equitable Life victims with the comprehensive spending review. That would be totally unacceptable. We know that the issue of Equitable Life has gone on for some years now, and it should not be arbitrarily subject to a review that is to take place in a few weeks’ time. Opposition Members are committed to seeing Equitable Life victims receive proper payments that reflect their losses. Anyone listening to what both the coalition parties said before the election would have thought that they too were committed to making proper payments. Indeed, they were vying with us to say that they would be more generous than we would. To state that the payments will now be subject to spending review cuts of perhaps 25% is absolutely disgraceful. What would have been a £100 payment could now be only £75. Frankly, that seems to me next to dishonest. Equitable Life victims were not responsible for the banking crisis, and they certainly do not deserve to be penalised by the slash-and- burn policies of the present Government, whom respected economists are now suggesting might send us into a double-dip recession.
Gordon Birtwistle (Burnley) (LD)
The hon. Lady says that she is keen to see the payments made to the Equitable Life policyholders. Will she tell us how much Labour would have paid out if it had been in control?
Nia Griffith
What is important now is to move on and get those payments made. The worry is that these smokescreens are putting people off, and the policyholders will not see any money at all. They want to see actual payments.
The policyholders are also worried about tax and benefit loss. I am pleased to see clause 1(3) in the Bill, but it is far too loosely worded. It gives the Treasury the power to disregard payments to Equitable Life victims when assessing their tax liability or their entitlement to means-tested benefits, but I would like to see a much more strongly worded provision, as well as a genuine awareness among Ministers that any payment will be disregarded.
Capital Gains Tax (Rates)
Gordon Birtwistle Excerpts(14 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Geoffrey Clifton-Brown
I remind the hon. Lady that the Labour party won the election in 1997. The Labour Government had between 1997 and 2008 to do something about that, but meanwhile more than 1 million pensioners had to go through means-testing and fill out huge forms to get pension credit. A considerable number did not want to claim the credit, because they were too proud to do so, and they therefore lived in poverty. In the first few weeks of this new Government, pensioners have got a better deal than at any point under the 13 years of the previous Labour Government.
Gordon Birtwistle (Burnley) (LD)
Does the hon. Gentleman agree that the Labour Government’s 75p increase for pensioners a number of years ago, which was reduced to 50p after tax, was an insult not only to pensioners, but to the people of this country, which is supposed to be one of the modern countries of the world?
Geoffrey Clifton-Brown
I entirely agree with my hon. Friend. Many pensioners have told me exactly that—that it was an insult—so I hope that we can move away from treating our elderly people in such a way. As I have said before in the House—I remember raising this point with the then right hon. Member for Sedgefield during Prime Minister’s questions—the way in which a society treats its elderly people is a mark of that society’s civilisation. I hope that we will treat our elderly people with respect.
In an excellent, sober speech, my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) put his finger on an interesting yet under-mentioned aspect of our economic problems. It is demonstrated by the table on page 7 of the Red Book, which shows that private debt has doubled in the past 13 years. It is, of course, up to members of households to make their personal decisions, but it is also up to the Government of the day to regulate the totality of private debt. The level of private debt has become unsustainable, something on which I often chased the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) in Budget debates. As the Red Book shows, the savings ratio was lower by the end of the Labour Government than at any time since the 1950s. It is incumbent on any Government of the day not only to encourage savings, but to ensure that the savings culture exists in a stable regime in which inflation is not completely out of control. If we did not take the action outlined in the Budget, interest rates would rise, thus putting inflationary pressure on the economy.
Angela Smith (Penistone and Stocksbridge) (Lab)
May I join those who have congratulated you on your election, Madam Deputy Speaker? If I may give the House an update on the score in the England match, it is still 1-0. I think it is no coincidence that I am surrounded by an unusually large number of Welsh and Scottish colleagues. Thank you, Madam Deputy Speaker, for allowing me to speak in this important Budget debate—the most important in more than 30 years.
Thirty years ago, in 1979, I was a young slip of a thing—only 17 or 18 years old—and I remember what I saw in the following years. I am not going to have a go at the record of the previous Tory Government, so those on the Government Benches can settle down. In areas such as South Yorkshire and northern Lincolnshire, we saw huge devastation of our economies. Those of us who know the Don valley—I know that the Economic Secretary knows it very well—from its origins up in the north of Sheffield and in Barnsley through to Doncaster will remember the devastation of that lunar landscape: that is the only term that could have been used at one point to describe the lower Don valley. We saw the flattening of Hatfield, where now we have the Meadowhall shopping centre, and the devastation—as in the valleys of Wales—caused to other south Yorkshire valleys such as the Dearne valley. Where there were the pits of Manvers, Wath and Cortonwood, we now have a Morrisons supermarket and a retail centre.
I well remember all that. I remember, too, the work that we have done since then to try to repair the damage. We have tried to diversify our economies in the north of England—in places such as south Yorkshire and northern Lincolnshire. To some extent we have succeeded. We have biosciences, sport and leisure, and retail—and we still have advanced manufacturing.
We were making progress, albeit very slowly, on reducing the gap in economic growth and prosperity between London and the south-east and places such as Yorkshire and the Humber, but what is happening now poses a new threat to our economy in the north. If we suffer significant damage yet again because of a return to recession, the fear is that that damage will be permanent and irreparable, and that we will be unable to move forward as we had previously hoped without even more funding—significant funding—from Government and Europe. That is the context to today’s debate. I agree with my hon. Friend the Member for Ogmore (Huw Irranca-Davies) that the impact of the Budget on individuals and communities must be at the forefront of our minds.
Unfortunately, the Budget is a wasted opportunity to help the British economy on the road to recovery. Instead of investment and the promise of future jobs, we have a Budget of cuts for the poorest and regressive tax increases—a Budget that risks our future. The race to austerity that the Government seem determined to follow belongs to a lesser-known branch of economics called ignorance economics, as Leslie Budd of the Open university calls it. As he correctly points out, although it is sensible to cut waste, the slashing of spending can do much more harm than good. That is what the Budget, with its massive cuts to public spending, will do.
Unprotected Departments could have real-terms cuts of 25% over the next four years. The key question is this: how many nurses, police officers, teachers and other civil servants will be thrown on to the scrap heap in the years and months to come? How fair is it that one of the significant cuts in the local government budget will be in the area-based grant? Sheffield Hallam is one of the richest constituencies in the country, and Sheffield Brightside one of the poorest. The gap has decreased in the past 13 years, but there is still a 14-year difference in life expectancy between those constituencies. The abolition of the area-based grant will hit Brightside, but it will not hit Hallam in any way at all. How can that be fair?
The pupil premium has been promised, but we are hearing that it will be based on the abolition of additional educational needs funding and vulnerable children’s grants. If we roll that funding up into a pupil premium, will it be distributed fairly, or will more of it go to the south of England at the expense of the north?
Although I welcome, and offer my support for, the increase in personal allowances from next April, it will be more than wiped out by the regressive increase in VAT to 20% from January next year. There is no rise in the personal allowances for over-65s, which will disappoint many of my older constituents—indeed, I received an e-mail on that subject just this morning. That gives the lie to the argument that the Budget is all about fairness. Although the confirmation of Labour’s policy of linking the state pension to average earnings is welcome—it builds on policies developed by the Labour Government—not increasing the personal allowance for pensioners in line with those for everyone else is just wrong.
It is obvious that the Prime Minister’s words before the election—never mind the Deputy Prime Minister’s words—that he had no plans for an increase in VAT were as worthless as similar words spoken back in 1979. I remember very clearly that in 1979 the Conservatives said they would not double VAT. The first thing they did on coming into office was increasing VAT from 8% to 15%. That was not quite double, but it might as well have been.
When there is a need to maintain demand in the economy, the Budget risks squeezing demand and creating a double-dip recession, which could be worse than the one that we recently experienced. Let us get rid of the myth that the public sector is bad and that only the private sector can get the economy growing again. The balance has to be right, as we in south Yorkshire know better than others; we know it all too well. However, the two sectors are interlinked. Private companies benefit from Government investment, which is why we brought forward the capital projects—to keep the economy moving and to keep construction workers in work. Ensuring that the private sector works with the public sector can give us growth.
Let us also demolish the myth that only by putting forward austerity measures will we see growth in the economy. The lessons of the 1930s show that not to be true. Although the 1929 crash dealt a massive blow to the global economy, it was the neo-liberal austerity budgets that followed that led to a vicious decline in international economic activity, leading to protectionism, a collapse in world trade and depression. My fear—it is shared, I think, by every Opposition Member—is that that is exactly where we will go. We have seen austerity measures introduced not just by the UK, but by Germany, Greece, Italy and Spain. The House ought to think carefully before going down that path. It was only after the new deal in America that growth started to return in the 1930s. Sadly, Government Members do not seem able to learn the lessons of that period in our history.
The current rhetoric from Government Members is, “Look at what Canada did!” It has been mentioned already by Labour Members that Canada’s actions in the 1990s to wipe out its sovereign debt were taken in a completely different context. Canada was able to reduce interest rates quickly, and had a route for its exports in a booming US economy, because the value of the Canadian dollar was allowed to fall. Interestingly, Canada once again has a large public debt and is not considering the reckless action that the Government are pursuing. Those options are not sensible or credible in the current situation.
Let us also bury the myth about Greece. The UK is not in the same position as Greece. In 300 years of national debt, the UK has never defaulted on its sovereign debt. The UK’s debt has a long time to run, with an average of 14 years to maturity—twice as long as most other European countries—which means that the UK needs to finance much less of its debt in any given year and, therefore, is much less sensitive to rising interest rates.
We hear from the Liberal Democrats that fairness is important, and yet they now say that it is right that public sector workers should see real cuts in wages, while capital gains tax rises by only 10% for higher rate taxpayers. They also say now that VAT should rise to 20%, which they once said would be totally unfair on the poor. The Liberal Democrat way now is that it is right to cut benefits by £11 billion for the poorest in our society. Where is the fairness in that? Members can use as many words as they like and whatever sophistry they like, but they will not persuade the British people of the credibility of their position if they say one thing one minute, and another thing the next, just because they have taken the reins of power.
Where is the fairness in freezing child benefit for the next three years—a benefit that is often the only one paid directly to women and mothers? When that is coupled with the reduction in tax credits, many of my constituents will see that this is not a fair Budget. It is a regressive Budget that I believe will get the reception is deserves.
Gordon Birtwistle
Does the hon. Lady agree that if the interest payments on our existing loans, which are approaching £40 billion a year, were half that amount, we would not be in our present situation, and we would be able to spend the money on the things that she is now suggesting?
Angela Smith
As I think I said earlier, equating the national economy to a household budget has already been declared by many respected economists to be ignorance economics. It has been discredited by respected economists throughout the world, including economists of the centre right in the United States who recognise the lessons of the 1930s and recognise that we need investment and public spending to bring back growth and jobs.
However, the question is whether the Budget is needed. According to the new body set up by the Government—the Office for Budget Responsibility, which I think we all support—the economy is in growth. OBR statements make it clear that the previous Government’s spending plans were credible and would have reduced the deficit gradually, over a four-year period. I believe, as I think everyone on the Labour Benches believes, that that was a sensible course forward. Therefore, it has to be said that the reason why the Government are pursuing this path is ideological dogma. They are cutting for the sake of cutting, in an ideological drive towards the small state. The language of the TaxPayers Alliance is alive and well in the corridors of power, but it is cloaked in the language of “Needs must”.
The prospect of a race to austerity is so worrying that President Obama’s Administration in the US have felt it necessary to write to the leaders of the G20 countries urging them to continue with the economic stimulus—something with which, as I have mentioned, many economists agree. Although the help for new start-up companies in the regions and the creation of regional development funds are welcome, those measures will be more than offset by the run-down of the regional development agencies, such as Yorkshire Forward, and the loss of no doubt thousands of public sector jobs. It has been said today in the Financial Times, but let me put it on the record, that the overall impact of the Budget, contrary to statements made yesterday, will be a 60% reduction in capital investment by the Government by 2016.
Let us not think for a minute that this is a Budget for investment. The Government have fallen at the first hurdle on that idea. With the £80 million loan to Sheffield Forgemasters, they had the chance to show that they were interested in investing in growth and exports, in state-of-the-art technologies and in UK manufacturing. However, they chose not to do that. The loan would have earned a 3.5% interest rate, and would have involved Westinghouse taking a stake in the company and giving a guarantee of forward orders. It would also have transformed Forgemasters into a major player in the nuclear castings sector. The loan was secured against the company and would have been part of a total package worth around £140 million, with £80 million from the Government on a loan basis.
That would have meant £140 million for Sheffield and UK manufacturing, allowing for the purchase of a 15,000-tonne press capable of making the pressure vessels at the centre of a nuclear power plant. To put things into perspective, the only other company in the world currently making forgings of a sufficient size for the international market is Japan Steel Works, which has recently tripled its capacity in order to make 10 pressure vessels a year. However, 11 new nuclear power stations were commissioned around the world last year, and the pace is accelerating, with 55 reactors in planning at the end of 2009 and more than 30 licence applications under active discussion in the US. Not only that, but with only one company in South Korea and two companies in China now intending to enter the business of making such forgings, any future project for building new nuclear power stations in the UK will have to import pressure vessels.
As my right hon. Friend the Member for South Shields (David Miliband) said last week on hearing the announcements, the champagne corks will indeed be popping in Japan and South Korea. The investment was not, as the Deputy Prime Minister would have us believe, set up in the dying days of the previous Government. I would testify anywhere, in any court in the land, that those negotiations had been going on for more than two and a half years, and they went through the most rigorous scrutiny possible. The scheme would not only have given value for money; it would have been of major strategic importance to the economic future of advanced manufacturing in the UK. Again as my right hon. Friend said, pulling the plug on that loan is a piece of gratuitous economic vandalism—but then again, what should one expect from a Tory party that almost completely destroyed steel making in south Yorkshire in the 1980s?
We heard a lot in the previous speech, by the hon. Member for The Cotswolds (Geoffrey Clifton-Brown), about the importance to the economy of an export-led recovery. I completely agree with what he said, so why did his Government not put the money into Sheffield Forgemasters, as that was all about exports, the future of UK manufacturing and the rebalancing of the UK economy? They turned down the chance to help this economy to recover. They failed the challenge on grounds of—[Interruption.] Well, tell me what the grounds were—ideology, dogma, pressure from Sheffield Forgemasters’ competitors to say no? We would like to hear about them.
If this is an example of the Government’s investment strategy, we should all be worried. For a relatively small loan that carried a commercial rate of interest, the UK would have had a company capable of being at the forefront of the supply chain for the nuclear power industry. It would have created jobs not only in south Yorkshire, but throughout the country. It would have led to high-value exports and secured the future of high-value steelmaking in the UK. Crucially, I know from working with Corus, Forgemasters and Fox Wire in my constituency how important it is for UK steel to stay ahead of the game when it comes to skills and advanced technologies. We cannot compete with China and the rest of the Asian economy on low-value steel casting and steel forging, yet we are giving that advantage to our foreign competitors.
It is also of interest to note that on the day the plug was pulled on the Forgemasters loan, the Department for Business, Innovation and Skills confirmed the building of a research ship for £75 million. There is nothing wrong with that investment, and I will support it, but the ship will be built in Spain because there are no longer any British yards capable of building it. The Tory Government of the 1980s decided that investment in shipbuilding was a waste of resources.
We should add to all this the fact that this Government have pulled the future jobs fund and slashed university places by 10,000. The hon. Member for Bournemouth East (Mr Ellwood) mentioned earlier that he had a relatively elderly constituency. Well, I have a lot of young people in my constituency, and they are worried about whether they will get the places they are looking for in the university system over the next five years or so.
Oral Answers to Questions
Gordon Birtwistle Excerpts(14 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
A range of announcements will be made in the Budget across a whole range of issues, but as the Chancellor has said repeatedly, one of the key tests of measures is fairness, to ensure that we do not repeat the mistakes of the previous Government in allowing inequality to widen and in missing child poverty targets.
Gordon Birtwistle (Burnley) (LD)
Does my right hon. Friend intend to continue using the very expensive PFI funding for future capital investment in the NHS? The most expensive to date has been in Wythenshawe hospital, where the NHS will pay back 16 times the original capital value. More prudent borrowing in the past would have delivered the investment without adding to the deficit.
Mr Osborne
The hon. Gentleman makes a very good observation about the hidden costs of PFI liabilities. After the Office for Budget Responsibility creates an independent set of national economic forecasts, it will go on to look at PFI liabilities. The deficit and national debt that we have been talking about are, of course, only half the story; there is the hidden iceberg of the PFI liabilities that the Labour party ran up over 13 years as well.