Amendment of the Law

Helen Goodman Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Sammy Wilson]

My fear is that, not just in Northern Ireland but throughout the United Kingdom, the measure will be more like a branding exercise and good for a soundbite, rather than something that will have any real impact. I hope that the measure has an impact, but, if I look at the amount of resources that will go into the zones, and at what really is required to lift such areas, I fear that it will not.

Other changes have been mentioned, such as those to the tax structure, and I noted what the Chancellor said, but some of them might not include extensive consultation—the issue is complex—and might be years away. So, again, they look good in the Budget, but what is the immediate impact going to be?

[Helen Goodman (Bishop Auckland) (Lab)]

On that point, it is interesting to look at the changes to national insurance contributions, which are forecast to have an impact right out to 2016, because they show that the proposed bringing together of the two taxes—national insurance and income tax—will not happen for at least five years.

[Sammy Wilson]

I hope I am not quoting the Chancellor wrongly, but I think he talked about nine years in the future before those changes have an impact, so again we have to ask, “What is the impact going to be?”

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[Mr Syms]

It was nothing to do with light-touch regulation; in fact, we needed more competent regulation. The Financial Services Authority was not up to the job, and the Bank of England would have done a better one.

The key thing is that we now have a great imbalance in our economy. Over the long term, Britain has always tended to have public spending of about 40% of GDP, taxation of about 40% of GDP, and a national debt of about 40% of GDP. We have always managed to grow and export, and to be a fairly successful economy. We now have to yank public spending and the deficit back to those sorts of levels. As was pointed out earlier in the debate, even after five or six years, we will only be back down to where we were towards the end of the Labour Government when we had to go into deficit to deal with the difficult economic situation.

I think that the Government’s response is sensible. It is planned over five or six years, and is gradual. For all the talk of expenditure cuts, the expenditure cuts will be gradual over that period. The plan, as the Chancellor set out today, is for the economy to grow. That should generate more tax revenue. The difficulty, of course, is that we will have to raise taxation, as can be seen in the plans, to help balance the budget. I hope that that is more of a short term, rather than a medium to long term thing, because we need to build incentives back into the British economy.

[Helen Goodman]

On that point, has the hon. Gentleman not noticed that table 2.1 on page 42 of the Red Book shows that, over that period, personal tax allowances will increase substantially, because the switch to CPI and the changes to national insurance outweigh significantly—by several hundred million pounds—the increase in personal allowances that the Chancellor made? This is a tax-raising Budget, not a neutral Budget as he said.

[Mr Syms]

The key fact is that the Government whom the hon. Lady supported left us with massive debts. There is no honest or honourable way in which we can deal with that problem, other than taking tough decisions, which will involve many of our constituents paying considerably more money. Over the next five years, unfortunately, more money will come in through taxation. There is no way around that. That is the legacy that Labour has left us. If we want to be responsible, to get the economy back into balance and to have long-term economic growth, we have no choice but to take tough measures.

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[Dame Anne Begg (Aberdeen South) (Lab)]

At the end of every Budget speech, the Chancellor has to pull a rabbit out of the hat. I will begin my remarks on the rabbit that I was not expecting today. It is something that will affect my constituency. Because I have been sitting in the Chamber since the Chancellor made his speech, I have not been able to quantify exactly how it will affect my constituency, but I have great fears that it might have a devastating effect.

I should explain that as a Member for Aberdeen, the economy of my constituency is based on the offshore oil and gas industry. I should also explain that I am the chair of the all-party group on the offshore oil and gas industry. Aberdeen has survived the downturn probably better than anywhere else, because the oil industry has been fairly buoyant. Unemployment in my constituency has risen from only 1.9% to 2.5%. I appreciate that that will sound very good to many Members. I fear that because of the rabbit that the Chancellor pulled out of his hat, that may not continue.

I speak, of course, about the fair fuel stabiliser. I think that that has the potential to destabilise the offshore oil and gas industry quite dramatically. I appreciate that the Chancellor was looking for something so that he could bring down fuel prices. However, it appears from the Red Book that huge amounts of money will come from the North sea. Apart from in the financial year 2011-12, in which the amount that will be given back to the taxpayer is £1.9 billion and only £1.78 billion will come in from the North sea from the increase in the supplementary charge, in every other year more will be raised by the Exchequer from the North sea oil and gas industry than the Chancellor will give away by bringing down petrol prices.

[Helen Goodman]

I also noticed that very interesting line in table 2.1—line 28. It shows that the proposed revenue stream is the same in every year. However, as the Chancellor said, that will depend on the oil price. Unless he is absolutely confident that the oil price will remain at the same level throughout the period, these are completely unfounded forecasts and estimates.

[Dame Anne Begg]

Indeed, if the oil price goes up, the amount that the Chancellor gets will go up. These must at best be guesstimates. Therein lies the problem for the offshore industry. The North sea is a mature province, but there is still a lot of oil left. In fact, there are probably as many known oil reserves in the North sea today as there were in the 1970s, but they are much harder to reach and more challenging to get out of the ground. The one thing that the offshore oil and gas industry needs is stability—stability in what the Chancellor is going to do. The last time the tax revenues for the offshore industry were changed, by the last Labour Government, there was a slowdown in the industry for a good two years before it recovered. The industry complained about the unexpected nature of that change and the fact that it was not able to plan for it. This change comes into effect from 12 o’clock tonight, so it will come as a huge shock to the offshore sector that it will be affected.

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[Dame Anne Begg]

With all due respect, that is not how the Chancellor has sold it. Even if there has been a windfall, perhaps it would have been better had he given some warning of the change so that people in the oil industry in particular could have taken account of it in their planning.

When we look at the Red Book, we see that the change is not tax-neutral. It states that by 2012-13, the tax raised will be £2.2 billion, and that it will be £2.1 billion the following year. The Chancellor is expecting to raise more than £2 billion a year—a much larger amount than is being given back to the consumer who buys petrol at the pump. Line 6 on page 42 of the Red Book shows that the Chancellor is taking more from the offshore oil and gas industry than from the banks, by a factor of 10.

[Helen Goodman]

I am grateful to my hon. Friend for being so generous in giving way. The other interesting thing in those numbers is that whereas the Chancellor claimed that the banks would not benefit from the corporation tax change, we can see from the Red Book that corporation tax reliefs will rise over the period in question but the bank levy will absolutely collapse.

[Dame Anne Begg]

Indeed, the bank levy will come down to just £100 million by 2015-16.

The change to the oil and gas charge has come as a bit of a shock, and it worries me. From looking at the Red Book, I am getting more and more worried about what the Chancellor has announced today. The Red Book states:

“The Supplementary Charge on oil and gas production will therefore increase to 32 per cent from midnight tonight.”

There was no warning, and it will have come as a big shock to the industry. The effect could be dramatic in my constituency. I only hope that the Chancellor has thought the matter through and had some discussions with the industry. I suspect he has not, and I am worried about what will happen.

I wonder what other nasties are lurking in the Red Book. Last time it was the 10% sanction on housing benefit when someone had been out of work for a year, which we did not discover until days afterwards. I am glad that the Government have backed down on that and that today’s Red Book shows that money again.

From a cursory glance at the Red Book, I discover something that comes as a bit of a surprise to those of us who were here for Prime Minister’s questions today. The Leader of the Opposition asked the Prime Minister why the Government were taking the higher-rate mobility component of disability allowance from people living in residential care. Those who were here will remember that the Prime Minister replied, “We are not”—a simple, straightforward answer. However, line d on page 44 of the Red Book is about the plan to

“remove mobility components for claimants in residential care from April 2013”,

with a figure of £155 million to be saved. That is different from the last Red Book, which stated that the change would come in in 2011-12 and save £135 million. All that the Government have done is delay it by two years. As the Leader of the Opposition pointed out, the change is still in the Welfare Reform Bill, and here it is in the Red Book. Perhaps the Prime Minister might want to come to the Chamber and apologise for not having been as accurate as he might have been.

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[Stephen Williams]

I am sure that the hon. Gentleman has been making that case in private to his well-connected friends. I and my colleagues have also been making the case for a green investment bank, not a green investment fund. It has been confirmed as a green investment bank today and it will have £3 billion of seedcorn capital to get it off to a flying start. It is going to start a year earlier than originally suggested. By the end of this Parliament, it will be able to issue bonds so that if we wish, we could all deposit our funds with that bank to invest in our green future.

I also welcome the investment made in innovation and skills, particularly in technology innovation centres. I talked a lot in the last Parliament about the skilling of our young people and how we needed to get more people to take up apprenticeship places, so the confirmation of 50,000 more places today means that there will be 250,000 more in this Parliament than we were left by the last Government.

Speaking as someone who before entering this House spent 17 years in a career in the private sector, advising small businesses on how to set up and take off, I welcome the confirmation or enhancement in the Budget of many reliefs designed to help new and innovative businesses to take off and the fact that by 2014 we will have the lowest rate of corporate tax in the G7. We now look forward to a further period of reform.

The hon. Member for Aberdeen South (Dame Anne Begg) rightly mentioned the integration of the income tax and national insurance schemes, on which there is to be consultation after the Budget. It is, of course, 100 years since Lloyd George, my political hero, introduced the national insurance scheme. During the slump of the 1920s, however—this deals with the point made by the hon. Lady—the actuarial soundness of that scheme was essentially undermined, and ever since then the fiction has been maintained by Governments of all hues that it is a separate fund. In fact, it is a second income tax in all but name, and the time has come to reform it. I am very glad that the Government are going to do that; and because they are going to consult on how it should be done, all the issues raised by the hon. Lady about contributions-based benefits are likely to be dealt with.

The other reform to which I look forward is the move to a system based more on sustainability, involving a tax on carbon. I am delighted that the Chancellor has confirmed the introduction of a new carbon floor price. On behalf of the Liberal Democrats, I will shortly produce a paper fleshing out how that can work during the rest of the current Parliament.

It is disappointing that we have not been able to agree internationally on further taxes on aviation—both coalition parties wanted an aeroplane tax rather than air passenger duty—and I hope that international agreement will be secured so that that can be achieved. However, I welcome the confirmation that we are to end the absurd anomaly whereby the jets that most of us use when travelling abroad are subject to air passenger duty while private jets are not. Under the existing law, a plane full of football fans going off to watch their heroes must pay tax, while the team itself takes off in a private plane and pays none.

The measures that have already been outlined, and the reforms to which we look forward, reward hard work, incentivise enterprise, and make progress towards a low-carbon economy.

Let me deal finally with the issue of the banks. I welcome the fact that the Government have introduced a levy that will be permanent, throughout the life of this Parliament. It has been confirmed today that the banks will not benefit from the reduction in corporation tax, and that the levy will be increased in future. We shall have to wait for the results of the Vickers review to find out whether there are proposals to break up the banks.

[Helen Goodman]

How can the hon. Gentleman say what he has just said about the banks, given that the bank levy is falling from £600 million to £100 million within three years? That is patently ridiculous.

[Stephen Williams (Bristol West) (LD)]

I understand that the bank levy is about £2.5 billion a year. The Chancellor announced recently that the levy, which was £1.8 billion in its first year, would be increased to £2.5 billion, and today it has been confirmed that the banks will not benefit from the reduction in corporation tax and that the levy will be increased.

Another issue connected with the banks is what we should do with our ownership, as taxpayers, of Lloyds Banking Group and the Royal Bank of Scotland. That is an issue with which the Government will have to deal at some point in the next few years. A couple of weeks ago I published a pamphlet, with CentreForum, which suggested that the shares should be given to the people so that the state could recover the £67 billion that was invested in the banks bail-out in 2008. The citizen should enjoy the upside: the citizen should enjoy the growth in those shares in the future. I hope that my Treasury colleagues will look favourably on that proposal as they decide what to do with the legacy from the last Government.

The Liberal Democrat-Conservative coalition Government have dealt with Labour’s toxic legacy, but Labour Members seem to be still in denial about the problem. They have not acknowledged its existence, let alone shown any sign of contrition for their role in the deficit. The Leader of the Opposition produced some very good jokes today—I will give him that—but he could at least have made an apology. We have started to clear up the mess. Today’s Budget sets in train a plan for a Britain that is fairer, with a stable economy and a low-carbon future. It recognises the need to help households with their budgets now, and to give them confidence that the economy and their country are back on track.

Several hon. Members rose—

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[Richard Harrington]

With the possible exception of the la-la land factor, my hon. Friend is absolutely right.

I want to talk about some specific factors that are important to business people, and therefore important to growth. There is a lot of talk about banks and the availability of capital, and about what the Government should do and what they have not done. Again, I want to comment based on my experiences in the constituency. The bank lending situation is getting better; there is no doubt about that, as the loans are beginning to come through. In Watford alone, under the enterprise finance guarantee loan scheme, 23 companies have already borrowed money amounting to £4 million. That is a comparatively small sample and it reassures me for the future that this scheme, which is to be expanded, does work, and that it does so in a comparatively short period of time.

It is very fortunate for us that interest rates are low, but the decisions made by businesses do not change when fluctuations are minor, such as 1% up or 2% down. Their decisions do change when the situation reaches a ludicrous point; I was once left with a loan on which I was paying 2% over base when the base rate was 15%. Variations such as 1%, 3% or 5% make little difference. Again, what matters is confidence in the economy and confidence that the Chancellor has done the right thing today. So I must encourage what the Government are doing on the fundamentals, because people and businesses will want to borrow money only when there is confidence in the future and confidence that we are doing the right thing.

My next point relates to the availability of skilled staff. Despite the fact that 3.7% of people in Watford—more than 2,000 people—are on jobseeker’s allowance and 700 or 800 young people there are not in education, employment or training, I visit factories and businesses that cannot recruit staff of the right calibre every week. A few weeks ago, I visited Davin Optronics, a manufacturing company that uses skilled labour to make lenses—it deals with complicated stuff. Its fear was that its work force were getting older and younger people did not want to join manufacturing businesses. That is a fundamental issue and we have to change attitudes.

[Helen Goodman]

How does the hon. Gentleman reconcile that situation with his Government’s policy on tuition fees and the fact that this week children in this country are being told that they cannot take three sciences at GCSE because of the cuts to school budgets?

[Richard Harrington]

The hon. Lady and I were at university at broadly the same time, so we were very privileged. We could debate tuition fees for hours, but no matter what one’s arguments on that, the new regime has not changed the current situation and we are, thus, dealing with Labour’s policy on tuition fees at the moment. I would be happy to debate tuition fees with her on another occasion, but the real issue is that we have young people and older people who are unemployed, and we have vacancies in jobs that people will not go into. The Government’s efforts on work experience for young people—today’s announcement on that was tremendous—and on expanding the apprenticeships scheme are very important, as are the technical universities. I commend those efforts because we must have a work force who have the right skills. That is not solely about graduates; it is also about people who are leaving school and are doing apprenticeships and further education courses. What the Government are doing to help will change the availability of staff.

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[Mr Jackson]

I know that the hon. Lady has some expertise on these issues. She can rest assured that my criticism will be confined mainly to the Leader of the Opposition, who delivered a master class in opportunism and vacuity. His loquacity was in inverse proportion to his intellectual insight. In his 15 minutes of speaking, no policy whatever was articulated.

The Budget is supported by the OECD, the International Monetary Fund and business leaders such as the deputy director of the CBI, John Cridland, and David Frost of the British Chambers of Commerce. It is about the Government putting in place the conditions for sustainable, balanced economic growth. Let us remember that the Institute for Fiscal Studies still says that public finances remain in a critical condition, but we have had no alternative whatever from Her Majesty’s Opposition. Indeed, we might have to call in Professor Brian Cox, the noted cosmologist, to search for the black hole where the Labour economic policy should be.

[Helen Goodman]

Will the hon. Gentleman give way?

[Mr Jackson]

I will make some progress; I am sure that I can let the hon. Lady in a bit later. The priorities of the Budget are primarily to reduce the deficit; rebalance the economy, which was left out of kilter by the Labour Government, with an over-concentration on financial services, the housing market and public expenditure; reform public services; and grow, via initiatives such as the green investment bank, green expertise, knowledge, skills and jobs. If I may give a plug, yesterday a collaboration was announced between Peterborough city council and Cranfield university on a centre for renewable energy and biofuels, to be based in Peterborough.

We need to move towards a high-wage, low-taxation economy with less pressure on household incomes, and the Budget provides a road map for that. No one denies that we have had to make some very tough decisions in the comprehensive spending review and in last year’s emergency Budget. There were real-terms cuts in departmental expenditure; the cut to departmental expenditure will be, on average, 11%. However, we should remember that between 1998 and 2010, there was a real-terms increase in budgets in each Department of anything between 2% and 8%. The fiscal tightening between now and 2015-16 will mean that we have to reduce public expenditure and put taxes up, with capital gains tax, tobacco, fuel, the bank levy, consumer prices indexation and child benefit affected. Contrary to received wisdom among Opposition Members, the richest 2% will be hit hardest by the tax benefit and other changes.

What choice do we have? Labour’s poisonous legacy and debt millstone left us with simply no alternative. In 2010-11, we had to borrow about £140 billion—perhaps around £10 billion less than expected. Only Ireland has a bigger cyclically adjusted deficit. Labour ran a structural deficit some seven years before the banking crisis in 2007-08, and we entered the financial crisis with the largest structural deficit in the G7. The national debt doubled between 1997 and 2010. In May last year, we were at significant risk of a downgrading in our international credit rating, with a catastrophic impact on public services, business and consumer confidence, a long period of stagflation, and a contraction in the economy.

[Mr Jackson]

The hon. Lady will know that the markets have recognised that the fiscal consolidation that the Government had to put in place as part of a policy of growth in the private sector and consolidation in the public sector has resulted in a lessening of the pressures in the gilt markets, with gilt yields down to 3.53% since May last year, and every 1% is £1 billion of interest payment. Of course, that is change in the pocket to Labour Members; we are spending £120 million on debt every day.

[Helen Goodman]

Will the hon. Gentleman give way?

[Mr Jackson]

No, not at this moment.

To put that in context, £95 million could have been spent on schools each day, but we are servicing Labour’s debt, and we could be spending £35 million on police, £25 million on social care, and £90 million on defence. The entire budget deficit that the Labour party ran up in government is £42.7 billion. That is 40 Type 45 destroyers, 33 Astute class submarines, 42,700 MRI scans, or 1.3 million nurses. That is the reality of the appalling profligacy and mismanagement of the Labour Government. We do not hear alternatives. We hear a policy that is dishonest, incoherent and irresponsible. The right hon. Member for Morley and Outwood (Ed Balls) shares very few values, I imagine, with the former US President Ronald Reagan, who once said, “I am not worried about the deficit. It is big enough to take care of itself.” That sums up the Labour party’s attitude in government, and the deficit denial on the Opposition Benches now.

Even some sensible and pragmatic Labour supporters are troubled by the incoherence and the substitution of political opportunism for a realistic alternative policy. The erstwhile Cabinet member, the right hon. Member for Salford and Eccles (Hazel Blears), said at the weekend:

“The public expects us to at least give a broad direction—but I think they are worried that we haven’t been as clear as we ought to be.”

She is absolutely right.

The former general secretary of the Labour party, Peter Watt, went further. In a rebuke to the institutionalised deficit denial of the shadow Chancellor, Mr Watt said on the labour-uncut website that Labour

“is . . . a highly toxic brand. . . we are still opposing every cut . . .It might make us feel better and win some short term popularity. But it isn’t an answer to the charge that we had become economically illiterate and had allowed massive overspending.”

If there is one lesson that I can offer the Labour party from our long period in opposition, it is this: rarely is it enough to be populist to win the respect of the electorate. That rarely forms the basis of a credible election strategy.

[Helen Goodman]

Is the hon. Gentleman satisfied with a Budget to which the oil and gas industry responded this afternoon by expressing its shock and stating that the investment climate has been seriously damaged and the Budget will drive jobs away from this country?

[Mr Jackson]

That is one viewpoint from one group of people. Others, such as Baker Tilly, the tax accountants, say that it is an excellent Budget. So do the CBI, the OECD, other industry groups, house builders and others. [Interruption.] I am glad the hon. Lady thinks it is humorous that people are supporting my right hon. Friend’s Budget.