Finance Bill

Ian Lavery Excerpts

Monday 2nd July 2012 Commons Chamber

[Cathy Jamieson]

Again, I do not want to focus on such issues at this time. I am sure that Government Front Benchers will want to take responsibility for their own actions.

I now want to address some points that Ministers may make about the Bill’s measures to reduce tax avoidance. The IFS has again been very busy and has made some extremely helpful and interesting points. It says this Budget compared poorly with Labour Budgets, which cut tax avoidance by more than £12 billion between 2002 and 2009—an average of more than £1.3 billion each year. This Budget, however, is estimated to have cut tax avoidance by just £800 million. Closing loopholes to prevent avoidance should be something that every Budget does, and we should not be required to compensate the very rich for the inconvenience.

The Government’s last line of defence will no doubt be that cutting tax for those who already have the most will unlock investment and kick-start economic growth, but that is pure ideology, with no evidence to back it up. The OBR documents accompanying the Budget show a continued pattern of the promised recovery of business investment being postponed. An 8% increase was promised for 2011, but the amount actually fell by 2%. A further 10% increase had been projected for this year, but the forecast is now less than 1%. The role of such investment in driving growth for future years has been significantly written down.

As for growth, again the OBR is clear. It states in box 3.1 on page 46 of its latest economic and fiscal outlook, which is headed “The economic effects of policy measures”, that the only policy with a measurable effect is the cut in corporation tax. It says that that will lead to an increase in GDP of

“0.1 per cent by the end of the forecast period.”

Beyond that, it says in the policy costings document:

“We have made no other material adjustments to the economy forecast as a result of Budget 2012 policy announcements.”

Therefore, according to the best evidence and the advice of independent experts, this is a tax change that will have no discernible impact on our economic prospects and, at a time of tight public finances and tough decisions on deficit reduction, it could cost billions of pounds, making it harder to deal with the deficit and necessitating harsher sacrifices for others in society.

The granny tax is addressed in another of our amendments, which would reverse the Chancellor’s shameful raid on pensioners’ incomes. We must give the Government a chance to make amends for what is essentially a broken promise, and for their shabby attempts to sneak this past Parliament and the public. We call on the Government to cancel this unfair measure for a number of reasons. First, the Government made a commitment as recently as last year that the age-related allowance would be uprated each year of this Parliament in line with the retail prices index. It is there in black and white on page 35 of the 2011 Red Book. Recently it has been reported that the Prime Minister is resistant to suggestions from the Secretary of State for Work and Pensions that he break pre-election promises on benefits for older people. Yet here is a promise made only last year that the Government have consigned to the dustbin. Instead of acknowledging this most disreputable of U-turns, the Chancellor actually sought to conceal it, dressing a crude tax grab up as a “simplification”.

According to the House of Commons Library, by far the majority of those being asked to pay more live on incomes that put them in the bottom half of taxpayers. The crucial point—again, I am sure that Government Members will have heard this—is that having a small personal or occupational pension of just £67 a week, or little more than £3,000 a year, would be enough to put someone in line to lose under this measure. We are talking about the people who did not earn big salaries in their working lifetimes but managed to save so that they could provide for themselves. These are more people doing the right thing; they avoided the means-tested benefits. So yet again I say: why are the Government so keen on policies that penalise the people who are doing the right thing? Why do they penalise the people who are trying to work—the low-paid, part-time workers who lose their tax credits—and the pensioners who have tried to avoid the means-tested benefits and have saved for their retirement and done the right thing?

There is no doubt that pensioners have been hit hard by this Government’s decisions: winter fuel allowance has been cut; pensions have been indexed to a lower measure of inflation; the increase in the state pension age for women has been brought forward; last year’s VAT rise added £275 to the cost faced by an average pensioner couple; and cuts have been made to services such as the NHS, social care and local transport—all the things that matter on a day-to-day basis for pensioners. So pensioners have been hit hard by this Government’s decisions and policies, yet with this Finance Bill the Government are coming back for more. They are not content with all those things and are coming back for more. In total, this measure will raise more than £3 billion pounds over the next five years.

[Ian Lavery (Wansbeck) (Lab)]

Is it a coincidence that the tax cut to the rich costs £3 billion, which is exactly the same as the tax increase for elderly people in society?

[Cathy Jamieson]

My hon. Friend makes a very valid point. That must be purely coincidental, because surely no Government would want to take that amount of money from pensioners simply to give it to the richest. Perhaps this Government would though; perhaps we have the same old Tories with the same old policies, yet again. The pensioners who have been hit hardest by this Government’s decisions are seeing them coming back for more. That £3 billion raised over the next five years is the biggest revenue raiser in the whole Budget, and it is coming from the pockets of pensioners with modest incomes. And it is all going towards what? Is it going to paying down the deficit? No. Is it going to help young people get back to work? No. Is it going to help the poorer pensioners? No. Instead, this money is being taken from millions of older people living on modest pensions and redistributed to a few thousand individuals with incomes of more than £150,000 a year. What an absolute disgrace: taking from the pensioners to give to those already on those high earnings.

The Government were said to be surprised by the anger this tax change has aroused. If that is the case—if they were surprised—that shows just how out of touch they are with the values, principles and priorities of the British people. At the time, the response of Age UK was very clear. It said that it was disappointing that the Budget

“offered a tax break of at least £10,000 to the very wealthy while penalising many pensioners on fairly modest incomes, who are already being squeezed”.

We could not have put it better ourselves. The chief executive of Saga said:

“Over the next five years, pensioners with an income of between £10,500 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.”

The National Pensioners Convention said:

“We have been inundated by pensioners who are disgusted that those on around £11,000 a year will no longer get additional reductions in their tax—whilst those earning £150,000 or more will see their tax bills reduced.

This is seen by many as the last straw...Pensioners feel they are being asked to bail out the super rich—and it’s simply not fair.”

Pensioners are absolutely right to feel that way.

These amendments are a chance for the Government to rectify one of the most blatant injustices in this Budget. It simply cannot be right to ask millions of pensioners on modest incomes to pay more while finding a way for a few thousand millionaires to pay less. It is extremely hard to comprehend how the Government could ever have thought that this was fair, or that it would be acceptable to pensioners and to others who care about pensioners, but now they have an opportunity to put it right, and Members from all parts of the House have a chance to show where they stand. They can support these amendments and do the right thing by the people who did the right thing for themselves.

--- Later in debate ---

[Charlie Elphicke]

I agree. There has been a climate in which it is somehow acceptable to avoid taxation and I made many speeches in Committee about how that culture is unacceptable and needs to change.

It is up to us to send a clear message, as Members of all parties, that tax avoidance is wrong. That was why I intervened on the shadow Minister earlier to say that the message sent by politicians who use personal service companies is deeply corrosive. They should all pay a fair share of taxation and should not try to avoid it in that way, because it sends the wrong message. In all fairness, I say that to members of my own party as much as to Labour members. It is not acceptable in the current age.

[Ian Lavery]

The hon. Gentleman and I had some good discussions in Committee—I would not call them enjoyable, but they were good. Does he think it is fair to hit the grannies—to hit elderly people—with a £3 billion loss and at the same time to cut taxes for the richest people in the UK?

[Charlie Elphicke]

I think it is fair to say that we are not cutting taxes yet, because the change would not come through to the next financial year. Hon. Members will correct me if I am wrong, but I believe that that is the case. We must consider the Exchequer numbers, which show that the cost of the cut is very low. I think those numbers are wrong, as they have not taken into account the dynamic effects of the change, which will probably be tax accretive to the Exchequer when all is taken into account.

As for the issue of age-related allowances, the Government’s triple-lock guarantee will mean that the overwhelming majority of older people—in fact, all of them, I think—will be better off and there are no cash losers. Secondly, we are talking about the very richest of the oldest. We are not talking about the oppressed pensioner with no savings but about the richest of the oldest and, as I say, there will be no cash losers. Although it is uncomfortable for many people and has been uncomfortable for all of us, the Government have been doing the right thing by the elderly and have been looking after the least well-off elderly first of all. It is really important to protect them from the difficult economic times we have had.

--- Later in debate ---

[Charlie Elphicke]

The age-related tax allowances only kick in to benefit those pensioners who have a substantial income, or a more substantial income, in retirement. We are not talking about the very least well-off pensioners who are affected by grinding poverty, but about pensioners who are better off and who have savings and income. As I said, there are no cash losers and they have had a massive benefit from the pensions triple lock.

[Ian Lavery]

When the hon. Gentleman says that there are no cash losers, does that mean that pensioners will not lose out?

[Charlie Elphicke]

That is my understanding, yes. Pensioners will not lose out, there will be no cash losers and no pensioners will be worse off in cash terms, As the hon. Gentleman well knows, we can have the argument about future rates of inflation and future rates of RPI, but one must also take into account the other side of the equation, as pensions and benefits for elderly people will rise in the same way and at the same time. Overall, we are not talking about a great difference; we are certainly looking after the least well-off of the elderly, and we have done so very well indeed. That is an important achievement of this Government. Pensioners have been better off under the Government and have been shielded from the austerity measures.

Let us look across the piece at what the Government have done. We have done the right thing to reduce taxation at the top level, which was meant to be temporary, to encourage investment in our economy and to encourage entrepreneurs. The Government need to take further action to deal with people who abuse personal service companies and other tax wheezes and to ensure that we have stronger measures against avoidance by individuals. We have seen enough of it in the newspapers, so I shall not go into individual cases because, as we know, that ends up in a spat about whether one likes Take That or late-night comedy shows. Nevertheless, it is right that we should ensure that individuals cannot play the system and that the law should be changed. It is all very well for the Labour party to take the moral high ground on the issue of tax allowances, but Labour was asleep at the wheel for about a decade and failed to deal with tax avoidance in the individual and corporate spheres. That was completely wrong.

--- Later in debate ---

[Barry Gardiner (Brent North) (Lab)]

“No cash losers”: I must say that I think that those are the most disingenuous words that I have heard in this Chamber for a great many years. I remember that in the Budget the Chancellor was not particularly keen to draw the House’s attention to this change.

In the Budget, the Chancellor glossed over the whole issue of the granny tax very quickly indeed, yet only a year before, he came to the Dispatch Box on Budget day and said that he would not hide anything—he would tell it like it was. He would tell the bad with the good. That was just a year before, but in this year’s Budget, he glossed over the granny tax altogether.

“No net losers”—how accurate is that if we look at the total picture for pensioners? For existing pensioners, the age-related allowance will be frozen. It is interesting that the year before, it was not the Chancellor, but the Prime Minister, no less, who promised that the allowance would increase in line with the retail prices index. “No net losers”—those who believed the Prime Minister’s promise to pensioners might be excused for feeling that they were losers under the change. That is what happens. People listen to what the Prime Minister says, and make their financial plans on the basis of it: “The Prime Minister promised me, so of course I can expect to have that.” Well, it did not happen, and I think that is disingenuous.

We heard in this Chamber that there are no net losers, but what about people who are about to become pensioners? Are they net losers? They certainly expected an age-related allowance, but they find that, for them, it is not frozen, but cut. We can stand here and call black white, but it is incumbent on us not to take the public for fools, and I am afraid that the speech from the hon. Member for Dover (Charlie Elphicke) did that. I regret that, because he is not a disingenuous character—he is quite a lovable character in this House—but to say what he did is to treat people with contempt. It is treating them as though they do not understand their own affairs, when it is their own affairs—their own pennies, in many cases—that we are talking about. That hits hard.

[Ian Lavery]

Is it not a fact that 4.4 million pensioners will lose roughly £83 a year from next year, and that people who turn 65 next year could lose up to £322 a year? That implies that it is disingenuous to suggest that people are not losing out—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. “Disingenuous” is not a word that we should use. I know that it is meant to be an appropriate term, but it is not the sort of parliamentary language that we accept. I am sure that we will not be using it again.

--- Later in debate ---

We have always had an age-related allowance for pensioners that is somewhat different from those for ordinary taxpayers, but one has to ask why that is the case. It is easy for politicians to go along with a system that has been in place for several years, but in an environment in which the Government are pushing up allowances, hopefully to £10,000 and beyond, at some point soon the basic allowance will overtake the age-related allowance. From a tax simplification point of view, that is sensible. People talk about pensioners, but they are not one homogenous group; they include poor people and rich people. In fact, many of my constituents have benefited from buying their homes and the post-war inflation, and the evidence from surveys suggests that the people struggling the most are actually young families with children.

[Ian Lavery]

The hon. Gentleman is very kind to give way. Does he agree with hitting pensioners hard with the £3 billion tax increase?

[Mr Syms]

About a quarter of my constituents are pensioners, but I have received only three or four e-mails on this subject. It is not a major issue in Poole, where most of my constituents pay tax. I do not think that it is the big issue that Opposition Members claim it is. It depends on how fast the basic allowance for all taxpayers overtakes the age-related allowance, which I presume is logically what the Government want it to do. Of course, it also depends on the level of inflation. If we freeze the allowance and have higher inflation, it will be eroded more quickly than if we have lower inflation. Thankfully, one of the good points about the past few months is that inflation is starting to crash back down towards 2%, and the sooner we reach that rate, the better.

If we look at what the Government have promised in their triple lock for pensioners—the increase in the basic state pension of over 5%—along with the winter fuel allowance, which we continue to pay, and free bus travel, we will see that their priority has been to support pensioners. We have been criticised over the reduction in the winter fuel allowance, but I point out that the previous Government put it up for the election year but made no budget provision for the year after, and we are faced with some very difficult problems. Unfortunately, it is an expensive item and the Government have been unable to keep it at the level it was for one year, but on the whole we have kept it at the level it was for most years at the end of the previous Government’s time in office, and that is a boon to many pensioners. I think that what the Government are doing on the age-related allowance is probably the right thing to do.

[Ian Lavery]

I am surprised to hear that only three or four of the hon. Gentleman’s constituents have contacted him on that point—I wish him good luck on that. Various figures have been bandied about and I wonder whether he disputes them. It has been suggested that 4.4 million pensioners will lose up to £83 a year and those turning 65 next year could lose up to £322. Does he support that?

[Mr Syms]

I am not sure that that is a massive loss of income. The most recent issue we debated was the 3p cut on fuel, which will make more of a difference to pensioners in my constituency than this minor change in tax allowances. I think that the Government’s policy towards pensioners is fine.

Let me turn to the top rate of tax. We all know that there is a lot of politics in this. The rate was 40p under the previous Government, except for the last 37 days they were in office, so the 50p rate was one of the wonderful inheritances from them. Clearly, if we want to stop people looking to avoid paying tax, we have to keep a competitive rate. At 40p we have a rate that was competitive with many western European countries, but at 50p we do not. If we have a country without exchange controls, a very mobile population, as we do, and people with highly tradable skills, there is a danger that if we start to put up the rates we will lose revenue and people will go abroad. As my hon. Friend the Member for Dover (Charlie Elphicke) said, having had a 50p rate which meant people started looking at how to avoid taxation, that might stay in the system for some time. I welcome what the Government have done by reducing the higher tax rate to 45p. I think that it is a pity they delayed it, because I suspect that the impact will be to reduce income tax take for the current year, but when the rate drops to 45p for the year after, we will see an increase in the income tax yield.

It is important to give a message. I was in this House when the previous Government put up income tax. In one of his last speeches from the Government Back Benches, Stephen Byers said that he very much regretted that the Labour party had decided to do that. If all the evidence suggests that that has not raised very much this year, it seems to me that it is being done for ideological reasons, rather than practical, economic ones. If nothing else we ought to be practical in how we do things. Therefore, the Government’s reducing the top rate, as a start, is the right thing to do which will have a beneficial effect in the long term. But let us not forget that the allowances for the lower paid have gone up this year. The top rate of tax will come down next year, by which time we will have had another Budget in which I hope the Government will have made more progress on assisting some of those on lower pay and taking more people out of the tax net.

The one thing that can be said about the Government is that their thinking is joined up. We have welfare reform, we are pushing up the tax allowances to increase work incentives, and we are dealing with a whole range of tax rates, including trying to make corporation tax more competitive, and I think that that will make us a much more competitive country in the world. We look like an island of stability, certainly compared with the eurozone countries. Let us hope that they sort out their problems so that we can start selling them our excellent goods, but let us face the fact that we live in a competitive world and unless our taxes are competitive we will not be able to generate the wealth to pay for all the things we want: health, schools, foreign aid, defence and all the things we need to do. I think that the Government are on the right track. Clearly, it is a very bumpy economic environment, certainly rather bumpier than we might have thought it would be when we came into office, but provided we have leadership and vision, we will get through.

--- Later in debate ---

On that basis, I will vote for the tax measure, although it is very difficult to sell and we all know the perils of upsetting people of that generation in our constituencies, but we have to go out there and say, “We have to take tough measures”; we cannot please everybody.

[Ian Lavery]

The hon. Gentleman recognises that we cannot please everybody, but does he agree that cutting taxes for the rich pleases the rich, while the ones who will be less pleased are pensioners, having £83 a week taken off them, and people who turn 65 next year, losing £322?

[Nigel Mills]

I am sure that people who benefit from a tax cut will be pleased and those who lose out from a tax change will not be, so I guess I can agree with most of that, but it will be interesting to see in the Lobby later whether the hon. Gentleman votes for his party’s amendment, which would mean the House passing the Bill after abolishing the 45p rate completely and reducing it to a 40p rate.

It is all right saying, “Perhaps we can do that and perhaps the Government will do something different in future,” but we are legislating in Parliament, and if we were to vote for the amendment and remove the 45p rate, it would not actually exist, and I am not sure that those Members who would rather the provision read “50p” than “45p” could in all conscience vote for that. I clearly will not vote for the amendment, because it would be the wrong measure at this time; I will vote for there to be a 45p rate in next year’s tax regime.

When I debate these things, I could take a narrow constituency view. I suspect that very few of my constituents pay the 50p tax rate, as I have many pensioners who are not that well-off and will be adversely impacted by the granny tax, so from a political and personal view I could happily oppose the tax cut and the granny tax, too, but we have to get our economy into sensible working order.

--- Later in debate ---

As my hon. Friend the Member for Brent North (Barry Gardiner) said, the big question about this tax take is how much revenue will be brought in from so-called missed tax avoidance in future years given that people will front-load their tax benefits in the early years. Overall, there is an inherent unfairness throughout the Budget decisions and announcements that the Chancellor made, and I hope that this measure will bite the dust. It is as much about the signal that it sends as the reality of it. For me, that is very important, because my constituents, many of whom are working hard and just trying to hold body and soul together, do not see the fairness in this and do not see why the very richest should pay much less tax as a result. Indeed, these people are supposedly saving £10,000 in a single year, and that is as much as many of my constituents earn in a year.

[Ian Lavery]

I totally agree with my hon. Friend. Ten thousand pounds a year equates to £833 a month, and it is more than hundreds of thousands of people in my constituency make on an annual basis.

[Meg Hillier]

Absolutely. If we have a duty in this House, it is constantly to remind ourselves of what life is like for our constituents. We can get lulled into a sense of safety and snugness on these green Benches and enjoy intellectual repartee and debate, but we are here to represent the people who elected us. It is incumbent on us to remember that many people are living on £10,000 a year or less, and it is important that we reflect their concerns in this House. For me, that is a burning issue. I want my constituents to earn more than £10,000 a year, but they will not be able to do so unless we get the economy moving.

Locally, we have real poverty and high unemployment. Youth unemployment has risen to about a quarter of the total number of my constituents aged under 24, as roughly a third of them are, and we are seeing an increase in over-50s unemployment. These are the people who are not gaining but seeing those earning over £150,000 gain considerably. There is a lot that we need to do.

We must look at the unfairness of the cut overall and at the needs of the people who are earning less. I do not think that the money that is supposed to come back will be used to reverse the cuts to further education, to make the banks lend or restore the overdraft facilities of small businesses in my area, or to restore the education maintenance allowance, which had a big impact in helping those in my constituency who wanted to skill themselves up to earn more money—the end of EMA put those people on the back foot. Those matters all impact on the lives of people in Hackney South and Shoreditch today.

A year ago, the Chancellor promised that the measures in the Budget, some of which we are debating today, would boost the economy. What have we seen in the past year? The economy has not just stalled, but shrunk. Again, who suffers the most? It is not the people who have gained from the reduction in the 50p rate of tax, but ordinary men and women up and down the country who are working hard and paying tax. The Chancellor has also had to borrow £150 billion more than planned.

I have mentioned the freezing of the personal allowance overall, but the decision to take away the pensioner element has the biggest impact on those who earn between £10,000 and £29,000 a year. There are not many pensioners in my constituency who earn more than that, although it does have an interesting mix. Being on the edge of a city, there are people of greater wealth in my constituency, but they are not many in number.

Somebody who is due to retire in 2013-14 aged 65 will lose £323 a year, which other Members have talked about at length. It is worth reiterating the point that I made to the hon. Member for Amber Valley: somebody who is on a fixed income or who will be on a fixed income in a year’s time will have to adjust their affairs overall, including their savings if they are lucky enough to have any. That £323 may not seem much to us on our comfortable salaries as Members of Parliament, but for people on low-level fixed incomes of just above the amount where they would get help other than the basic state pension, that will have a real impact on their household income. I reiterate that we must think about the message that that sends out: pensioners are the victims; those earning £150,000 a year or more are the victors. That is unfair.

--- Later in debate ---

[Jacob Rees-Mogg]

It is a real pleasure to follow the hon. Member for Edinburgh East (Sheila Gilmore), who made such an enormous contribution to the Public Bill Committee. She enlivened it regularly with her thoughts, with which I have almost invariably disagreed—and today is no exception.

We are now dealing with the best part of the Budget: the heart, soul and even the guts of it. We are doing some big and bold and important things, with which I shall deal in turn. One of them is tough and brave and noble. It is the proper aim of Government to take on difficult things which, although difficult, are right. But I shall start, instead—

[Ian Lavery]

Will the hon. Gentleman give way?

[Jacob Rees-Mogg]

Of course I will.

[Ian Lavery]

Is it bold and tough to rob the pensioners of £3 billion and give the millionaires a £3 billion tax cut?

[Jacob Rees-Mogg]

The pensioners are not being robbed. The pensioners have been extraordinarily well looked after by this Government, and rightly so. I agree in many respects with the hon. Member for Dunfermline and West Fife (Thomas Docherty), who talked earlier about how important the elderly were to our society. He called them the golden generation. I thought that, out of respect to Her Majesty, we ought to call them the diamond generation, as they are all over 60.

Of course we owe a great deal to the elderly. That is why it is right that they have kept their bus passes—which they are pleased to have, although there are not many buses in North East Somerset—and their winter fuel allowances. If they are over 75, they will also retain their free television licences so they can watch the BBC free of charge. I think that many of them prefer Sky nowadays, but that is a separate issue. The Conservative party, in alliance with our Liberal Democrat friends, has looked after the pensioners.

As for the thresholds, it is absolutely right that they should be evened out. Let us consider the people who are paying tax across the country. How is it fair for those who have retired to be given an automatic tax break, rather than those who are working hard and perhaps bringing up children? They need the income just as much as the pensioners, and in some cases more. That, I think, was bold and brave of the Government, and right.

I want to begin, however, by discussing the easiest step to defend—the one that was so startlingly obvious that it is surprising that the Government did not take it earlier and go further. I am talking about the reduction in the 50p tax rate to 45p. We know well that high taxes drive out enterprise and people, and drive down tax revenues. That is not because of evil schemes of tax avoidance; it is because people simply decide that if they are not going to get paid, they will not work. They remove their labour. Our socialist friends—

--- Later in debate ---

[Jacob Rees-Mogg]

But my concern was about Somerset county cricket club. Football teams such as Manchester United do very well through having more foreign players. Somerset, however, has yet to win the county championship, but this lower level of tax and greater freedom in employing overseas players may lead to its achieving that.

Returning to the question of the 45p tax rate, we have had a discussion about avoidance in that context, and I want to defend tax avoidance. I know this is not the most popular cause to espouse, but I do so because I believe in the rule of law, and I do not believe the rule of law is best maintained by Parliament being arbitrary in its taxation.

We have the power, through our votes this evening, to set rates of tax as we choose—to set schemes that allow people to be charged tax, or not to be charged tax, as we choose. If we in this House are too incompetent to draw up the tax law properly, is it reasonable to say to the taxpayer, “You must work out what Parliament may have wanted. This is not what is said, but Parliament may have wanted you to pay this extra amount on top”? Should we then also say that to people who put money into their individual savings accounts? Should we retrospectively say that they ought to have paid more tax on their ISA sums, or on their pension funds?

[Ian Lavery]

Does the hon. Gentleman agree that there is a moral obligation on people to pay taxes, as well as a legal obligation?

[Jacob Rees-Mogg]

No, I do not. I do not believe that taxation is a matter of morality. I believe the law is a matter of morality and it is immoral to break the law, and therefore I divide very firmly between tax evasion and tax avoidance, which is the historical position of this Parliament—and, indeed, of English law. Tax evasion is criminal and should be prosecuted to the full extent of the law. I think the scheme used by a comedian, whose name momentarily escapes me but who is quite famous, was almost certainly unlawful, and that scheme should be prosecuted.

--- Later in debate ---

[Jacob Rees-Mogg]

The hon. Gentleman is wrong on that last point; I recognise that there is a need for taxation, though slightly beyond the clauses we are immediately discussing. However, I will answer the important point that he has raised on the tribal nature of football and why people are willing to see these high salaries paid. It is because they recognise that those salaries get them the best quality players and they want to see the best quality players playing for the team that they so ardently and passionately support—it is an ardent passion that I do not have, but I understand that many people do have it. That requires low taxes, because otherwise these players take their talent abroad.

I come back to Professor Laffer, because his argument is one that is so obvious as to be self-evident: if the tax rate is zero, nothing will be raised and if it is 100%, no sane person will pay it either as there is no point in working or in earning. There is some point along that curve where the least legal avoidance takes place—I emphasise that avoidance is legal—the most amount of working is done and the highest amount of revenue is received. We have seen this. I know that some Conservative Members, myself included, think that there was a golden age when Baroness Thatcher was in charge—

[Ian Lavery]

rose—

[Jacob Rees-Mogg]

I give way to another supporter of the golden age.

[Ian Lavery]

I intervened just too early, because he mentioned Margaret Thatcher—another issue. Is there anywhere on this curve that the hon. Gentleman continues to mention where morality comes into play?

[Jacob Rees-Mogg]

This argument is not a moral one. We are not the House of Bishops. I am all in favour of the Lords Spiritual having a view on this, but I am not one of them. I did not go into the Church; I went into politics. Politics is about raising the revenue that is needed for the country to carry out its business, and it is not an issue of morality in terms of how we phrase the laws. That those laws are then obeyed is a matter of morality. I can probably quote paragraphs of the Catholic catechism on this, but you are looking fretful at that thought, Mr Deputy Speaker, so I shall move back to the golden age of the noble Baroness Thatcher, Lady of the Garter, Order of Merit.

In 1979, the top tax rate was 98%—83p in the pound on income tax and a 15p surcharge. [Interruption.] I hear Labour Members saying that that was excellent and a jolly good thing. It is rather splendid to know that I am not the only one with dinosaur-style views in this House; there are even greater dinosaurs on the Labour Benches. When those tax rates were reduced they came down first to 60% and then to 40%, to fury from hon. Members. I believe that the House was suspended when the noble Lord Lawson introduced the rate of 40p in the pound; I think the Scottish nationalists got up in a passion of anger, wishing for higher taxation to spread across the realm of the United Kingdom. What did that reduction do? It raised more money for Her Majesty’s Government, which meant that the Government could spend money on their priorities and pay down their debt. We had a golden economic scenario when the noble Lord Lawson was at the helm, because we believed in low tax rates and had the courage of our convictions.

--- Later in debate ---

[Jacob Rees-Mogg]

I agree with my hon. Friend. I believe that there are studies that show that that rate would be 36p in the pound. I hope that the Minister is listening and that we can look forward in the next Budget to the rate being lower still.

We have heard discussion about the morality of tax rates, and I dispute that there is morality to tax rates, but there is a perniciousness about taxing for the sake of it and about taxing for the sake of envy, because people do not like the rich or because they wish to crush the income earners in society. That is not the type of envy that we have on these Benches. Even our Liberal Democrat friends do not suffer from that type of envy; they recovered from it after their experience in 1909.

We Conservative Members have never had that type of envy. We recognise that if the maximum amount of revenue is raised, it is better for everybody. We heard our Prime Minister giving an invitation to our friends in France, saying, “Come and join us. The weather here may be rainy, but the tax rate is only 45p in the pound, compared with the 75p that you may have to pay.”

[Ian Lavery]

Will the hon. Gentleman enlighten the House on what personal tax allowances he would put in place at different levels, if he were the Chancellor and had the power?

[Jacob Rees-Mogg]

It would be an impertinence for someone who entered the House in only the past two years to aspire, even hypothetically, to the height of Chancellor of the Exchequer. I leave that question to my hon. Friends on the Government Front Bench, who, having listened carefully to all that is said in this debate, will no doubt advise the Chancellor. They may consider the figure of 36p in the pound to be perfectly suitable—or they may go further and advocate a flat tax, which is a very attractive proposition. Perhaps people could have tabled an amendment to that effect, but sadly they did not. As I understand from my hon. Friend the Member for Amber Valley (Nigel Mills), who is no longer in his place—

--- Later in debate ---

[Mr Gauke]

My hon. Friend makes an important point. If we are talking about unfairness in the tax system as far as rates are concerned, I should say that the much greater unfairness is when wealthy individuals are paying very low rates of income tax—lower rates than are paid by the vast majority of people working in this country.

Let me say a word or two about avoidance. In the Budget, we announced a package of measures that will yield more than £1 billion and protect more than £10 billion in revenues over the next five years. Our approach to tackling stamp duty land tax avoidance and the banking scheme closed down in February demonstrate that we are prepared to move quickly and take radical action where necessary. We are introducing strategic changes to address the underlying loopholes in the tax system, as can be seen in clause 22, which is about the treatment of manufactured overseas dividends. More generally, the Government have been active in their response to tax avoidance schemes and can and do act as soon as they become aware of abusive schemes. We have provided HMRC with additional financial support and we remain absolutely committed to tackling tax avoidance.

Amendment 1 asks us to leave out the additional rate for 2013-14. It is exactly the same amendment as was tabled in the Committee of the whole House. I will not repeat every point that I made then, but as my hon. Friend the Member for Amber Valley (Nigel Mills) said, that might well leave us with just a 40p rate rather than a 45p rate. There is an alternative interpretation, which would mean that no income tax was charged for earnings above £150,000. I say that with some nervousness. I hope that I have not overexcited my hon. Friend the Member for North East Somerset; I think that even he would accept that that was below the revenue maximising point.

When the 50p rate was introduced, the right hon. Member for Edinburgh South West (Mr Darling), the then Chancellor, explicitly stated that it was a temporary measure. We are announcing the cut to 45p now to provide stability for investment decisions and certainty for employees and the self-employed. That is why my right hon. Friend the Chancellor set out the rate for 2013-14 this year.

It is right that we take these measures to improve competitiveness, and our doing so has been widely welcomed. This matter must be viewed in the context of the personal allowance increase, which shows that we are committed to a fairer tax system that provides greater reward for work while supporting the public finances. This year there is a £630 increase in the personal allowance, as introduced by clause 3. That represents the second step in our commitment to increase the personal allowance to £10,000 on top of last year’s increase of £1,000. We have also announced a further increase of £1,100 next year—the largest ever increase in cash terms. The Government are taking 2 million people out of income tax, we are providing a tax cut to 24 million people, and we are well on course to meeting our target of a personal allowance of £10,000.

Let me turn to the second subject that we have debated—age-related allowances. Amendment 23 seeks to leave out clause 4, which introduces a phased withdrawal of age-related income tax personal allowances. Those will remain in place until the income tax personal allowance for those born after 5 April 1948 aligns with or overtakes these levels. At that point, the clause guarantees that older people will receive the higher allowance. Amendment 23, like others tabled by Opposition Front Benchers, is a repeat of an amendment tabled in the Committee of the whole House. The Government have committed to increasing the personal allowance above the rate of inflation. Next year, the personal allowance will increase by £1,100—£840 above inflation—and so from 2013-14 everyone born after 5 April 1948 will receive the same personal allowance of £9,205. This will take a further 880,000 people out of tax altogether. Similarly, everyone born after 5 April 1938 will continue to receive the age-related allowance that they currently receive instead of moving on to the higher age-related allowance, which will be maintained for those born on or before this date. There will be no new recipients of age-related allowances from next April.

One of the Government’s key objectives for the tax system is to make it simple and straightforward for people to understand. Clause 4 helps to provide for a simpler system while ensuring that nobody will lose out in cash terms as a result. It will help to make sure that people get the allowances to which they are entitled and pay the right amount of tax, and make the system simpler for Government to administer, thereby minimising costs to the taxpayer.

[Ian Lavery]

It has been mentioned a hundred times tonight that no one will lose out in cash terms. Will there be any losers in this?

[Mr Gauke]

Nobody will lose out in cash terms; that is the point.

Age-related allowances are complex and hard for older people to understand, as the Public Accounts Committee confirmed in a 2009 report. The same report also stated that too much emphasis is placed on older people having to prove their eligibility, resulting in erroneous claims and potential overpayments of tax. Furthermore, in March this year the Office of Tax Simplification published its interim report on its review of pensioner taxation in which it highlighted no fewer than nine complexities with the age-related personal allowance.

Half the people aged over 65 in 2013-14 will pay no income tax at all and are therefore unaffected by these changes. Those who will now not receive an age-related allowance will benefit from a £1,100 increase in the personal allowance, which represents the largest cash increase ever. At the same time, those who are affected by the withdrawal of age-related allowances will still see the total deductions they pay reduce significantly because we have retained the exemption from national insurance contributions for those of state pension age.

It is important to consider these changes to age-related allowances in the context of the wider support that the Government offer to pensioners. Only 40% of pensioners benefit from age-related allowances, about 50% are unaffected by the changes made by the clause because they pay no tax and will continue to pay no tax, and the remaining 10% have incomes above the taper limit for age-related allowances and are therefore unaffected by these measures.

Let us also remember that the triple lock ensures that each year, the basic state pension will be uprated by the highest of these: inflation, earnings or 2.5%. This April, the basic state pension increased by the consumer prices index inflation rate of 5.2%. That meant that there was an increase of £5.30 a week in the full basic state pension—the largest ever cash increase in the basic state pension. Under the previous Government’s plans, the basic state pension would have increased by only 2.8% from this April—an increase of only £2.85 per week. That means that the full basic state pension is £127 a year higher in 2012 than it would have been under the previous Government’s plans. Next year, a full basic state pension is forecast to be £130 a year higher than under the previous Government’s plans, and the year after that, it is forecast to be £133 higher.

Each year, more than 11 million pensioners will benefit from the introduction of the triple lock. An existing pensioner with a full basic state pension will gain more from the triple lock in each of the next three years than they will lose from the freeze in age-related allowances. The Institute for Fiscal Studies has said:

“Our analysis shows that they have lost considerably less from recent tax and benefit changes than any other demographic group. And over the past decade and more pensioner incomes have risen faster than those of the working age population.”

To conclude, the Government are making changes to ensure that there is a fair and competitive tax system. Some of them are controversial, but we should look at the evidence, not the Opposition’s rhetoric. The 50p rate is not sustainable. The introduction of the triple lock on state pensions means pensioners continue to be better off. These changes are good for our long-term tax revenues, good for our economy and good for the UK as a whole. I ask the Opposition to seek leave to withdraw the amendment.

Changes to the Budget

Ian Lavery Excerpts

Monday 11th June 2012 Commons Chamber

[Mr Speaker]

Order. I am sorry if I did not explain the position sufficiently clearly—although I must say I thought I did. Some Members are making speculative bids for extending the U-turns. They may wish to do so, but the terms of the urgent question relate specifically to the announced changes. I am sure that understanding that point will not be beyond the ingenuity of the hon. Member for Wansbeck (Ian Lavery).

[Ian Lavery (Wansbeck) (Lab)]

On the announced changes—the U-turns—on everything from buzzards and skips to caravans and pasties, when will the Government reconsider a U-turn on the granny tax and the cut in the tax on the rich people in society?

[Mr Speaker]

I am disappointed in the hon. Gentleman. He started out as such a good boy, and it is a pity that he spoiled that thereafter. I know that a similar sin will not be committed by the hon. Member for Kingston upon Hull East (Karl Turner), because he is a good listener and a quick learner.

Business and the Economy

Ian Lavery Excerpts

Monday 14th May 2012 Commons Chamber

[Ian Lavery (Wansbeck) (Lab)]

Thank you, Mr Deputy Speaker. It is always a privilege to speak in a debate when you are fiftieth out of 50 Members, having rewritten your speech four times, for three minutes, five minutes, eight minutes and then 10 minutes, which is absolutely fabulous, and having listened to the discussions and heard everything you wanted to say and every punchline in your speech used by other people. I think that is called parliamentary democracy.

The country was desperate for a Queen’s Speech last week that included a boost for jobs and a boost for growth. It was interesting to see the Government come forward with a plan B at the weekend, subsection (1) of which tells businesses and hard-working people to stop whingeing and get on with it, and subsection (2) explains to them that if they do not do so the Government will change workers’ protections at work and sack them. That is the change of direction we got from the Government.

The coalition Government’s proposals outlined in the Queen’s Speech do nothing to help my constituents, particularly those looking for work, the ordinary families who are already suffering and having their living standards squeezed, and the huge number of mainly small and medium-sized enterprises and businesses that are struggling even to survive, never mind expand.

In my constituency, which was already experiencing extremely high levels of joblessness and deprivation, we have recently experienced another hammer blow, with the forthcoming closure of Rio Tinto Alcan, the largest private sector employer in Northumberland. That has been followed by announcements involving a number of small and medium-sized enterprises, including Remploy.

Remploy factories were set up after the second world war to look after disabled people and to ensure that they could work in a particular environment and do meaningful work, but now we are looking at the closure of 54 such factories throughout the country. It is an absolute outrage that in 2012 we are about to put more than 2,500 disabled people on the dole. If anybody dares to suggest that it is the best thing for them, they had better have asked the individuals involved. I meet them regularly, and believe me, they have no future in terms of employment in this country.

The closure of Rio Tinto will have a massive and devastating impact on south-east Northumberland and what can only be described as an already fragile economy. Some 3,250 jobs will probably be lost, including 650 direct high-quality jobs and 2,600 in the supply chain. As I have said before, those are highly paid private sector jobs in an area that has already been hammered by the Government’s public sector job cuts. There will be a loss to the economy of £120 million on 2007 prices, including £60 million in the immediate vicinity of the plant. There will be an extra cost to the state of £10 million per annum in terms of state benefits and the loss of business rates.

Mr Deputy Speaker, you and many in the Chamber will have heard the saying, “It’s the economics of the madhouse,” and here we see it once again. The loss of the largest private sector company in Northumberland will be felt sharply by coalfield areas in my constituency. Of working-age adults in my constituency, 28%—one in five—are in receipt of out-of-work benefits; that is almost three times the national average. One in three children aged four or under is living in poverty. This is 2012. Those figures are absolutely damning of any Government. Let me tell you, Mr Deputy Speaker, I am ashamed to be a politician when one in three children under the age of four do not have enough even to feed their bellies to go to school. It is an absolute outrage.

[Julie Hilling]

What was my hon. Friend’s view when he heard the Prime Minister say:

“You call it austerity, I call it efficiency”?

[Ian Lavery]

If I was not in the palace of varieties and the great hall of democracy, I would answer that exactly as I would like to.

I have mentioned public sector jobs—500,000 of them. Those jobs have not been lost. They have been torn from the economy; they have been stolen from ordinary people; they have disappeared because of the actions of this Government. Those jobs have been lost because of nothing other than the ideology of an incoming Government. We are desperate for growth, jobs and investment, but what do we have? We have a double-dip recession.

There is good news in my area, with Bernicia and Akzo Nobel having decided to locate there. That is absolutely fantastic, and I hope that it will continue, but there are problems with the regional growth fund and with not distributing money fast enough. Statistics announced at the weekend suggest that each job costs some £33,000, but that is not what it was like under the old regional development agency system. We had a shining light—a beacon—in One North East, which was providing brilliant results for the region. Sadly, though, it was abolished within weeks of the Government being elected.

If new companies are to be encouraged into our region, they need to be incentivised. Enterprise zones are fine, but if an area is not part of one and is surrounded by them, it will have huge problems, as we do in Wansbeck. The enterprise zone needs to be extended up through the Alcan site and around the town of Ashington, but the capital allowances must come with that extension. It is no good extending enterprise zones without capital allowances; it may as well not happen. I appeal to Ministers to consider extending the enterprise zone in south-east Northumberland around the Alcan site and to bring with that what capital allowances can be afforded.

We need to protect deprived areas from the effects of the discussions that are taking place in Europe about EU state aid. I urge the Government to give serious consideration to ensuring that small and medium-sized enterprises will still be able to get EU state aid after 2013. That is essential because otherwise we will have a double whammy. We also need infrastructure in south-east Northumberland in the form of the Ashington, Blyth and Tyne rail line, so that we can get to and from other areas.

The Queen’s Speech offered little to my constituents. We have done everything we can to try to get them on to an even keel. I simply ask: do this Government care?

Budget (North-East)

Ian Lavery Excerpts

Tuesday 17th April 2012 Westminster Hall

[Mr David Anderson (Blaydon) (Lab)]

I shall break with the habit of a lifetime and say something good about the Government. I welcome the news about what is happening with Nissan, but the context is that without intervention from our Government four years ago, Nissan might not have been in the position that it is in now. We introduced the scrappage scheme and reduced VAT. We gave grants so that battery electric cars could be developed and brought forward the training budget, which kept people from being laid off. Compare that with what the present Government did in respect of the building schools for the future fiasco. In Gateshead alone, £80 million was earmarked for five schools in March 2010, but the Secretary of State for Education took that money away in May, despite recognising, in meetings with me and my hon. Friend the Member for Gateshead (Ian Mearns), that the schools needed to be refurbished and rebuilt. The crazy thing is that, although the money would have gone to Gateshead council, it would just have passed it on to the private sector to build and furnish the schools and put the infrastructure in. So now everybody loses, including the public sector, the children and the private sector.

The RDAs have been mentioned a lot. The RDA was successful in the north-east of England. We have been here before; this is not new for us. Exactly the same programme and attitude that we saw in the 1980s and ’90s is being repeated now. People are being thrown on the dole with no hope or support, no way forward and no framework for intervention. The RDA worked because people came together—unions, employers and the public sector—partnership building, working together, bringing in international support and making things work. That is why it is a real shame that the RDA has gone and has been replaced by the regional growth fund, which is nothing more than a farce and a joke.

[Ian Lavery (Wansbeck) (Lab)]

My hon. Friend tells me that during discussions on the RDAs in the main Chamber, on more than one occasion senior Ministers—in fact, the Secretary of State for Business, Innovation and Skills—said that the RDA in the north-east was the flagship RDA and was working very well indeed.

[Mr Anderson]

I could not agree more. People will remember when they could believe what the Liberal Democrats said, although that was some time ago. The Secretary of State for Business, Innovation and Skills now says that he supported the RDAs, but the leader was not sure. It is now clear that the Liberal Democrats are being dictated to for ideological reasons. Anything that smacks of being positive about the public sector has to go. That is why we are suffering in our region.

Look at chaos and incompetence that has come from the Budget. People at the bottom have been hit: people with disabilities, old people, vulnerable people, children and women. Benefits have been cut. Millionaires have had tax cuts while pensioners’ tax levels are frozen. Government Members talk about taking people out of tax. They have taken a lot of people in Gateshead out of tax: 1,600 people have been taken out of tax because they have been put on the dole by the cuts, and 710,000 people from the public sector are being put on the dole and will not be paying tax or national insurance and will not be buying goods and services. Lessons from the past have not been learned. These things will have an impact on the economy.

The pasty tax is, to some extent, a joke. However, I am worried that it is classed as a harmonisation and simplification of the tax system; if that is so, will the Minister tell me what else she is going to simplify and harmonise that does not have VAT on it? Are there any other plans to increase the scope of VAT? Will she give us a guarantee today that VAT will not be extended to any other part of the tax system?

We all know about the impact of the charities tax. Because the Government cannot control the people who are avoiding and evading tax, the charities that the Government expect to cover for the job and service cuts in the public sector will not be able to do so. Charities in my region tell me that they are already suffering because of funding cuts and that, if money does not come from private investors, they will go even further down that road.

The application of VAT to listed buildings has had a disastrous impact. Ryton Holy Cross church in my constituency magnificently raised £300,000 in 15 years. Now, it would have had to raise £360,000 to do exactly the same work. People are telling me that that fills them with despair.

This Budget exposed the Government’s incompetence. They are not up to the job. The best thing that they could do for our region and our country is to go now.

[Ian Lavery (Wansbeck) (Lab)]

The Budget is a great missed opportunity, not only for the north-east but for the whole country. It should have been a Budget for jobs and growth, but instead it was a Budget for tax cuts for the rich and the toffs.

Unemployment rates in the south-east of Northumberland—in my constituency—are alarming. According to the Library, statistics revealed last week showed that, on average, 22.2 people were applying for each jobseekers’ vacancy. Earlier this year, according to the Office for National Statistics, that figure was 55.5. Every time we mention the problems faced by unemployed people in our area, we are told that we should look at the positive signs, such as Nissan. Nissan has been and is tremendous, but it is a million miles away from where I live.

[Grahame M. Morris]

I am sorry to stop my hon. Friend in full flow, but it is important to place on the record that, although we welcome the additional jobs and the announcement about Nissan, it must be put in context. Does he agree that although 250 jobs are welcome, they do not go anywhere near even offsetting the private sector job losses in my constituency alone? Reckitt Benckiser has lost 500 jobs; Fortress Doors has lost 100; Carillion, Cumbrian Foods and, most recently—

[Sir Roger Gale (in the Chair)]

Order. I am terribly sorry, but the hon. Gentleman is beginning to make another speech. This must be an intervention. I remind hon. Members that each of the first two interventions adds a minute to the time that the speaker is allowed. Hon. Members are in danger of pushing one of their colleagues off the end of the list, if they are not careful.

[Ian Lavery]

Thank you, Sir Roger. I agree with everything that my hon. Friend said.

We in the south-east of Northumberland are a million miles away from Nissan. The perceived jobs bonanza at Nissan is two bus journeys, a Metro journey and a further bus journey away. We wish that we had the same opportunities as there are at Nissan. We hope that they will come. We have not even got a rail service in my area: there is a railway line but no trains to run on it. We cannot even get to Newcastle, Sunderland or Middlesbrough city centre from where we live, because there are not the transport links and the much-needed transfer links.

I want to focus on a strong appeal to the Minister to hear the case of the people in south-east Northumberland. If we in Wansbeck are to have an opportunity for growth, a Northumberland extension of the North Eastern local enterprise partnership enterprise zone—the port of Blyth and the estuary—needs to benefit from capital allowances and rate relief at the same time. It is not enough to extend the enterprise zone without the provision of the additional allowances and incentives necessary to attract businesses and jobs. We need those guarantees. In addition, with the appropriate allowances and incentives, further extension to the enterprise zone is desperately needed, so that it stretches through Wansbeck as far up the coast as the Alcan site. A failure to do so will place Wansbeck and south-east Northumberland at a distinct disadvantage, by further damaging employment opportunities for our communities.

[James Wharton]

On a point of regional, cross-party unity, I echo the hon. Gentleman’s calls. The enterprise zones are a good initiative of the Government, and I should like to see them extended. Anything that we as a region can do to put pressure on Ministers to extend the enterprise zones and to give us further opportunities for growth is welcome.

[Ian Lavery]

Having enterprise zones surrounding areas such as mine only compounds the entire problem; basically, they incentivise people to stay away. May I appeal to Ministers, on behalf of the young and the old? Please listen, visit the area, help the anxious communities that we represent, give them fairness and a level playing field and give them hope and access to aspiration. Although not the most wealthy people in the country, we are most honest and most sincere. We need the Minister and the Government to act now to save what might be lost future generations.

--- Later in debate ---

[Chris Leslie]

The jobs crisis worries people, and all contributors today have talked about that, including my hon. Friends the Members for North West Durham (Pat Glass), for Hartlepool (Mr Wright) and for Wansbeck (Ian Lavery). The statistics that 22 people apply for every vacancy, and that youth unemployment in the north-east is rising by 155% are shocking. The Minister must react to that crisis.

[Ian Lavery]

What does my hon. Friend think about the fact that the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling) refused to meet me to discuss the severe problems facing unemployed people in my district, saying that it was inappropriate at this point?

[Chris Leslie]

I have heard of similar cases. What sort of Minister refuses even to discuss such issues, and turns a blind eye to the problems? A pointless Minister, so what is the point of having that individual in that post.

Many issues have been raised—too many to mention. My hon. Friend the Member for Gateshead and others referred to the case for investment and infrastructure. There is the impact on the so-called big society, with major charitable trusts and others losing out. The Chancellor is taking away from them while staff who are being made redundant from Alcan and elsewhere have dug into their own pockets for their works welfare fund donations to local charities. Their example contrasts so much with that of the Chancellor of the Exchequer.

Greggs was founded on Tyneside in 1939, and if ever a part of the country should be astonished at the Chancellor’s move to extend VAT, it is the north-east. The hon. Member for Redcar (Ian Swales) referred to the temperature of his sausage roll, and he will have the opportunity to vote on the matter in the House this week. We hope that he will join us in the Lobby.

I do not want to take up any more time, because we want to hear from the Minister. She should listen to these exceptionally powerful voices from the north-east. People know what they are talking about. She should recognise the warning signs for jobs and growth, and change course now before it is too late.

Budget Leak Inquiry

Ian Lavery Excerpts

Thursday 22nd March 2012 Commons Chamber

[Mr Gauke]

I refer my hon. Friend to, for example, the 50p debate, which the hon. Member for Nottingham East (Chris Leslie) mentioned. In the days before the Budget there were five different versions of what was going to happen. One turned out to be correct and four turned out to be incorrect.

[Ian Lavery (Wansbeck) (Lab)]

We heard almost more information and detail on the Budget on Tuesday evening than we did on Wednesday evening. Was that due to the Liberal Democrats, was it due to the Conservatives, or were they simply all in it together?

[Mr Gauke]

My right hon. Friend the Chancellor set out yesterday a Budget for growth and for working people. There was an awful lot of information in it. It was an ambitious Budget, and one of which this Government are very proud.

Living Standards

Ian Lavery Excerpts

Monday 5th March 2012 Commons Chamber

[Ian Lavery (Wansbeck) (Lab)]

I was amazed to hear the Minister claiming to be putting fairness at the heart of policy, when this Government are viciously attacking the most vulnerable and the lowest paid in the country.

As has continually been said, the forthcoming Budget must include measures for jobs and growth. Without jobs and growth, everything else in the economy fails and the cuts will continue indefinitely. The country is suffering greatly as a result of the coalition Government’s policies. I call on them to reconsider their intended changes to tax credits and child benefit, which will cost ordinary hard-working families up to £4,000 a year.

These proposals will impact heavily in my constituency. For the benefit of the Government Front-Bench team, I should point out that Wansbeck is in the north-east—not near Aberdeen, but in the north-east of England. We are being hit very hard already. Before the general election, the Prime Minister said he would hit the north-east the hardest, and, by goodness, that is one promise he has kept. Some 240 households in Wansbeck will be hit by the measures that are to be introduced, and 465 children in Wansbeck will suffer as a consequence. The situation is dire.

[Yasmin Qureshi]

I sympathise with my hon. Friend’s constituents. In my constituency, 880 households, which include 2,095 children, will be affected. Does my hon. Friend agree that these measures are disgraceful?

[Ian Lavery]

I entirely agree.

The dire situation in my constituency is compounded by the following fact. The Office for National Statistics stated last week that 55.4 people are applying for each vacancy advertised at the jobcentre—and there are only 48 unfilled jobs in Wansbeck—although two weeks ago the House of Commons Library said this figure was a little lower, with some 36.5 applicants per vacancy. The notion that there are plenty of job opportunities, and opportunities to take on extra hours at work and part-time employment, is a myth propagated by the Government.

I am very concerned. Today, I have written to the Prime Minister, the Business Secretary and the Employment Minister, the right hon. Member for Epsom and Ewell (Chris Grayling), calling for urgent discussions on the future of my area. The attacks on the disabled and the less well-off seem to have abated since the new welfare reforms passed through Parliament, but now the Government are beginning in earnest their attack on hard-working families with children.

The tax and benefit changes will hit women, children and single parents hardest. We must ask why that is the case. Why are the bankers not being attacked? Why do they get a tax cut? Why is there now talk about the rich people getting their 50p tax rate reduced, while at the same time the Government are continuing to attack those who are unable to support themselves? That is obscene, to say the least.

The average family with a child will lose up to £580 per annum. As many as 200,000 couples with children will face losing up to £4,000 in their income. Some 212,000 households and 470,000 children will be affected if people cannot secure extra hours in their workplace. We have got to ask ourselves: where will people get these hours from in their workplace? There is not enough employment in any case—if the Minister wishes to intervene, that would be great. He can tell people in Wansbeck, where there are 50-odd people after each job, how they will get extra hours in part-time employment. The fact of the matter is that they have absolutely no chance, so they are going to lose their money. In a recent Union of Shop, Distributive and Allied Workers survey, 78% of people said that there was absolutely no chance that they would get an extra hour in their workplace, and so they will be losing their tax credits.

[Yasmin Qureshi]

My hon. Friend rightly says that there are no jobs out there, with more than 2 million unemployed. So people will become unemployed and the state will then have to spend hundreds of pounds on keeping these families on benefits, as opposed to allowing them to work and contribute to the economy.

[Ian Lavery]

Again, I thank my hon. Friend for her intervention, as I could not have put it better myself.

We are talking about the same hard-working families who were used two or three weeks ago by the Government as shining examples of why people on benefits should lose them. We are talking about the people who are getting out of bed and going to work, even if it is for 14, 15 or perhaps 16 hours a week—these are the shining examples and look what has happened to them. A lot of people believed in what the Government had to say but, unfortunately, that has now gone out the window. These are not necessarily the squeezed middle, but the working poor, and they are very hard-working people. I must point out that £4,000 is a mortgage to lots of people involved in this issue, and people—hard-working families—will lose their homes as a result of these policies being introduced by the Government. Their figures suggest that some people will actually be better off not going to work. Only a few weeks ago, we heard a million and one times, “It doesn’t pay to be on benefits and nor should it.” So they attack the “scroungers” first and look what is happening now. The situation is an absolute disgrace, because under these new proposals someone can be better off on benefits than in work, possibly by as much as £728 per annum, as some have it. How is it that people can be better off on benefits?

The proposal on child benefit is the most bizarre and ridiculous, and it has to change, as I am sure everyone in this Chamber understands—it is that stupid and it involves a huge anomaly. How can it be fair that someone in a family earning £84,000 can keep their benefits, whereas someone in a family earning £43,000 can lose theirs? It is absolutely outrageous. I am sure that that will change—if it does not, God help us all. I hope that this glaring anomaly will be cleared up.

The Government cannot continue their unfair attack on those less well-off in society—it is mainly an attack on women, children and hard-working people. The hard-working people cannot continue to pay the highest price for this too fast, too far Government approach. Hard-working people cannot continue to pay the lion’s share in a failing economy, purely on the basis of ideology. Given an increase in fuel prices, the introduction of unfair welfare reforms, high unemployment—the highest in 17 years—huge energy prices, pay freezes and pension cuts, the burden must be shared. It must not be shared just by women, children and those hardest up who are willing to go to work—the hard-working people, as we have heard a million times. It is time that the coalition Government changed direction. Instead of flying into the abyss, they should look after the hard-working people in this country, and revisit their proposals on child benefit and tax credits.

--- Later in debate ---

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

We have heard a lot of twaddle from Government Members today. I was shocked that the Minister seemed to agree with the hon. Member for South West Norfolk (Elizabeth Truss) about the need for unregulated child care, as though high-quality, regulated child care is a cost too high for working parents to pay. As a working parent who uses child care, and as someone who represents many young people in my constituency who face having to seek child care, I must say that having lower-quality child care is not the answer. Cost is an issue but lowering the quality is not the answer. I hope the Minister will pick up on that point in responding.

I represent half of a borough that has the unenviable record of being one of the country’s poorest. About 45% of children in my constituency live in out-of-work households or in in-work households that have an income below 60% of the national average. That compares with 22% in the UK as a whole according to 2009 figures.

One in five of my constituents is under 16, so the two changes that the Government are introducing have a very big impact on a very large number of people in my constituency—the youngest, the children who need the support, and their parents as well. Anything that hits children affects Hackney particularly hard. When we are talking about the impact on young people, their life chances and their opportunities, we should not forget the impact that that has on the wider population. It is my constituents who will be paying the pensions of the older population of the rest of the country in time to come. It is my constituents who will be creating the jobs that will pay for this country in time to come. We need to make sure that we give them a little more respect than the Government currently do.

The Government have form in this respect. About a third of my constituency is aged under 24. This group has already been hit massively by the loss of the education maintenance allowance, which had a high take-up in my constituency. For example, one young woman said to me, “By Thursday, when the electricity key was running out, I would pay that,” so she could do her homework and the house would be warm. It paid for basics like that in my constituency. I will not revisit the pain of tuition fees, on which the Liberal Democrats have shown their true colours.

I turn to working tax credits. In my constituency 12,000 families receive tax credits overall. Of those, 4,500 families, which include 8,600 children, are in work and receive both child tax credits and working tax credits. Of the total 12,000 families, 1,100 families receive working tax credit only. Those figures are from December last year, and they hide real people, such as the woman who came to see me on Friday and wept as she said to me, “I’m working 16 hours a week. I want to work more but I cannot find the hours.” She will lose more than £300 a month as a result of the Government’s changes. She has one month to find eight hours of extra work. Where is she going to find that at her level of income?

A related issue, which I am digging into, is school support staff. I have had a number of reports from primary schools in my constituency where low grade staff working 10 or 11 hours a week have been told by the jobcentre that they need to increase their hours to 16, because that gets them off some statistic that the Department is gathering about part-time work. When they went back to the school to ask for extra hours, one head teacher had the wit to go to Jobcentre Plus and say, “Give me this in writing. Tell me who is directing this.” No information was forthcoming.

Those people were being encouraged to give up a good job of 10 or 11 hours a week to find some job somewhere that might be 16 hours a week, but as many of the jobs in low level retail are on zero hours contracts, it is difficult to be guaranteed the 16 hours, let alone the 24 hours. They may get 16 hours now in a good week but not in a bad week, but going up to 24 hours will be increasingly challenging. I talk about my constituency, but as we have heard, up to 200,000 working parents will lose almost £4,000 a year in working tax credit as a result of the changes, which are about three weeks away.

I move on to child benefit. We know that in London child care costs are very high and many of my constituents on good incomes find it unaffordable to work. Their child care would cost more than quite generous full-time earnings, so many have made the understandable decision to opt for one of the couple to stay at home and look after the child. The Minister’s answer was, “Unregulate the child care and make it cheaper”, but that is a retrograde step.

The Government talk about being family-friendly and wanting to support the family unit of two parents with children. The reward for those families for doing what the Government profess to want is a cut in child benefit. What does that mean? If one of the couple is earning £43,000 but the other is not earning and they have three children, they lose £188 a month in child benefit.

[Ian Lavery]

I shall be brief. The hon. Member for Bristol West (Stephen Williams) commented that that is an extreme example. Does my hon. Friend agree that it is not extreme; it is absolutely accurate?

[Meg Hillier]

I completely agree with my hon. Friend. It is rich for the Liberal Democrats to speak sanctimoniously today, when we know what they were saying on the campaign trail just over two years ago.

A family with two incomes totalling £84,000 a year and three children loses nothing in child benefit. The policy is bonkers. It was not even written on the back of an envelope. It must have been written late at night in the bar, because it does not make sense in any way, and the Minister was unable to answer my question about how much it would cost administratively for individuals to collect the paperwork to find people who are on those incomes, in order to take their child benefit away.

We will have the Budget in a fortnight’s time, but my constituents are already being hit. Working tax credit is being taken away from the lowest-paid. There are the cuts to child benefits. We hear from The Daily Telegraph that there might be some changes, but we have heard nothing today from the Minister at the Dispatch Box. VAT has been increased to 20%, affecting the cost of day-to-day purchases for all my constituents. We read of the threat of mortgage interest rates going up. Rents for new social housing will now have to be 80% of private rents, which in my constituency will make it unaffordable for most people—and we can add to that the housing benefit cap, which would affect two thirds of my constituents renting in the private sector, the fact that private rents are increasing exponentially all the time, that energy bills and food prices are going up, that unemployment is increasing, and the loss of the education maintenance allowance.

Many of my constituents may be poor, but there is no poverty of aspiration in my constituency. These policies, layered on month after month and year after year under this wretched Government, are a real kick in the teeth for my constituents, many of whom have come from other countries to do well and to put time and effort into education and training in order to improve their lot. As they are struggling up the ladder of ambition and trying to improve their lot and support their families, the Government are pulling the rug out from under their feet and taking away the lower rungs of the ladder. It is shameful.

Public Service Pensions

Ian Lavery Excerpts

Tuesday 20th December 2011 Commons Chamber

[Danny Alexander]

That is an extremely good point. Under the earlier cap and share arrangement, there would have been a three-yearly salami slicing of pensions: every three years, public service workers would face the prospect of increases in their contributions and reductions in their benefits. The principal feature of the new scheme, which protects them from that prospect, is the link between the normal pension age and the state pension age. As the state pension age rises, so will the retirement age for public service workers. That arrangement, which Lord Hutton recommended, is the best and simplest way of protecting public service schemes from the longevity risk in the future, which is why those schemes are fundamentally sustainable.

[Ian Lavery (Wansbeck) (Lab)]

The right hon. Gentleman said that agreement had largely been reached in the negotiations, and that it would now be referred to trade union executives and, perhaps, individual members, through a ballot. Does he agree that, according to the democratic process, those individual members have as much right to reject the offer as to accept it, and will he tell us what attitude the Government would adopt to such a rejection?

[Danny Alexander]

Members of trade unions do indeed have that right, and it will be for the unions to decide their individual processes. I made clear in my statement that the negotiations on the heads of terms had been completed, that this was the Government’s final position, and that we were proceeding to draft legislation on that basis.

Finance (No. 3) Bill

Ian Lavery Excerpts

Tuesday 5th July 2011 Commons Chamber

[Tom Blenkinsop]

I thank the hon. Gentleman for his comment, and I entirely agree with him. The industries are in it to make money, and it is obvious to anyone who knows them that they need to reduce the amount of energy that they expend to make their products.

British manufacturing output as a whole has been growing for decades, according to figures from the Office for National Statistics. Why is that? Output in the chemicals industry has increased, unlike in other sectors. During the 2008-09 downturn, the industry suffered the second smallest decline in production. The development of the chemical industry over the last decade under Labour has been largely unreported. Only now is it being seen as a sexy subject. However, in places such as Middlesbrough, Redcar and Billingham, we have always referred to ourselves as proud smoggies, in the knowledge that our manufacturing endeavours have far more worth than the machinations of the City.

According to DECC statistics on greenhouse gas reduction, the disappearance of the chemicals sector would directly save an average 10.79 million metric tonnes of CO₂ equivalent, out of the total UK generation of 627.85 million metric tonnes of CO₂ equivalent. Across industry, the chemicals sector is responsible for only 3.9% of energy-related emissions. The growth reviews in November and December last year gave good signals to manufacturing. However, the rhetoric contained in those reviews assumed that a low-carbon economy could emerge only by pricing energy-intensive users out of the market. The flaw in that logic is the assumption that the full substitution of fossil fuels will miraculously come about if intensive energy users are strangled. A further flaw is that the technology that will develop green industries actually flows from the existing energy-intensive industries, their research and development, and their skilled work forces, but they will obviously no longer exist in the UK if we force them abroad.

The December growth review stated that high energy prices were a barrier to advanced manufacturing growth, yet the Secretary of State for Environment and Climate Change said at the same time that recovery does not come from old industries “bouncing back”, and that the low-carbon industries would be an important part of our growth story over the next 10 years. That was in his speech to the Institute for Public Policy Research on 1 December last year.

For every tonne of CO₂ emitted in producing insulation, 233 tonnes of CO₂ are saved, and, as my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) said, for every tonne of CO₂ emitted in producing a wind turbine blade, 123 tonnes of CO₂ are saved. For every tonne of CO₂ emitted in the production of energy-saving tyres, 51 tonnes of CO₂ are saved—and so on, and so on. In the case of insulation, one year’s CO₂ emissions created producing insulation saves 2.4 billion tonnes of CO₂.

At the heart of the issue is the lack of understanding in the Treasury and DECC that these chemical companies cluster, as they always have done, and as they previously did within the large-scale set-ups of ICI. As NEPIC—the North East of England Process Industry Cluster—has proven in my region, locally produced products often feed on-site sister businesses or other company-owned plants. That integration produces better economies of scale, efficiency, profitability and technological development. It is regional clustering, as exemplified by NEPIC in north-east England, which was set up by One North East, that exemplifies industrially-led industrial activism. The Government’s carbon floor pricing policy, on the other hand, fragments industrial integrative clustering.

Unfortunately, the Government assume that secondary industries will not leave the UK, even if the primary chemical industries do. Indeed, the Secretary of State for Energy and Climate Change has said that

“quite a few of the high energy users have forms of natural protection like high transport costs so the impact is rather less than you might expect.”

Unfortunately, empirical evidence wholly contradicts the Government’s stance. As Jeremy Nicholson, director of the energy intensive users group has said:

“The idea that downstream industries are likely to remain here indefinitely if primary production goes might have a theoretical case but I’d say just look at the empirical evidence: downstream manufacturing thrives on co-location with primary industry and why would you expect that to cease in the future?”

Real life examples clearly show just how fragile downstream companies are. Let us consider Wilton, the former ICI site in the constituency of the hon. Member for Redcar (Ian Swales). The plants were balanced with the ICI ethylene cracker at the top of the production pyramid; as foreign ethylene became cheaper and producers produced offshore, the requirement for the cracker was reduced, leading to other plants downstream such as the Dow plant also being affected.

When Dow closed, 55 direct jobs were lost. That is not as big a media story as the events that unfolded at the mothballing of the Redcar blast furnace at the then Teesside Cast Products Corus plant, but the repercussions of Dow were just as profound. An estimated 2,500 jobs were lost downstream as a result of the closure of Dow’s ethylene oxide production plant—the only ethylene oxide plant in the UK. NEPIC has bounced back, bringing in other investments to Teesside, but it is acutely aware of the loss of primary chemical production and of lost opportunities for technological developments that could be made on Teesside, securing new green markets in turn.

More than this, however, the Secretary of State’s comments condone the loss of primary chemical production as a result of the carbon floor pricing while actually actively pursuing it. The question I must ask is: if industry flees within two years, as feared, how on earth will this carbon floor pricing levy taxation apply when the energy-intensive industry is no longer here? An industry cannot be taxed if it will not hang around to be taxed, which leaves Britain with neither the tax nor the industry.

As many primary raw chemicals are very expensive to transport and in some cases are banned from transportation, the Secretary of State’s relaxed approach appears uninformed. Many secondary production companies are small and medium-sized enterprises, often with fewer than 10 employees, and economies of scale for the transportation of such vast quantities of chemicals are just not viable, making the whole operation futile and highly costly for such small operations.

Amendment 12 would ensure that the Government look at the immediate impact of the provisions in the schedule on energy-using manufacturing industries and on employment in those industries; and at how the moneys raised by those measures will be used to mitigate the immediate impact of the schedule on consumers and on manufacturing industries and to encourage green investment. At the very least the Government must monitor and review their own policy and its consequences, which I fear will be devastating for energy-intensive industry and for my area of Teesside. A review will allow the Government to take stock.

[Ian Lavery (Wansbeck) (Lab)]

Is my hon. Friend aware of the double whammy of the European trading scheme and the carbon floor price, which will have a devastating effect not just on Scunthorpe and Teesside but on Lynemouth in my constituency? Rio Tinto Alcan is the company there and it makes a current profit of £50 million a year, which will be totally wiped out as a consequence of this double whammy, putting 600 quality jobs at risk. Does my hon. Friend agree that special measures must be put in place to overcome these unjust taxes?

[Tom Blenkinsop]

I thank my hon. Friend for his intervention. Yes, I certainly do. To finish, let me say that a review will allow the Government to take stock of the policy and to make quick changes to it, as I fear they might have to before it is too late.

Finance (No. 3) Bill

Ian Lavery Excerpts

Tuesday 3rd May 2011 Commons Chamber

[Mr Redwood]

I do not agree with the hon. Gentleman about that. It is true that in the venture capital world EBITDA multiples are more common, although people would not give the same value or the same multiple to a highly taxed business as they would to a more lowly taxed business; but in the open share market in the major stock exchanges, it is more normal to look at price earnings multiples based on earnings net of taxation. There is no doubt that if more tax is taken out of a business, it is less valuable to its private owners—of course that must be true. The private owners are trying to buy a stream of profit or revenue and if some of that is taken in tax, the business will be less valuable.

I had just moved on to my final point, which is about the impact everything we are discussing has on economic recovery. I urge the Minister to bear in mind that the kind of tax proposed, if carried too far, can be damaging. It impedes banks making the sorts of loan and building up the sort of asset base that we want them to at a time of recovery. In addition, any given jurisdiction going too far could become a trigger for the bank’s moving some or more of its activities offshore or changing its arrangements in a way that it thinks would allow it to get around some or all of the tax impost. I would prefer that this tax had not been invented—there are better ways of taxing banks—but if we are to have such a tax, let us ensure that we have thought about two very important consequences of setting it too high: it might damage our own share values and it might damage lending for the recovery.

[Ian Lavery (Wansbeck) (Lab)]

The general public are outraged at the levels of bankers’ bonuses, which remain very high indeed. The Government were forced, as we are all aware, into multi-billion pound bank bail-outs during the financial crisis. Quite simply, people cannot understand why bankers and people employed in the financial institutions have been given billions and billions of pounds of taxpayers’ money at a time of great austerity.

To pay massive bonuses in the midst of a financial crisis is a national disgrace, as it is to pay massive bonuses at a time when public sector services are being destroyed and young people face an unprecedented attack via tuition fees, the abolition of the education maintenance allowance and changes in Sure Start. Last year, Barclays boss Bob Diamond and his two replacements at the head of the investment bank were paid an obscene amount of money: £28 million. The trio also received shares worth £40 million for past performance. That must have been some performance!

I have just done some calculations. The people who are now receiving redundancy notices in the public services—many council workers, nurses, doctors, police officers and the rest—would be lucky to have a bonus of £50 a week. That is £2,500 a year, £25,000 over 10 years and £125,000 over 100 years. So to make £1 million, they would have to live until they were 400. To make the £28 million that the Barclays heads were given, they would have to live to 11,200. That is highly unlikely—I am merely accentuating the point—but those figures are an absolute disgrace.

[Barry Gardiner]

I do not wish to disturb my hon. Friend’s flow, but is he aware that I was informed by the Independent Parliamentary Standards Authority the other day that I could not raise any of my staff’s salaries, even though they have been the same for a year, because they are public servants? If I wanted to give them any reward for exceptional service, the maximum I was allowed to give was a £15 token each year for a meal. Where can anyone get a meal for £15 around here? It is absolutely disgraceful, when such sums are being given out to the bankers.

[Ian Lavery]

I thank my hon. Friend for that question, which is a great way of introducing IPSA into the debate on the Finance Bill. I think we would have agreement on that point across the House.

Let me get back to the discussion. Barclays bosses were compared to Somali pirates by one of their own shareholders, amid anger over their obscene bonuses. Shareholders lined up to vent their fury at the annual meeting, complaining that their dividends had plummeted while senior executives continued to enjoy huge pay packets. Another shareholder accused the executives of rank historical folly, saying:

“In these times of austerity the seemingly excessive payments to senior bank staff seems to show the lack of wisdom reminiscent of Marie Antoinette saying let them eat cake.”

HSBC has tried to seize the high ground by announcing a reduction in maximum bonuses for top bosses, but chief executives could still receive a package of more than £12.5 million this year. This mammoth pay deal comprises a salary of £1.25 million plus up to £7.5 million in long-term bonus shares and a possible £3.75 million annual bonus. Some reduction. That is why the bankers must pay their share, and why the Labour party are seeking this amendment to ensure that that happens.

This recession was not made in Britain; it is a global recession. Let me set the scene for a minute or so. In the decade before the financial crisis, Labour cut Britain’s national debt and Britain’s deficit. Both were lower than the amounts we inherited from the Tories. Before the financial crash we had a lower national debt than America, France, Germany or Japan. The crisis was caused by the financial institutions—by these banks. Governments and central banks were also, of course, at fault, including in Britain, where we did not see it coming and should have been tougher in regulating the banks.

The cry from those on the Conservative Benches, and from the City, for lighter regulation of the banks should have been totally ignored—and, yes, Labour should have been tougher on the banks. When the City and the Tories called for lighter regulation, we should have ignored them and been tougher still. Our priority, however, was to prevent recession turning into depression and to keep people in jobs. We always said that once the economy was growing strongly, tough decisions would be needed to get the deficit down again. The plan, as we all know, was to halve the deficit in four years, including through a continuation of Labour’s bank bonus tax.

The crisis was not the result of our spending on essential front-line services such as the NHS, schools, police, local authorities or any other public service.

[Mr Kevan Jones]

Does my hon. Friend share my disappointment at the sparse attendance on the Liberal Democrat Benches? Before the election, the Liberal Democrats lectured us on bank bonuses and what we were doing about the banks—and now, in places such as Northumberland, they are devastating public services through the cuts that they say are needed because of the financial mess that the banks got us in to.

[Ian Lavery]

That is a very good point about Northumberland. In my constituency in particular, 60% of women and more than 40%—nearly 50%— of men are employed in the public services. Many are being subjected to enforced redundancies by the Liberal Democrat-led Northumberland county council. We hope that will change in 2013, but let us wait and see what happens on Thursday, as that will give us a good idea of what will happen in the coming months and years.

We must realise that the recession was caused by the financial institutions and, yes, by the banks. We are certainly not alone in Britain as a nation in deficit. The financial crisis affected every major economy, resulting in national deficits worldwide. It is the different way in which those nations agreed to tackle their deficits that is the issue. We are saying that we need financing from the banks and the continuation of Labour’s bank tax to ensure that we have the money to allow the programmes we had planned to go forward.

The Government are cutting too far and too fast and they are hitting the most vulnerable, as well as jobs and families. It is necessary to prioritise an economic plan that focuses on increased growth and increased employment opportunities, which would place Britain in a better position to emerge much more rapidly from the current economic situation, which has been flatlining, at best. Part of such a plan would involve repeating Labour’s bank bonus and investing in growth and jobs.

The economy remains extremely fragile. The Office for Budget Responsibility has revised down its growth forecast for the UK economy in 2011 from 2.6% a year ago to just 1.7%. Last week’s growth figures were hardly a triumph for the economy. Growth flatlined over the last quarter of 2010 and the first quarter of 2011—it was down 0.5% in the former before going back up 0.5% in the latter—an effect that the Office for National Statistics has largely attributed to poor weather in December.

--- Later in debate ---

[Helen Goodman]

I agree with my hon. Friend. Does he agree that it is very odd that the rate of the bank levy is being cut in the second year and that the revenues from the levy, which start at £630 million, will fall to only £100 million by the end of the Parliament?

[Ian Lavery]

That is strange, but it is probably what we should expect. It does not surprise me one jot that the tax on banks will reduce in the years to come rather than increasing in line with profit or productivity.

Most Members will be lucky enough to have a credit card, and many of them will have maxed it out and might still have a maxed-out card. That is a new term I have learned since coming to Parliament—“maxed-out credit card”. Incidentally, returning to IPSA, my IPSA card has definitely been maxed out: it has been stopped, as there is only £1 left on it, but that is another issue. On a serious note, many hon. Members will have maxed out their credit card and will not be looking to pay it off in the next year or so. Instead, they will be planning how and when it best suits their pockets to pay it off, when they are able to do so. Paying it off immediately would mean having to go without even the most basic of necessities. That is life: it is about having effective financial means.

The world economy revolves around borrowing and debt. People the length and breadth of the nation live off debt, and the issue is how that debt is managed and repaid. That kind of debt is like a mortgage: people have to pay it off, but it becomes like a family deficit that is paid off over 25 years. If people were told they had to pay their mortgage off in two years they could not do it, because they could not survive. That is exactly the approach that the Government are taking with the deficit. This is about having a fair process; it is about financial management. We are definitely not all in this together, but the Labour party’s bonus tax would have helped to implement a number of social programmes that would have benefited many of those who feel they are being disproportionately affected by the cuts.

[Mr Kevan Jones]

I do not know whether my hon. Friend saw the Newcastle Journal on Saturday, but he knows that the housing market is struggling in my area. The Journal has reported that only 13 houses in the north-east were bought for more than £1 million last year. Is it not ironic that one of the bank bonuses that has been paid could have bought all of those houses?

[Ian Lavery]

I think that is ironic, and I assure my hon. Friend that not many houses in my constituency are valued in the region of £1 million. That is not only ironic; it is pretty sad and desperate when I think of the number of people in my constituency and elsewhere in the north-east who are looking for social housing and who cannot even get on to the housing ladder as a result of the austerity measures that are being put in place. That is why Labour says that although it is hurting, the signs are that it is not working.

The amendment calls on the Government to review the overall taxation burden on the banks. They have declined to renew Labour’s bank bonus tax, which raised £3.5 billion last year, and have instead proceeded with a bank levy that will raise about £2.5 billion. Labour is calling on the Government not to give a tax cut to the banks, but to use the money that would be raised from repeating the levy to invest in jobs and growth. The Bill’s provisions for the bank levy equate simply to a tax cut for the banks, because it is estimated that it will bring in £2.5 billion a year, which is less than the £3.5 billion that Labour’s bonus tax brought in last year according to the OBR.

Furthermore, the Government are giving banks a corporation tax cut of more than £100 million in 2011-12 and the value of that tax cut will rise considerably by the end of the Parliament. It is essential to repeat the bank bonus tax, to increase the bank levy and to invest in jobs, growth and housing. Labour believes that in addition to continuing with the bank levy the Government should repeat the bank bonus tax and raise at least £2 billion more, so that the banks do not get a tax cut this year. Frankly, I am opposed to the banks getting a tax cut in any year.

[Gavin Williamson (South Staffordshire) (Con)]

The former Chancellor of the Exchequer thought that it would be unsustainable to impose the bank bonus tax for more than one year. Does the hon. Gentleman disagree with his colleague?

[Ian Lavery]

The simple answer is yes. Things have changed dramatically since my right hon. Friend left office; even the hon. Gentleman would agree with that.

[Gavin Williamson]

Only for the better!

[Ian Lavery]

“Only for the better.” Of course.

In future years, the Government should increase the bank levy to ensure that the banks continue to pay their fair share of tax, so that taxpayers are not left picking up the bill for a crisis caused by the irresponsible actions of those institutions. The OBR’s November 2010 forecast showed that the bonus tax brought in revenues of £3.5 billion in 2010-11.

[Stephen Pound]

My hon. Friend might be surprised to hear that he is engendering in me some sympathy for bankers. The sheer, overpowering, pressing agony of having to spend £28 million would put so much pressure and pain on a person; one has only to look at Wayne Rooney to see the consequences of that. Does my hon. Friend agree that if bank bonuses are not about money, they are actually about mutual approval and standards? We could simply give bankers a golden tick on a badge, or a sticker, to show that we love them, and get the £28 million back to refresh the economy and get jobs into his constituency and mine.

[Ian Lavery]

That is the first time I have been accused of being sympathetic to the bankers, but I thank my hon. Friend for his comments. I would much rather give the bankers a nice little tick or an A* for the way in which they perform—or perhaps in this particular case a C, D, E, F or a fail. At the moment, an F would still equate to many tens of thousands of pounds for most bankers.

[Mr Kevan Jones]

Does my hon. Friend think that his constituents or mine believe that most of the bankers who got us into the mess we are in deserve a bonus at all, or even an F?

[Ian Lavery]

The reality is that people in my constituency cannot even get a loan from the banks. In the past they could get loans for all sorts of things, and that was a run-of-the-mill thing to do in my community and many others. If someone wanted a holiday, a carpet or a car and they could not afford it outright, they would have gone to the bank or building society and got a loan.

Now they not only cannot get loans, they cannot even get credit cards. The bankers are making billions, but the people at the sharp end, who are suffering the most as a result of the Government’s cuts, cannot even get a loan from the banks or building societies.

[Andrew Gwynne (Denton and Reddish) (Lab)]

My hon. Friend is right, but it is not just his constituents who cannot get a loan—many of his local businesses face the same problem. He spoke earlier about the need for growth in our economy. Is it not a scandal that many banks will not, as the right hon. Member for Wokingham (Mr Redwood) said, take a risk on small and medium-sized businesses? They will not even take a punt on a good business proposition.

[Ian Lavery]

That is exactly right. I was merely highlighting the plight of ordinary families. Small and medium-sized enterprises in every region of the country are suffering greatly as a result of the austerity measures and of the negative attitude of bankers, who think only about how much they will make at the top of the ladder, not about how anybody else—business people or ordinary people—will manage.

[Jeremy Corbyn (Islington North) (Lab)]

Does my hon. Friend realise the perverse effect of the difficulty in getting loans from banks is that many people are forced to turn to very expensive money lenders, corner shops and so on, where they pay ludicrous rates of interest, with no security whatever for what they are trying to achieve? That is simply wrong.

[Ian Lavery]

I thank my hon. Friend. That is a serious matter. Many people who were once able to get bona fide loans from building societies or banks are now forced to seek finance from loan sharks—

[The Temporary Chair (Mr James Gray)]

Order. We are ranging rather wide of the amendment under discussion. The Chair would be grateful for a little more focus on the amendment.

[Ian Lavery]

Thank you for your guidance, Mr Gray. I thought it was my duty as a parliamentarian to try to answer Members who were asking questions. Thank you for telling me that I may not.

--- Later in debate ---

[Ian Lavery]

I agree 100% with my hon. Friend’s suggestion, but as I have just suffered the wrath of the Chair, I shall not try to respond.

The OBR’s November 2010 forecast showed that the bonus tax brought in revenues of £3.5 billion in 2010-11. We cannot know how much a repeat of the tax would yield in 2011-12, but a cautious assumption by any measure would be about £2 billion. The Labour party’s view is that that estimated sum would go a long way to supporting many projects, such as, first, establishing a youth jobs fund and creating up to 100,000 new youth jobs at a time when youth unemployment is almost 1 million, its highest since records began in 1992-93. That is one thing we could do with the bank tax.

Secondly, we could build 25,000 new homes for low cost home ownership and affordable social rent. This could create tens of thousands of jobs and help create 1,500 construction apprenticeships. It is important to ensure that young people can get on to the property ladder. Thirdly, an additional £200 million could be provided as funding for the regional growth fund bids. Getting more people in work and paying taxes is the best way to bring the deficit down. The Tory-led Government are cutting too deep and too fast, and now the economy has stalled and unemployment is higher.

There is a better way. Instead of giving the banks a tax cut this year, next year or the year after, the Government should repeat Labour’s bank bonus tax and use the money raised to invest in creating more than 100,000 jobs for young people and in construction, and to build 25,000 affordable homes.

The cuts are going too deep and too fast. There is an alternative. If we were still in government we would be halving the deficit steadily over four years, in line with the pledges made by major economies at the G20 last year, not trying to cut it further and faster than any other major economy in the world. Yes, tough choices are required. The deficit cannot be brought down if the economy is not growing strongly and hundreds of thousands of people are being thrown out of work. That is a simple, basic message.

In conclusion, I repeat that the most important factor in getting the deficit down is what happens to jobs and growth in the economy. That is why last year, as the economy started growing again and unemployment was falling, the deficit came in more than £20 billion lower than expected. That changed as the economy stopped growing at the end of last year and unemployment is higher. Stop the tax cuts to the banks, invest in the future of our young people, invest in this nation, invest in jobs and growth and adopt the Labour example of the bonus tax on banks.

[Nic Dakin]

It is a pleasure to follow my hon. Friend the Member for Wansbeck (Ian Lavery), who gave a comprehensive account of why we should support the very precise amendment on the bank levy.

A banker writing in the 1920s wrote:

“April is the cruellest month, breeding

Lilacs out of the dead land, mixing

Memory and desire”,

and went on to talk about the present month as “depraved May”. I quote T. S. Eliot—

Finance Bill

Ian Lavery Excerpts

Tuesday 6th July 2010 Commons Chamber

[Ian Lavery (Wansbeck) (Lab)]

Thank you, Mr Speaker, for allowing me to participate in this debate on the Second Reading of the Finance Bill.

One thing that is certain is that all parties agree that the deficit exists; we disagree only about how we would seek to reduce it, and how quickly or otherwise. Having now seen the detail of the Budget, and having like other Members been drip-fed even more bad news on a daily basis, I feel that the Budget and the subsequent cuts represent a most draconian, vicious and bitter attack on the hard-working people of the UK.

This has been described as the worst Budget in living memory, and I must say that I agree with that sentiment. This unprecedented attack by the coalition—the Tories and the Liberal Democrats—seems to be relished by many on their Benches. There appears to be something of a perverse glee among many of them when they see this attack on the people of this country. Only the wealthy and the well-off seem to have escaped the far-reaching measures forced upon the nation by the slash-and-burn, patched-up coalition Government.

If I may, I wish to introduce a more human side to the debate on the Finance Bill and the Budget. Tonight we have heard a million and one different figures, and I am sure that most of them are accurate, but we have not heard too much about the human side and the impact that the figures in the Bill will have on ordinary working people. In my constituency, 53% of the people work in the public sector—the highest proportion in the country. We should not treat those people as social outcasts, yet that appears to be happening. We have people in integral employment in the public sector—doctors, nurses, firemen, policemen, paramedics, prison officers, teachers, lecturers, classroom assistants, council workers, refuse collectors, street cleaners, chief executives and administrators among many more. Those are all valued occupations—essential jobs for the economy, including that in my constituency.

Let us consider the police. Today, they have been on the front line, chasing an armed murderer only 10 miles from where I live. We should be proud of those police officers and not look to cut their numbers. Today, they are protecting the public; tomorrow, they could face unemployment because of the cuts. Let us consider the firemen. They are the only ones running towards an explosion, or towards a fire in which people are trapped, while the general public run away. We should be proud of them. They are on the front line today, but they face unemployment tomorrow.

We must stop treating people as mere statistics. They are real people, with real lives. They have real families and real mortgages and, like many of us, they have aims and ambitions. Most of them chose a career path when they left school of serving their communities in the public sector. Should they be punished for that through the Bill and the Budget? They should not. They never expected to be unreasonably attacked through Government policy.

Why on earth the Government have attempted to divide public and private sector workers, driving a wedge between them as if they are different sorts of people, in different classes, and creating some second-class citizens is beyond me, unless it is a case of divide and rule. They have not only imposed a two-year pay freeze, but attacked pensions. “Pay more while you work, get less when you retire” seems to be the policy.

Let us consider the figures from my constituency. An average public sector worker in the NHS in Wansbeck can expect a pension of some £6,000 per annum. A local authority worker can expect a pension of £4,000 per annum. That is frankly disgraceful and unacceptable. It is also unashamed vindictiveness towards hard-working people.

The attack on the hard-working people of the public and private sectors through an attempt to dilute safety and health legislation is also worrying. Some on the other side of the House claim that it is burdensome, yet we have some of the best safety and health legislation in the world. When Lord Young of Graffham is being asked to reform safety and health laws and clearly states—

[Mr Speaker]

Order. The hon. Gentleman is addressing the House with great force and eloquence. A few moments ago, I was waiting for a specific reference to the Bill and he made it, for which the House was indebted to him. However, he is now talking about health and safety and wider reviews, and there is the difficulty that those matters do not appertain to the Bill, to which I know he will now revert with his customary force and eloquence.

[Ian Lavery]

Thank you very much for that, Mr Speaker —I understand. Whether or not health and safety and other such issues are part of the Bill or the Budget, they are integral to the people whom we represent.

To top it all off, those hard-working people are expected to accept the reduction in their pensions and pay cuts without any voice. It is reported that the Government are looking to tighten what are already the worst anti-trade union laws in the western world, to prevent people from having the democratic right to oppose the cuts in the Bill and the Budget. With pay cuts, pension cuts, benefit cuts, employment rights eroded, and health and safety laws diluted, their futures are in tatters. Who says that we are in this together? I invite the Chancellor and the Prime Minister to visit my constituency, to explain to the people of Wansbeck, including the 53% who may lose their jobs, how on earth we are in this together. What about the young and the future jobs fund and university places? What about the lack of job opportunities and the abolition of the regional development agencies? With the cutting of benefits, what future do the young people have as a result of the Bill?

Disabled people will be affected. What about the tax on disabled benefits? In my constituency, benefits for disablement and incapacity, including disability living allowance, are extremely important, because Wansbeck is a heavily industrialised area. The child trust funds are to be abolished—

[Mr Speaker]

Order. I am genuinely trying to be helpful to individual Members and to the House. It is open to the hon. Gentleman, and to other hon. Members who speak, to say something about corporation tax, capital gains tax, value added tax, insurance premium tax, income tax, etc.

[Ian Lavery]

Thanks for that, Mr Speaker. Every Member who has sat in the Chamber for as long as I have today is probably as fed up as I am about VAT and everything else. I accept everything you say, Mr Speaker, but I must say that I am just trying to change things, because we are talking about the cuts and the impact they will have on ordinary people. That is the only thing I am trying to get across. I understand quite clearly that I am probably stretching the limits of the debate—

[Mr Speaker]

Order. I am extremely grateful to the hon. Gentleman and I know he is doing his best to heed my advice—not altogether successfully—but from his last sentence, I suggest that he could delete the word “probably”. He was not following my advice, but I know that he will now do so. There are other matters to address if he wishes to do so.

[Ian Lavery]

Once again, Mr Speaker, thank you very much for your indulgence. I conclude not by mentioning VAT or anything of that nature, but by suggesting once again that it is not fair to say that we are in this together, because we certainly are not.