Ian Swales
Main Page: Ian Swales (Liberal Democrat - Redcar)Department Debates - View all Ian Swales's debates with the HM Treasury
(10 years, 8 months ago)
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Ian Swales (Redcar) (LD)
This Finance Bill represents another step in clearing up the mess left by the previous Government. Most of my constituents know that a standard of living that depends on borrowing from the bank and running up credit card bills will eventually be reduced when people have to start paying off the debts. That is what we had under the previous Government. The Opposition are trying to con the public—
Ian Swales
Just a moment; I have only managed a couple of sentences. The Opposition are trying to con the public into believing that the cost of living can remain the same, regardless of the history and of the amount of money that was left behind.
Ian Swales
Unfortunately, I was not here during the last Parliament, but I have read a great deal of what my right hon. Friend the Member for Twickenham (Vince Cable), now the Business Secretary, said at the time. He was warning of the difficulties many years before they actually arose. I am quite certain that our party was watching the situation carefully, and that it could see what was happening.
There is a growing myth, which was repeated by the hon. Member for Cardiff South and Penarth (Stephen Doughty), who is no longer in his place—[Hon. Members: “He is here.”] My apologies; he is in a different place. That myth has also been repeated in the Opposition’s reasoned amendment, which states that
“working people are £1,600 a year worse off”.
Even the Institute for Fiscal Studies would admit that that is to do with gross income; it is not to do with net income, and it is not the amount by which people are worse off. Even the shadow Chief Secretary to the Treasury, the hon. Member for Nottingham East (Chris Leslie) pointed that out in his speech. One reason why people are not worse off by that amount is that there has been a large cut in income tax. That was a high priority for the Liberal Democrats, and I am delighted that in a few days’ time people will have experienced a £700 tax cut since the general election. The Bill includes another £100 for basic rate taxpayers.
Julie Hilling
Would the hon. Gentleman like to mention the 24 tax rises that his Government have introduced, including the massive hike in VAT?
Ian Swales
I will come on to some of those tax rises in a moment. I am just saying that working people are not £1,600 worse off, as the Labour amendment suggests. There is no expert who says that they are.
This Government’s tax cut has reduced inequality. It has been praised by the Living Wage Foundation as reducing the gap between the minimum wage and the living wage, and I am proud that my party has driven it through in this Parliament. It is also good that the Budget shows that there will be real growth in household disposable income from now on.
Sheila Gilmore
Would the hon. Gentleman admit that, for many low-paid workers, the increase in the tax threshold over the past few years has been more than cancelled out by the cuts in tax credits, the freezing of child benefit and other changes? In fact, the Government have given with one hand and taken away with the other.
Ian Swales
Everyone is in a different situation, but it is certainly not true to say that, for more people, the Government have given with one hand and taken away with the other. The hon. Lady should know that.
The Opposition’s reasoned amendment also mentions a “tax cut for millionaires”. This is from a party whose former Business Secretary said that he was
“intensely relaxed about people getting filthy rich”.
And it showed in what the Labour Government did for 13 years: the top rate of income tax was 5% lower than it is now until 6 April 2010, the very last day Labour Members sat on the Government Benches—until then they cut taxes for millionaires every year they were in power; capital gains tax was 10% lower, meaning that hedge fund managers in the City had a lower tax rate than those cleaning their offices; tax relief was available on pension contributions of £250,000 a year, whereas the current figure is £40,000—the difference is £100,000 in tax; and VAT was 2.5% lower, making a top Ferrari £5,000 cheaper—that is what was actually happening for millionaires.
Ian Swales
I do remember that, but I would make some comments about it. First, at that time we had not seen the note left by the previous Chief Secretary to the Treasury saying that there was no money left. Secondly, and unfortunately, the Liberal Democrats were 269 short of an overall majority at the last election, so we did not have the power to implement our manifesto. Thirdly, VAT is a good, progressive way of raising money from the wealthy. [Hon. Members: “No it is not.”] I suggest hon. Members do the maths and have a look. I suggest that those who doubt that talk to someone on the minimum wage and ask them how much standard rate VAT they think they are paying, given that there is no standard rate VAT on their housing costs, food, energy and utility bills, children’s clothing, public transport, TV licence and insurance. Standard rate VAT is not paid on any of those items.
After the number of enforcement and compliance staff in HMRC was slashed by 10,000 by the previous Government there was such a culture of tax avoidance that six years ago a Radio 1 DJ thought it was fine to pretend to be a second-hand car dealer in order to avoid paying £1 million in tax. I am pleased that this Government are doing something about such avoidance, including in that particular case, and overall it is clear that millionaires had a much better time under the Labour Government.
I now wish to discuss some other items in the Bill, the first of which is the marriage tax allowance. That is the only area where I have sympathy with the Opposition amendment, as the measure was not a Lib Dem priority and it does affect only one part of the community. For example, it gives no benefit to a couple who are both on the minimum wage. We did not win the argument there and it is one area where we might have done things differently. The Opposition amendment then makes a comparison with a 10p tax rate—I would have thought they would not have wanted to remind people about the 10p tax rate and the fact that they doubled taxes on the lowest paid in this country, but by reviving it, they revive those memories. It is pretty irrelevant, as the Institute for Fiscal Studies says, because we can simply raise the minimum threshold by half as much and achieve the same effect, or a very similar one. So that proposal is something of a red herring and a grim reminder of how Labour ignored the low paid in the previous Parliament.
The amendment also refers to energy bills, and that reminds me of what we often see from the Opposition: writing the headline first and then filling in the detail afterwards—at least that is how it appears. They say that they want to freeze energy prices and they must be pleased at the recent Scottish and Southern Energy announcement, but they should examine the small print, because they would see that it involves the company cancelling investment. Of course, that was highly predictable when the price freeze was first announced. Everyone from the OECD to uSwitch has rubbished the policy, because the price freeze will also freeze investment and freeze the position of the big six. The idea that it will somehow damage the big six is nonsense because, as all observers say, it will freeze out investment by new players. I have six power station projects live in my constituency right now and I can tell hon. Members that this price freeze announcement is totally spooking the financial investors for those projects. Labour’s policy will lead to lower investment, less competition, more risk to supplies, and, ironically, higher prices. If it wishes to persist with this policy, it needs to produce some independent experts who think it is sensible, but I have not yet found one who does.
Despite the fact that the shadow Business Secretary has put his name to the motion, it does not contain a single word about business, which tells us something about Labour’s stance. It also cements its reputation as an anti-business party and shows that it has learned nothing from the fact that, on its watch, manufacturing halved as a proportion of the national economy.
The Budget is good for business. It has been welcomed by the North East chamber of commerce, the Chemical Industries Association, the Federation of Small Businesses and many others. As a north-east MP, I had a lot of sympathy and empathy with what the hon. Member for Houghton and Sunderland South (Bridget Phillipson) said.
I welcome the £100 million extra for apprenticeships—the number of which has doubled in my constituency. Despite the unemployment position in the north-east, we have, believe it or not, a skills shortage, so those amounts are especially welcome.
I welcome the support for manufacturing. The doubling of capital allowance to £500,000 will help those who wish to invest. As a joint founder of the all-party group on energy-intensive industries, I especially welcome measures to support those industries. We have been congratulated on them by the steel industry, although it would like to see the measures implemented more quickly. I also welcome the support for low-carbon technology in the Budget.
In the end, we must generate jobs, particularly in areas such as the north-east. Over the past year, unemployment in my constituency has come down 22%, youth unemployment by 31% and long-term unemployment by 14%, and they are all significantly lower than they were in May 2010.
I share the concern of the hon. Member for Houghton and Sunderland South about the EU. There was a large inward investment project heading to my constituency last year. We expected it to be signed, but suddenly, on 18 September, it was switched to France. I am certain that the uncertainty over our position in the EU was a factor. That was disappointing, but it just shows that all this talk is damaging the economy now and not just in the future.
I am pleased that the Finance Bill includes another round of tax-avoidance measures. The Government have taken many steps in that regard, but there are many more still to take. I welcome the publication a couple of weeks ago of the base erosion and profit shifting paper. I hope the Government will act on that, and look in particular at the shifting of profit through interest payments. Of concern was the fact that the paper mentioned the possible exemption of infrastructure industries from any measures in that regard. In particular, there was a mention of the private finance initiative industry, which ballooned under the previous Government. For example, junctions 1A to 3 of the M4 is 50% owned in Guernsey, 50% of schools in Redcar are owned in Jersey and, most absurdly, the whole of Her Majesty’s Revenue and Customs offices are owned in Bermuda. The exemption of those companies that have put in place those structures and the suggestion that they are not shifting profits out of the UK needs to be looked at again. At the very least, we should consider how PFI business cases are assessed, as it seems to be the norm to move the profits out of the country.
Labour has very little to say about this Budget. In fact, the Leader of the Opposition had nothing to say. The Opposition do not seem to have a coherent plan, although some of their measures are at least interesting. They appear to be using the same statistician as the leader of the UK Independence party for some of what they do. Although there is a long way to go, this Finance Bill will produce a stronger economy and a fairer society, which is what my party wants to see.
Mr Bain
We remember the tooth-and-nail opposition of the Conservative party to the minimum wage and the lack of support for it from Scottish nationalists—none of whom are present—when the previous Labour Government legislated on it.
The Government are all at sea as to how to reverse the decline in living standards over which they have presided. Under this Prime Minister, living standards have fallen more sharply and for longer than under any Prime Minister since the second world war, including Heath, Thatcher, Wilson, Callaghan, Eden, Macmillan, Douglas-Home and Churchill. If this Government were a football club, the team would be at the bottom of the league, facing relegation at the end of the season, with rising clamours for the manager to be given the sack. Some have even called for the return of the special one to come and lead the blues—no, not José Mourinho, but Boris Johnson—and speculation is rife as to which Government Member will be sent to the subs bench in order to let him get back in the team after the next general election.
Ian Swales
I agree that the minimum wage was one of the great achievements of the previous Government and I think that more should be done to police its implementation even today. However, does the hon. Gentleman share my regret that his Government took more than £1,000 a year in tax and national insurance away from people on the minimum wage? The reduction of £700 a year in their tax bill has given them a real-terms net increase.
Mr Bain
I hope the hon. Gentleman will use his undoubted influence to speak to the Business Secretary, whose Department has presided over a 10% drop in the real value of the minimum wage since 2010. Indeed, if the hon. Gentleman wants to build on the success of the minimum wage, he ought to speak to the Secretary of State about how he is going to reverse that trend, because the small rise announced by the Low Pay Commission simply will not do the job. How on earth will there be a £7-an-hour minimum wage by next October? That was the Chancellor’s pledge at the beginning of the year, but it is hard to see it happening, given the remit involved and without this Government taking firm action on enforcing and improving the national minimum wage.
I welcome some aspects of the Bill, such as the tax concessions for participants in the Glasgow grand prix. I believe they will attract a world-class field for that athletics meeting and ensure that those athletes stay on for the Commonwealth games. That will add to the economic growth of my city, Scotland and, indeed, all of the United Kingdom.
I am sure that any hon. Member who has witnessed the scourge of the rise of fixed odds betting terminals on high streets up and down the country will support the increase in machine games duty. Anything that discourages people from spending their hard-earned wages on those machines—I am sure that every hon. Member is aware of this issue—should be welcomed. The Government should be going much further, of course, in regulating the way in which those machines operate. They take a terrible toll on some of the poorest communities in the country, including in my constituency.
Ultimately, this Finance Bill is soft on the banks and hard on ordinary working families. It fails the national economic interest in three main ways. First, it does nothing to boost growth. According to the OBR, its measures and the Budget that it will enact contribute nothing in terms of an uplift in growth and, in relation to trade and exports, there will be no contribution to growth from net trade over the next five years. The Budget also fails to raise levels of business investment, which are currently among the worst in the EU and the G20.
Secondly, this Finance Bill does not meet the challenge of our times in that it fails to tackle our growing crisis of long-term youth unemployment—up by 50% since 2010—and it takes no measures to deal with under-employment. The Institute for Public Policy Research has today identified that as a growing crisis for our country, with more than 1 million people going to work for low wages and seeking more hours, but unable to get them in this weak economy.
Thirdly, this Finance Bill entrenches the inequities of its predecessors in this Parliament by failing to repeal the hated bedroom tax, which has devastated 2,500 people in my constituency and 600,000 people across the whole country. It fails to reintroduce a 50p rate of income tax for those earning more than £150,000 a year, or to introduce a 10p starting rate of income tax, which would benefit 24 million taxpayers.
All that at a time when the Bill offers banks a further tax concession in the bank levy and when the Government are failing to get to grips with the skills revolution that is needed if we are permanently to earn our way to higher living standards. At an event in London only today, the IPPR has said that Britain’s performance on skills has been worse than that of our leading competitors since the beginning of the economic crisis. If we are to get people into better-paying jobs, fill in our hollowed-out jobs market and repair the losses of jobs in construction and manufacturing, this Government and their Labour successors next year will clearly have to do much more on skills. The lack of any incentives in the Bill to improve skills in the workplace or to improve apprenticeships is a serious omission that does not serve the national interest well.
The conclusion one has to reach on examining the entirety of the Bill—all 295 clauses and 34 schedules—is that it is long on detail, but short on real action. It does nothing to raise the incomes of people in the rest of the country, while it perpetrates a recovery simply for those at the very top of society. If the International Monetary Fund—those well-known crypto-leftists—and President Obama get the point that cutting the gap between rich and poor is vital to having a recovery for every one of us, it is a matter of regret that this Government do not seem to get it.
Ian Swales
The hon. Gentleman is making a point about inequality, but does he not welcome the fact that the Red Book states that
“inequality is at its lowest level since 1986”?
Does he regret that inequality widened under the 13 years of a Labour Government, which is a truly shameful record?
Mr Bain
I hope that when the hon. Gentleman speaks to his constituents in Redcar, he will remind them of the entirety of the record of the previous Government, who of course oversaw a dramatic decline in pensioner poverty and a huge fall in child poverty. Those policies did work. The inheritance we were left on both counts in 1997 was a disgrace that should have shamed Conservatives who were Members of that Parliament.
David Rutley
Certainly, very important steps are being taken, such as raising personal allowances, which will help all our constituents who are facing challenging times. However, there are also measures in the Bill that will help businesses to create more work and more wealth, and help us to achieve greater growth and prosperity.
Returning to clauses 39 to 43, the Chancellor has championed the consumer’s right to take decisions in accordance with their own life circumstances, over and above the procrustean desires of the state. Much has been said about these reforms, and no doubt plenty more will be said in the days and years ahead, but I want to focus today on how other clauses in the Bill are equally supportive of consumers by bolstering competition and lowering barriers to entry for British enterprise—clause 10, on capital allowances, clause 6, on corporation tax, and clause 73, on air passenger duty, to name but a few. Encouraging new entrants—those first-time entrepreneurs, employers and exporters—is vital in increasing choice for consumers and in keeping established businesses on their toes and responsive to their customers. This Government have slashed barriers to entry through deregulation initiatives—an ongoing process that I have been involved with on the Deregulation Bill Committee—and there is also the red tape challenge and the one-in, two-out regulatory arrangements. These are important steps in creating much-needed supply-side reforms.
I hope to contribute further on the Finance Bill Committee—if I can catch the Whip’s eye—because the barriers to small new businesses, new employers and new exporters have been kept far too high in the previous decade or more. We need to get on and finish the job and create a real enterprise pathway. There is little point in trying to address the problem of firms that are too big to fail if we do not also seek to address that of new businesses that are too small to succeed against barriers to entry that have been in place for far too long. This Bill helps us to take significant strides forward. In the words of the British Chambers of Commerce:
“By making a better business environment his top priority, the Chancellor has recognised that successful and confident companies are the key to transforming Britain’s growing economic recovery into one that is felt in homes and on high streets.”
It is the economics of strong, long-term measures for long-term growth.
Ian Swales
The hon. Gentleman is making a very good speech. As somebody who represents the north-east corner of north Yorkshire, which is part of the north-east region, I am sure I can join in the north-east theme this afternoon. He talks about the drive to improve businesses. Does he agree that it is only through successful wealth creation that we can provide the public services that Opposition Members—and all of us—want to see?
David Rutley
Absolutely. Real growth and true wealth creation have to come from the private sector: that is how we generate the wealth needed to provide the public services that Members on both sides of the House welcome and want to help our constituents.
The Institute of Directors has described the Budget measures in the Bill as “responsible and imaginative” ones that will
“promote growth, exports and investment”.
It says that
“doubling the annual investment allowance…will bring forward a significant amount of investment…with knock-on effects across the economy”,
while
“increasing the cash value of Research and Development credits…will benefit many new businesses immediately”.
That will create the jobs we want to see and tackle the challenges of youth unemployment that Opposition Members have mentioned. Yes, we have had to consolidate the nation’s finances, but we have also signposted clearly the future direction of lower taxes. Although cutting air passenger duty, for example, has not been affordable in recent years, the Bill will very generously cut the two highest rates from 2015. This Government do not shirk from the difficult decisions that need to be taken to restore order to the national balance sheet. It is precisely this approach of taking long-term decisions that has allowed us to double investment allowances to £500,000 and to cut APD, which we have been able to do responsibly and affordably. I hope that business will respond by investing in export potential and taking advantage of lower flight taxes to get out and sell to the world. The barriers are down, and the pathways to achieving export potential are getting clearer. That is a clear priority of Members on this side of the House.
We are moving forward with corporation tax, too. Cutting it to the lowest level in the G20, the Bill will further improve our competitiveness in the international market. The new employment allowance will slash the cost of taking on a first-time employee. These are pro-enterprise, pro-competition measures that will create long-lasting benefits for the economy, for jobseekers and for our consumers. By making it easier and less expensive to deal with the state and to pay its taxes, the Bill also makes it easier for first-time entrepreneurs to become first-time employers and first-time exporters.
The Chancellor has promised to do all he can to boost our export performance. The CBI has noted that the increasing export finance stream announced in the Budget should “strengthen our armoury”, although it also agreed with something that Lord Young and Lord Green have already acknowledged, when it stated:
“The Government must now work much harder to promote these schemes, since many fast-growing firms are unaware of the support available.”
I know that the Government are acutely aware of that fact, but it is critical, now that we have the plans in place, that we do a better job of communicating with SMEs and telling them what support is available.
When customers are free to choose, businesses are required to innovate, to offer better service and to control their prices. When the state stands in the way of that market competition, prices are skewed and, in the longer term, the economy deteriorates. We have only to look across the channel to see where that path could lead—to plan B, as we might say—and to see what that strategy has delivered for France: rising unemployment and a budget deficit higher than had been predicted. We do not need to look across the channel to learn who would bring similar economic woes to Britain; we need only to look across to the other side of the House. Thank goodness that we on this side of the House chose to stick with the right plan. We now want to finish the job.
I was fortunate to attend the British Chambers of Commerce annual conference this morning. It was a positive start to what I am sure has been an excellent day for chambers of commerce across the country. The theme was “State of the nation—good to great”, highlighting the need for what was called “great growth”— growth that is sustainable and for the long term. It was a timely reminder of the most pressing economic priority facing the country. I am proud that this Government are firmly committed to meeting that challenge head on. The Budget and the Finance Bill are both further evidence of that commitment, and that is why I will support the Bill tonight.
Mr Jones
I would not put anything past the new Conservative party, although I know that the hon. Gentleman is part of the ancient—even prehistoric—Conservative party. It is clearly part of the Conservative party’s strategy to try to give the impression that we have turned the corner and that the sunlit uplands are now before us. The public are neither so stupid nor so naive as to believe that, however, because they are living the reality of what this Government are doing to this great nation of ours.
Ian Swales
I thank the hon. Gentleman for giving way. The North East chamber of commerce said recently that its members’ business outlook was the most positive since 1995. Does he disagree with that? I accept that business is not everything, but surely he can welcome that.
Mr Jones
I have great respect for the North East chamber of commerce, but it represents only a certain section of the business community—it does not represent all the business community—and I have never seen it disagree with any Budget, because, understandably, it likes to keep in with the Government of the day. The “Conservative” Member for Redcar is clear in giving an upbeat assessment of his own constituency, but it is not one that I recognise and neither do many Members representing north-east constituencies.
The hon. Member for Macclesfield said that the Government had a clear sense of direction and the hon. Member for Dover (Charlie Elphicke) said that they had a clear plan, unlike the Opposition. Let us look at this clear plan and sense of direction. The narrative goes as follows, and before any Government Member says differently, these things are not invented by the Opposition; they are what this Government did when they came to power. We should recall that in 2010 our economy was actually growing. Why did it go into recession? It did so because of what happened during their first few days, including the measures on investment, which my hon. Friend the Member for Nottingham East (Chris Leslie) mentioned. What the Government did sucked money straight out of the economy, so demand went down. We have had the longest recession and recovery in history. On the Conservative party’s and the Chancellor’s own figures—these are not my figures or the Labour party’s—by now we should have seen 8.4% growth, whereas we have actually seen 3.8% growth. We were supposed to have got rid of the deficit by 2015, but we are actually borrowing another £190 billion more than we were planning to borrow.
That is the Chancellor’s supposedly successful plan. People would think that he would apologise for that, but that is about as likely as the hon. Member for North East Somerset (Jacob Rees-Mogg) walking into the Chamber wearing a pair of Wrangler jeans. The fact is that the Chancellor’s plan has not been working, with the root cause—the Liberal Democrats have been going along with this—being an ideological Conservative party, which is not just about deficit reduction, but is actually about small state Conservatism. The headlines in last week’s Budget were clearly designed around things such as the pension measure, which I will discuss in a moment, but tucked away were another £1 billion of cuts, which the Chancellor made permanent for future years. So that is more pain for Departments across Whitehall and communities across our country.
The Budget headline was clearly on pensions, and much has been said about the freedoms that the measure is going to give. I do not usually agree with the hon. Member for Watford (Richard Harrington), but he made some interesting points in his contribution and I share his fear about people’s ability to get proper financial advice about what to do with their pensions. I take his point that we are dealing with relatively small sums in terms of pension pots of £20,000 to £25,000 and the costs of giving that advice would be astronomical. Are we, however, going to avoid the chaos we had—many of us remember seeing it in the 1990s—when the vultures descended on workplace pension schemes, advising people to take money out and put it into all sorts of products, which led to people making bad investment decisions?
The Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), who is responsible for pensions, says that he is not really bothered if someone wants to go and blow it all on a Lamborghini. Hon. Members might not be surprised to learn that I do not know a great deal about Lamborghinis, but I was a bit disappointed that he did not use an example of a British car, because it would have been a good idea to boost the British economy if he really wanted to give an example of an expensive car. Today, I looked up the cost of the cheapest Lamborghini and found that it is £300,000—that represents quite a big pension pot. The problem arising out of that policy is that the Government have not published the modelling on what the effects will be on the public purse. They need to do that because hidden issues need addressing. It is right to give people choice and freedoms, but the Chancellor did nothing at all to affect the charges, fees and so on that small pension pots are attracting, which can be substantial, not only at the time of buying an annuity, but over the lifetime of the pension. That would be a thing to do.
I have serious concerns. For example, if a pensioner uses their £300,000 plus to buy a Lamborghini—or possibly a Bentley, which would at least boost jobs in this country rather than in Italy—what do they do when they have no money left? The Pensions Minister says, “Well, that’s fine because it has all been taken care of by the new generous state pension.” He forgets that there are other things. There is no mention, for example, of care costs or of housing benefit. Those things need to be explained. It helps the Chancellor; he has a figure in the Red Book for the amount of tax he will raid out of pensions in the short term. There will clearly be a boost if people spend their money in the economy. I am not usually a great fan of the Association of British Insurers, but a serious issue has been raised about the future of the annuities market. Insurers do not just get in money and sit on it; they invest it, so we are talking about long- term investment that is being taken out of projects and businesses. To make a full assessment of the effects of this move, we need to understand the modelling of the scheme, and that has not been forthcoming. It will be interesting to see whether the Government will produce it.
The other issue is the increase to £15,000 a year in the allowance for individual savings accounts. Like the hon. Member for Macclesfield, I speak to my constituents. It is laughable to suggest that they may have £15,000 lying around to invest each year. I think that most people are in the same position. As my hon. Friend the Member for Glasgow North East (Mr Bain) said, people are not investing the money; they are actually spending it to live in their old age. Some 8 million people in this country have no savings whatever, and another 32% have less than £1,000 in savings, so the proposal will not help anyone. It may help some who have £15,000 to invest. Should we welcome that? Possibly, but the idea that it will help most of my constituents, or most of the constituents of my hon. Friends, is frankly not right. On Saturday, when I was out at an event in Chester-le-Street in my constituency, someone said to me, “Who’s got £15,000 lying around to invest in that type of savings plan each year?”
When the Chief Secretary to the Treasury opened the debate, my hon. Friend the Member for Nottingham East said that he was suffering from Stockholm syndrome, because he has actually become part of the Conservative party. Indeed, having heard the speech and the comments of the hon. Member for Redcar, I think that he also has a very bad dose of the syndrome.
I asked the Chief Secretary at what point in the previous Labour Government did his party say that spending was too high. I then gave him another chance and asked him whether the Liberal Democrats had called for reduced expenditure in any area—whether it be in the NHS or anywhere else. There was not one single area. At least the Conservatives could say that they ditched the pledge around 2008-09. The Liberal Democrats kept going right into the last general election. To hear the hon. Member for Redcar now, we might think that he had long been there calling for fiscal responsibility and less expenditure. The Liberal Democrats may trumpet it now, but that was not the case back then.
The Chief Secretary to the Treasury said that he was proud that the increase in allowances was straight from the last Liberal Democrat manifesto. It might have been, but the commitment on VAT—he was challenged about what happened to that—went the same way as the commitment on tuition fees. Remember the VAT bombshell? It was the first thing they did and the Liberal Democrats could not even claim at that stage that they had been affected by Stockholm syndrome, as they were only in the early days of captivity. And what did they do? They increased VAT. The hon. Member for Redcar says that the increase in VAT is a progressive form of taxation. I am sorry, but it is not. All the indications show that it is a regressive form of tax that hits some of the poorest in our communities, including in Redcar.
Jacob Rees-Mogg
The calculation from the removal of exchange controls is not one that I know or would be able to make. The effect of their removal has been to create a much larger economy for the United Kingdom, so we are talking about 37% of a larger pie rather than getting a higher rate in a closed economy. However, it is worth bearing in mind that in the years before exchange controls were lifted in 1979 we still were not getting a tax take of more than 38% of the economy. The series goes back longer than the abolition of exchange controls.
I part company from the Government to some degree on the question of tax avoidance and tax evasion. It is measurably important not to elide the two. Tax avoidance is perfectly legal—indeed, the Government come up with schemes in every Budget to encourage it. One example is saving for pensions—that is tax avoidance on people’s income. ISAs are a form of tax avoidance, as is duty free. In the Budget and the Finance Bill there are schemes for investing in films and television programmes that actively encourage tax avoidance. Such schemes become part of Government policy for growing the economy.
Governments then get very upset when people use the tax avoidance schemes, which the Government themselves have put into legislation, for purposes that the Government had not thought of. That strikes me as a fault of the legislative process and an incompetence of the legislators—I am sorry to say, Mr Deputy Speaker, that it is our fault—for allowing such loopholes. It is not the fault of the taxpayer for using them. Any sensible, intelligent taxpayer will pay the minimum amount of tax that is legally required. To elide avoidance and evasion is, I think, against the rule of law: it undermines the rule of law by pretending that something that is innocent is nefarious.
It is important to crack down on tax evasion, which is rank criminality, but the Government should not take excessive measures against that which is legal. Instead, they should write simple tax law because, to go back to the point I was making, Governments manage regularly to raise 37% of GDP in taxation almost regardless of the taxes they levy—they change a tax here and a tax there, but still get roughly 37% of GDP. Simple tax laws can probably get us to that level without the need for complex anti-avoidance legislation that undermines the rule of law. That is the one part of the Bill about which I have my doubts.
Ian Swales
The hon. Gentleman is making a characteristically fascinating speech. Does he agree that the difference between tax evasion and tax avoidance needs to be made very clear? For example, those who pretend to be second-hand car dealers in order to avoid tax are actually evading tax.