Debate on the Address

Graham Stuart Excerpts

Tuesday 25th May 2010 Commons Chamber

[Mr Redwood]

Indeed, and even in this new possible age of austerity, and even with a September sitting, I am sure that it would be possible to fit in a visit to Greece. That is exactly the kind of help that the Greek economy needs, and it would be much more attractive if they had a devaluing drachma—so that we could buy ouzo rather more cheaply. So my hon. Friend’s point is, of course, absolutely correct.

There are these very important differences, therefore, but the message to Britain has to be that we cannot go on printing and devaluing ad infinitum. There comes a point where the markets pull the rug from under us and say, “This is extreme—you cannot do this anymore.” There comes a point where we will be effectively reneging on our debts, because we will be devaluing the currency in which we are repaying them by so much.

That is why I so strongly welcome the clear response of the coalition Government to put at the top of the Queen’s Speech the need to take action to tackle the deficit, and why I think that they are right to have three phases. We saw the first phase on Monday—the down payment of £5.7 billion net—and we will then have the emergency Budget, which I hope will include some guidance on how we are going to get the deficit down in the medium term. We will then have the really important work, in the autumn, when the Government have had time to do the full-scale public spending review that the previous Government ducked out of and declined to do at the appropriate time. We will then be able see the proper trajectory for spending, which will be important for curbing the deficit.

I want to see the euro stabilised. However, it will be difficult to do that, because it was not wise, as many of us said at the time, to include Portugal, Spain, Ireland and Greece in the euro area. The euro works fine for France, Germany, Benelux and Austria, but it is difficult to get it to work for such a diverse grouping. However, the United Kingdom Government have to allow the euroland members to take more direct power over the euroland economies, because a single currency cannot work unless there is a single budgetary policy and controls over the amount that those countries borrow. They are all borrowing in the same currency. It is like sharing a bank account with the neighbours, where we need to control how much the neighbours spend, otherwise there will be an awful shock when we see how they have flexed the credit card and the overdraft. We need to let those countries have such power, so I hope that the Government will offer advice and assistance.

I would like us to get some powers back for ourselves, at the same time that more powers are being taken for the centre. However, it would be quite wrong of Britain to be obstinate and say that the centre should not have those powers. It is in our interests that the euro should work, and the only way that a currency union can work is if there is centrally controlled budgetary discipline and central agreement on how many euros are printed—some more will probably need to be printed now—in order to get out of this mess and get reflation going in those economies.

However, I am, of course, much more concerned about the prosperity of this country. I am conscious that although we need to control the deficit and take the measures that I and others have often argued for, we are not going to get out of this mess unless we have the strong private sector recovery that I and others are now referring to. I would therefore say to the coalition Government that they need to spend as much time on regulation, tax and other matters that affect the rate of growth of the private sector economy as they spend on curbing the spending problems in the public sector. The two need to go together. It is not a good idea simply to cut the public sector, if we do not create the conditions for strong and good growth in the private sector.

Let us take the sensitive issue of tax. I have been doing a little research on the topic of capital gains tax. I share the Liberal Democrat and Conservative coalition Members’ wish to raise more money from capital gains tax. That might come as a shock to many of my parliamentary colleagues, but in this situation we need to tax the rich more. They have more money and we need more money to come into the Treasury; we need to tax the rich more. However, the result of my researches shows that the way to get more money out of capital gains tax is to lower the rate. The figures are quite dramatic, although it is easier to see the effect in the United States of America than in the United Kingdom, because there have not been so many fiddles and changes in the way that capital gains tax is levied there as we have had here. We have had indexation, business relief and all sorts of complications, although the British series, as adjusted, seems to bear out the same case.

In America in the early 1980s, there was a period of cutting capital gains tax rates, down to 20%. Capital gains tax revenues hit a massive high in 1986, on the back of the lower, 20% rate. The Americans spent the next part of the 1980s hiking up capital gains tax, from 20% to, I think, 33%, and the revenues collapsed, but they did not get the idea. However, in the ’90s they returned to a more common-sense policy and the revenues picked up again. By the 2000s, the Americans decided that even 20% was a bit high for maximising the revenue, so they took the rate down to 15%, which is where it is now, and revenue surged. The 15% rate seems to be much nearer the optimum, producing far more tax from the rich in the United States than 20, 28 or 34% produced.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

My right hon. Friend is giving a masterclass in economics that, sadly, the Opposition failed to listen to in all their years of taking us to this current low ebb. Is he sure, however, that when the rates of capital gains tax are lowered, people will not simply manufacture a way of turning income into a capital gain, in order to avoid taxation elsewhere? If that were to happen, the gain might not be entirely real.

[Mr Redwood]

Those periods were also periods of surging income tax receipts, which demonstrates that this is good for enterprise, profits and jobs. We need more profits, more savings, more investment and more jobs. If we tax things more lightly, we get more of them. If we tax them more heavily, we get less of them. The enthusiasts for high taxes in this House have always said, “We must put up the taxes on petrol to stop people driving so much, and we must put up the taxes on smoking to stop people smoking so much.” So, presumably, putting up the taxes on enterprise will stop people being so enterprising. That must be the logic.

--- Later in debate ---

[Keith Vaz]

The hon. Gentleman has made this point before. As a small business man, he was concerned about policing in his constituency. It is also, of course, natural constituency work. People want visibility and if they do not see a police officer, they get worried. When we consider police budgets and re-organisation, we must make sure that we protect those front-line services.

We also ought to be very careful about electing commissioners and chief constables. I am all in favour of a review of the police committees. Most police committees are not absolutely accountable to local people, most of whom do not know who sits on their police committees. Similarly, very few people know who the executive directors of primary care trusts are, despite the fact that they dispense a huge amount of NHS money locally. I am all for more accountability and am happy to look at proposals that would allow certain numbers of people to be elected on to police committees, but we should not take away the operational responsibilities of police officers and the priorities of local policing from police officers and place them in the hands of people who do not necessarily have the experience to do their work.

[Mr Graham Stuart]

For a man of his experience and expertise, I am surprised that the right hon. Gentleman morphed the election of police commissioners with the election of police chief constables. No one is suggesting the election of chief constables. We are talking about addressing the very point that the right hon. Gentleman rightly makes, which is that there is no accountability. When we knock on the doors of our constituents, we find that they are frustrated that the local police force has not been focused on local needs and wants but on what I call cricked-neck policing, looking always to the Home Office for leadership. The elected police commissioner, working with the unelected chief constable, will provide the accountability and clarity to local people who have suffered from frustration for too long.

[Keith Vaz]

I am very pleased to hear that reassurance from the hon. Gentleman, who knows his party’s policy better than I do. I am glad that there is no proposal to elect chief constables, but we must look at the democratic deficit to see how it can be filled effectively, leaving operational matters to local people. [Interruption.] A former Police Minister, my right hon. Friend the Member for Delyn (Mr Hanson), has just come in, no doubt to check on what I am saying about him. I have said nice things, I can assure him.

On identity cards, there has always been concern—my hon. Friend the Member for Walsall North (Mr Winnick), a member of the Committee in the last Parliament, was always very strong on this subject, as was the Committee as a whole for a number of years, certainly before I took over the Chair—that they would not deal with the issues that the previous Government had in mind. The Government believe that identity cards should be abolished but they have been introduced and apply to foreign nationals. We need to look at the practical implications of that. What do those people do? Do they have to give back their identity cards, or will we keep them specifically for those who are not resident in this country? We need to look at the detail.

The Select Committee also expressed concern that the DNA of innocent people was being kept on the DNA database. It is the largest DNA database in Europe, and there was great concern about people being able to get their DNA off it, including Members of this House whose DNA was taken from them, especially the hon. Member for Chelsea and Fulham (Greg Hands). He conducted a three-year campaign to try to get his DNA off the database, only finally to be told it was never on it in the first place. If we had a more effective way of dealing with such situations, we would not have had the problems we ended up with. I will support the Government on the database scheme because that is precisely what the Select Committee said when we last conducted an inquiry into the subject.

I am worried that the proposed cuts to the health budget will remove some of the emphasis our Government placed on health, and especially preventive health care, over the past 13 years. I only discovered that I had diabetes five years ago, when by chance I went to my local GP at a time when a drugs company had been asked to conduct a pilot involving a new diabetes drug. I just went along to our local health centre to launch this scheme, as most of us would do. I was telephoned the next day to be told I was on the front page of the Leicester Mercury opening the pilot study, and then I was phoned by my GP to be told that the bad news was that I had type 2 diabetes.

The issue here is that the more money we spend on preventive work and testing people for diabetes, making sure their cholesterol is under control, the less we as a country will have to spend. At present, £1 million an hour is spent on diabetes-related care. At present, too, 500,000 people have diabetes without knowing that—including some Members of this House, to repeat a point I have made before—and if we direct that £1 million at testing the population for diabetes, that will save us a lot of money in the future, and lengthen people’s lives. If people have diabetes without knowing that, that can knock at least five years off their life.