Graham Stuart
Main Page: Graham Stuart (Conservative - Beverley and Holderness)Department Debates - View all Graham Stuart's debates with the HM Treasury
(12 years, 8 months ago)
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Danny Alexander
I will give the hon. Gentleman time to cool down, if he likes. He will know that a draft statutory instrument has been published, which goes into the matter in some detail, and the House may well have an opportunity to discuss it in due course. However, the basic answer is that food that is hot and taken away is taxed as hot takeaway food. It is as simple as that.
We will stick to our plans on the economy because financial discipline is the essential pre-condition for economic growth, even though that requires difficult and sometimes unpopular decisions, and helps provide confidence and the low and stable interest rates that businesses need to invest in growth and job creation. That confidence was shown at the weekend by the reaffirmation of this country’s triple A credit rating by Standard & Poor’s, the same agency that called it into question when the right hon. Member for Morley and Outwood (Ed Balls) was a member of the Cabinet.
We are committed to securing a recovery led by private sector entrepreneurs, wealth creators and export industries—the sort of growth that the Opposition failed to deliver in more than a decade in government. That is why we are going even further in the Bill to boost our competitiveness and ensure that Britain is again one of the best places in the world to do business, reversing our fall down the global competitiveness league tables that took place under the Labour Administration.
Mr Graham Stuart (Beverley and Holderness) (Con)
This is a Budget for jobs—it lowers corporation tax and takes some people out of tax altogether. That is why it is particularly concerning that it proposes to introduce 20% VAT on static caravans, which are mostly manufactured in east Yorkshire and are deployed in coastal and rural communities throughout the country—the entire supply chain is in this country. The cost of the proposal in jobs will be thousands, and I am grateful that the Government are consulting on it. Does my right hon. Friend agree that Members of all parties are concerned? We need to get that right because the Budget will reverse the destruction of manufacturing that happened under the previous Government, and we do not want to make any inadvertent errors.
Danny Alexander
I am grateful to my hon. Friend for raising that point. I know that it is a matter of concern to several Members, particularly in his part of the country. The change is, again, intended to equalise the VAT system for caravans that are used for leisure purposes. There will certainly be an opportunity to consider the detail, and my hon. Friend will be free to make representations, along with, I am sure, colleagues from his part of the country. We look forward to hearing what he has to say.
Danny Alexander
No, I will make some progress, because, as my hon. Friend also said, and as the House knows, the Government have already set out plans to reduce the main rate of corporation tax to 23%, but this year’s Finance Bill goes even further for precisely the reasons that he gave.
Clauses 5 and 6 will reduce the main rate of corporation tax to 22% by 2014—a headline rate that is dramatically lower than that of our competitors, the lowest in the G7 and the fourth lowest in the G20.
Rachel Reeves
This Government are borrowing an extra £150 billion because of the costs of their economic failure. The reality is that, with more people out of work and therefore claiming benefits, and with fewer businesses succeeding and paying taxes, this Government are ending up borrowing more, because their risky gamble with their economic policies has failed.
Instead of continuing on the downward path begun under the previous Government, total unemployment has mounted to new highs. It is now at the highest level since 1997. Some 2.67 million people are out of work. More than 1 million young people are out of work. We have the highest level of youth unemployment on record. That is a cruel fate to be inflicting on people leaving school, college and university. Instead of going on to get a job or training, they are being left to rot on the dole queue. The truth is that—just as we on this side of the House, along with numerous independent economists, warned—the Government’s attempts to cut too far and too fast have choked off the economic recovery, squeezing households and businesses and sending unemployment soaring, with the result that, as I said to the hon. Member for Dover (Charlie Elphicke), the Government are now forced to borrow £150 billion more than they had planned.
This lesson is being learned around the world, as over-ambitious austerity plans founder. Last year the OECD warned credit rating agencies which press for rapid fiscal consolidation but
“react negatively later, when consolidation leads to lower growth—which it often does.”
Sure enough, Standard & Poor’s decision earlier this year to downgrade nine of the eurozone’s 17 member states was accompanied by the warning that
“fiscal austerity alone risks becoming self-defeating.”
The International Monetary Fund’s sharp downward revisions of its global growth forecasts—including for the UK—for 2012 was accompanied by a call to “reconsider the pace” of fiscal consolidation. Indeed, the IMF’s chief economist has said:
“Substantial fiscal consolidation is needed, and debt levels must decrease. But it should be…a marathon rather than a sprint”
and cited the proverb
“slow and steady wins the race”.
Our economic performance did not have to be this way. We need only look across the Atlantic to see the benefits of a more balanced approach to deficit reduction, with the US now enjoying steady falls in unemployment and accelerating economic growth. Let me quote the opinion of Adam Posen of the Bank of England’s Monetary Policy Committee. His forensic comparison of the US and UK experiences concluded:
“Fiscal policy…played an important role as well. Cumulatively, the UK government tightened fiscal policy by 3% more than the US government did…and this had a material impact on consumption. This was particularly the case because a large chunk of the fiscal consolidation in 2010 and in 2011 took the form of a VAT increase, which has a high multiplier for households.”
In other words, by hitting households as hard as they did, sapping confidence and sucking demand out of the economy, the Chancellor and his ready accomplice, the Chief Secretary, have got the UK stuck in the slow lane while other key players in the global economy are overtaking us.
Mr Graham Stuart
On the subject of others overtaking us, the hon. Lady will be aware that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) became Finance Minister at roughly the same time as the Finance Minister in Australia, but whereas at a certain point the right hon. Gentleman lost the plot and spent money that this country could not afford, Australia paid down its national debt. Thus, when the financial credit crunch came, Australia was able to stimulate its economy, whereas this country had overspent in the good times and was not able to do so.
Rachel Reeves
Between 1997 and 2007 this country’s debt ratio fell from 42.5% to 36% of GDP, so the debt burden fell; in 2007, our debt-to-GDP ratio was lower than when we came to power in 1997.
What hope did the Chief Secretary and the Chancellor offer in this Budget for the future of our economy? The answer is precious little. The Government’s own Office for Budget Responsibility predicts another year of low growth ahead; it predicts just 0.8% growth in 2012, followed by 2% growth in 2013. That is well below what was promised when the Government took office. According to this morning’s forecasts from the Ernst and Young ITEM—Independent Treasury Economic Model—club, even those dire outlooks now seem optimistic. Ernst and Young predicts just 0.4% growth for 2012, followed by 1.5% growth the year after. Meanwhile, on any prediction, including the Government’s, we will still have at least 2 million unemployed people by the end of this Parliament.
Even those figures conceal deeper failures and more disturbing trends. Some may remember the Chancellor’s promise of a new economic model for Britain, based on lower levels of borrowing, and higher levels of saving and investment. In reality, the promised renaissance of business investment has been repeatedly postponed. An 8% increase in investment was promised for 2011, but investment actually fell by 2%. A further 10% increase was predicted for this year, but an increase of less than 1% is now forecast. The role of investment in driving growth for future years has been significantly revised down, too. Ernst and Young said this morning that business spending
“has picked up nicely in the US”
but that UK plcs remain “extremely reluctant” to invest. It continues:
“Consequently, the economy is bleeding cash into company coffers at an alarming rate…This haemorrhage is sapping the strength of the economy, keeping it on the critical list.”
They are not my words, but those of the Ernst and Young ITEM club.
Meanwhile, figures from the OBR reveal that the Government have increasingly become reliant on household consumption for their growth forecasts. That consumption is not being financed by growth in real disposable incomes, which, as I said, have stagnated and which the OBR confirms are set to stagnate for at least another two years. The household consumption growth is being funded by a fall in savings every year from now until 2016 and by a rise in total personal debt of almost 50% over the next few years; it will reach a staggering total of £2.12 trillion by the end of this Parliament.