Budget Resolutions and Economic Situation

Ian C. Lucas Excerpts

Wednesday 18th March 2015 Commons Chamber

[Ian Lucas (Wrexham) (Lab)]

I want to start by quoting a Conservative, which is not something that I generally do. The commentator Tim Montgomerie has said of the Chancellor of the Exchequer:

“He promised austerity but repeatedly missed deficit targets and has presided over a massive increase in government indebtedness. He defended Plan A against all comers but pursued a semi-Keynesian Plan B.”

I have been here throughout the debate, and it never ceases to amaze me that Conservative Back Benchers repeat their mantra of the “long-term economic plan”, which of course has failed completely. As we have heard from a number of Opposition Members, in the emergency Budget the Chancellor stood at the Dispatch Box and said that there would be no deficit by now. He has failed in the target he set himself and he has done so because of his own poor policy choices. He inherited economic growth and falling unemployment, but in 2010, following his Budget, he introduced a number of specific policies that strangled growth. First, he increased VAT, the tax the Conservatives never mention. They talk about being a tax-cutting party, but they always increase VAT. It is a tax that takes money out of the pockets of consumers and channels it directly into the Treasury in Whitehall. It takes money away from high streets and presents it to central Government. If we look at high streets in the UK today, we see how much pressure is on them, and one reason for that is the choices this Government made on VAT.

In my constituency, the median wage has fallen by 7.4% in the past year alone. That is the reality of what life is like for my constituents today. To hear some of these speeches by Government Members is to hear about a complete fantasy world; that view is reinforced whenever my constituents see this Chamber and hear what Government Members are saying. The lack of demand is having an enormous impact on local businesses and our local economy, and it has all been presided over by this Chancellor, who decided to raise £14 billion from increasing VAT. His decision was so bad that he had to change policy. As Tim Montgomerie said, the Chancellor had to move to plan B. Plan B was a policy he pursued from 2012-13, because he had strangled growth in the two years from 2010 to 2012.

The Chancellor has introduced some public sector projects. It is extraordinary that the Minister responsible for prisons, the hon. Member for South West Bedfordshire (Andrew Selous), has just arrived, because I am about to refer to the proposal to build a prison in north Wales, which I welcome. It is a public sector project, investing public sector finance in the local economy. It is the first prison for a quarter of a century that is going to be run by the public sector and a Conservative Government introduced it. It will bring jobs and money to the local area, so I am puzzled about why a similar project was cancelled by the incoming Government in 2010.

Unfortunately, according to press reports, Her Majesty’s Revenue and Customs office in Wrexham is now to be closed. It is the last such office in north Wales, where a number of specialist tax public employees work. There has been no discussion with me about this and it has become known only because of newspaper articles in the past week. That move will take away 383 jobs, which is more than will be brought in by the new prison, so the picture is mixed.

We are approaching an election again and we have a budget deficit of £75 billion, which the Chancellor has failed to eliminate in the way he promised he would. The IFS tells us:

“Debt is set to peak at over 80% of national income. The deficit is still more than 5% of national income….Difficult choices lie ahead.”

What will this Chancellor do after the election? We recall that both the Conservatives and the Liberal Democrats said before the 2010 election that they had “no plans” to increase VAT. When I pressed the Chancellor on his plans for VAT when he delivered his autumn statement, he said:

“The plans that I have set out involve spending reductions and welfare reductions…We will go on reducing spending and reducing welfare, and we do not need tax increases.”—[Official Report, 3 December 2014; Vol. 589, c. 331.]

The Office for Budget Responsibility tells us today in its report that, if the next Government are to stick to the Conservative and Liberal Democrat spending plans, the budget cuts that will have to be made will be bigger than those implemented by the current Government, and we all know what those have meant.

What do the Conservatives do after elections when they want to raise money? They increase VAT. They did it in 1979, 1991 and 2010. They never say before an election that that is what they will do, but when they come in and raise VAT it has a devastating effect on economies and on people on low incomes. I have absolutely no doubt that the spending that the OBR is talking about cannot be done without tax rises. This Government are a tax-raising Government. They put up taxes and VAT in 2010, and raised £14 billion. As night follows day, if a Conservative Government are re-elected, they will increase VAT, and they will use the money raised to fund the positions set out in the OBR report.